10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                           to

Commission File Number 1-4101

Tennessee Gas Pipeline Company, L.L.C.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of Incorporation or Organization)	74-1056569 (I.R.S. Employer Identification No.)
El Paso Building 1001 Louisiana Street Houston, Texas (Address of Principal Executive Offices)	77002 (Zip Code)

Telephone Number: (713) 420-2600

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o	Non-accelerated filer þ	Small reporting company o
		(Do not check if a smaller reporting company)

     Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

     Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

     Common stock, par value $5 per share. Shares outstanding on November 3, 2011: 208

     TENNESSEE GAS PIPELINE COMPANY, L.L.C. MEETS THE CONDITIONS OF GENERAL INSTRUCTION H(1)(a) AND (b) TO FORM 10-Q AND IS THEREFORE FILING THIS REPORT WITH A REDUCED DISCLOSURE FORMAT AS PERMITTED BY SUCH INSTRUCTION.

TENNESSEE GAS PIPELINE COMPANY, L.L.C.
TABLE OF CONTENTS

Caption	Page
PART I — Financial Information
Item 1. Financial Statements		1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
Item 3. Quantitative and Qualitative Disclosures About Market Risk		*
Item 4. Controls and Procedures		13
PART II — Other Information
Item 1. Legal Proceedings		14
Item 1A. Risk Factors		14
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		*
Item 3. Defaults Upon Senior Securities		*
Item 4. (Removed and Reserved)		14
Item 5. Other Information		14
Item 6. Exhibits		15
Signatures		16

*	We have not included a response to this item in this document since no response is required pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.
	Below is a list of terms that are common to our industry and used throughout this document:

/d = per day	BBtu = billion British thermal units
MMcf = million cubic feet	TBtu = trillion British thermal units

     When we refer to “us,” “we,” “our,” or “ours,” we are describing Tennessee Gas Pipeline Company, L.L.C. and/or our subsidiaries.

i 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TENNESSEE GAS PIPELINE COMPANY, L.L.C.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions)
(Unaudited)

	Quarter Ended						Nine Months Ended
	September 30,						September 30,
	2011			2010			2011			2010
Operating revenues	$	224		$	213		$	674		$	637
Operating expenses
Operation and maintenance		84			81			242			235
Depreciation and amortization		51			53			148			148
Taxes, other than income taxes		6			14			41			41
		141			148			431			424
Operating income		83			65			243			213
Earnings from unconsolidated affiliate		4			4			11			11
Other income, net		17			7			34			16
Interest and debt expense		(26	)		(38	)		(98	)		(113	)
Affiliated interest income, net		5			4			12			11
Income before income taxes		83			42			202			138
Income tax expense		33			14			77			51
Net income	$	50		$	28		$	125		$	87

See accompanying notes.

1

TENNESSEE GAS PIPELINE COMPANY, L.L.C.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except share amounts)
(Unaudited)

	September 30,		December 31,
	2011		2010
ASSETS
Current assets
Cash and cash equivalents	$	—	$	—
Accounts and note receivable
Customer, net of allowance		13		24
Affiliates		75		378
Other		51		51
Materials and supplies		56		44
Deferred income taxes		72		43
Other		15		5
Total current assets		282		545
Property, plant and equipment, at cost		5,356		4,951
Less accumulated depreciation and amortization		995		1,056
		4,361		3,895
Additional acquisition cost assigned to utility plant, net		1,893		1,923
Total property, plant and equipment, net		6,254		5,818
Other long-term assets
Note receivable from affiliate		650		617
Investment in unconsolidated affiliate		58		56
Other		82		76
		790		749
Total assets	$	7,326	$	7,112
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
Accounts payable
Trade	$	51	$	90
Affiliates		34		38
Other		97		57
Current maturities of long-term debt		86		86
Taxes payable		72		23
Contractual deposits		33		28
Asset retirement obligations		25		28
Accrued interest		47		33
Accrued liabilities		55		13
Regulatory liabilities		60		78
Other		13		25
Total current liabilities		573		499
Long-term debt, less current maturities		1,768		1,765
Other long-term liabilities
Deferred income taxes		1,473		1,422
Regulatory liabilities		56		90
Other		30		35
		1,559		1,547
Commitments and contingencies (Note 4)
Stockholder’s equity
Common stock, par value $5 per share; 300 shares authorized; 208 shares issued and outstanding		—		—
Additional paid-in capital		2,209		2,209
Retained earnings		1,217		1,092
Total stockholder’s equity		3,426		3,301
Total liabilities and stockholder’s equity	$	7,326	$	7,112

See accompanying notes.

2

TENNESSEE GAS PIPELINE COMPANY, L.L.C.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

	Nine Months Ended
	September 30,
	2011			2010
Cash flows from operating activities
Net income	$	125		$	87
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization		148			148
Deferred income tax expense		22			49
Earnings from unconsolidated affiliate, adjusted for cash distributions		(2	)		22
Other non-cash income items		(26	)		(6	)
Asset and liability changes		(4	)		(107	)
Net cash provided by operating activities		263			193
Cash flows from investing activities
Capital expenditures		(543	)		(193	)
Net change in notes receivable from affiliate		274			327
Other		6			7
Net cash provided by (used in) investing activities		(263	)		141
Cash flows from financing activities
Dividend paid to parent		—			(334	)
Net cash used in financing activities		—			(334	)
Net change in cash and cash equivalents		—			—
Cash and cash equivalents
Beginning of period		—			—
End of period	$	—		$	—

See accompanying notes.

3

TENNESSEE GAS PIPELINE COMPANY, L.L.C.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

  Basis of Presentation

     We prepared this Quarterly Report on Form 10-Q under the rules and regulations of the United States Securities and Exchange Commission. As an interim period filing presented using a condensed format, it does not include all of the disclosures required by U.S. generally accepted accounting principles, and should be read along with our 2010 Annual Report on Form 10-K. The financial statements as of September 30, 2011, and for the quarters and nine months ended September 30, 2011 and 2010, are unaudited. The condensed consolidated balance sheet as of December 31, 2010 was derived from the audited balance sheet filed in our 2010 Annual Report on Form 10-K. In our opinion, we have made adjustments, all of which are of a normal, recurring nature, to fairly present our interim period results. Due to the seasonal nature of our business, information for interim periods may not be indicative of our operating results for the entire year. Our disclosures in this Form 10-Q are an update to those provided in our 2010 Annual Report on Form 10-K.

     Effective October 1, 2011, we converted our legal structure to a limited liability company and changed our name to Tennessee Gas Pipeline Company, L.L.C. For a further discussion of our conversion to a limited liability company, see Note 6.

     On October 16, 2011, El Paso Corporation (El Paso), our indirect parent, announced a definitive agreement with Kinder Morgan, Inc. (KMI) whereby KMI will acquire El Paso in a transaction that values El Paso at approximately $38 billion including the assumption of debt. The transaction has been approved by each company’s board of directors but remains subject to the approvals of El Paso shareholders, the Federal Trade Commission (FTC) and other customary regulatory and other approvals. The approval of KMI shareholders will also be required, but a voting agreement has been executed by the majority of the shareholders of KMI to support the transaction. The completion of the merger may trigger change in control provisions in certain agreements (e.g. debt) to which we are a party.

  Significant Accounting Policies

     There were no changes in the significant accounting policies described in our 2010 Annual Report on Form 10-K and no significant accounting pronouncements issued but not yet adopted as of September 30, 2011.

2. Financial Instruments

     At September 30, 2011 and December 31, 2010, the carrying amounts of cash and cash equivalents and trade receivables and payables represent fair value because of the short-term nature of these instruments. At September 30, 2011 and December 31, 2010, we had an interest bearing note receivable from El Paso of $702 million and $976 million due upon demand, with a variable interest rate of 2.5% and 1.5%. While we are exposed to changes in interest income based on changes to the variable interest rate, the fair value of this note receivable approximates its carrying value due to the note being due on demand and the market-based nature of the interest rate.

     In addition, the carrying amounts of our long-term debt and their estimated fair values, which are based on quoted market prices for the same or similar issues, are as follows:

	September 30, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
			(In millions)
Long-term debt, including current maturities	$	1,854	$	2,252	$	1,851	$	2,071

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3. Credit Facilities

     We are eligible to borrow amounts available under an El Paso revolving credit facility and are only liable for amounts we directly borrow. During the first half of 2011, El Paso refinanced this credit facility and reduced its overall borrowing capacity from $1.5 billion to $1.25 billion. Certain collateral restrictions under the facility have been modified providing El Paso’s master limited partnership the ability to acquire up to 100 percent ownership interests in us or another El Paso subsidiary, or some combination thereof. This credit facility provides for an elimination of collateral support upon El Paso achieving investment grade status by one of the rating agencies. There were no other significant changes to our restrictive covenants from those reported in our 2010 Annual Report on Form 10-K, other than a change in pricing. Our current cost to borrow under the El Paso credit facility has increased to LIBOR plus 2.25. As of September 30, 2011, El Paso had $472 million of capacity remaining and available to us and our affiliates under this credit agreement, and none of the amount outstanding under the facility was issued or borrowed by us.

4. Commitments and Contingencies

  Legal Proceedings

     We and our affiliates are named defendants in numerous legal proceedings and claims that arise in the ordinary course of our business. For each of these matters, we evaluate the merits of the case or claim, our exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If we determine that an unfavorable outcome is probable and can be estimated, we establish the necessary accruals. While the outcome of these matters cannot be predicted with certainty, and there are still uncertainties related to the costs we may incur, based upon our evaluation and experience to date, we had no accruals for our outstanding legal proceedings at September 30, 2011. It is possible, however, that new information or future developments could require us to reassess our potential exposure related to these matters and establish accruals accordingly.

  Rates and Regulatory Matter

     Rate Case. In November 2010, we filed a rate case with the Federal Energy Regulatory Commission (FERC) proposing an increase in our base tariff rates and the implementation of a fuel volume tracker with a reduction in our fuel retention rates, among other things. In December 2010, the FERC issued an order accepting and suspending the effective date of the proposed rates to June 1, 2011, subject to refund, the outcome of a hearing and other proceedings. In September 2011, we filed a proposed settlement with the FERC, which was uncontested by our customers. The proposed settlement provides for, among other things, an increase in our revenues of approximately $60 million to $70 million annually, net of revenues from excess fuel retention, significant contract extensions until October 2014 and a requirement to file new rates to be effective no earlier than April 2014 but no later than November 2015. Although the FERC has not yet approved the proposed settlement, we believe our accruals established for this matter are adequate.

  Environmental Matters

     We are subject to federal, state and local laws and regulations governing environmental quality and pollution control. These laws and regulations require us to remove or remedy the effect of the disposal or release of specified substances at current and former operating sites. At September 30, 2011, our accrual was approximately $4 million for expected remediation costs and associated onsite, offsite and groundwater technical studies and for related environmental legal costs; however, we estimate that our exposure could be as high as $9 million. Our accrual includes approximately $1 million for environmental contingencies related to properties we previously owned.

     Our environmental remediation projects are in various stages of completion. Our recorded liabilities reflect our current estimates of amounts we will spend to remediate these sites. However, depending on the stage of completion or assessment, the ultimate extent of contamination or remediation required may not be known. As additional assessments occur or remediation efforts continue, we may incur additional liabilities.

5

     Polychlorinated Biphenyls (PCB) Cost Recoveries and Refund. Since 1994, we have been conducting remediation activities at certain of our compressor stations associated with PCBs and other hazardous materials. We have collected amounts, substantially in excess of remediation costs to date, through a surcharge to our customers under a settlement approved by the FERC in November of 1995. In November 2009, the FERC approved an amendment to the 1995 settlement that provides for interim refunds over a three year period of approximately $157 million of our collected amounts plus interest of 8%. Through September 30, 2011, we have refunded approximately $122 million, including interest, to our customers. Our remaining refund obligations of approximately $60 million, including interest, are recorded as current regulatory liabilities on our balance sheet as of September 30, 2011, based on the timing of when these amounts are expected to be refunded to our customers.

     Superfund Matters. Included in our recorded environmental liabilities are projects where we have received notice that we have been designated or could be designated as a Potentially Responsible Party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund, or state equivalents for four active sites. Liability under the federal CERCLA statute may be joint and several, meaning that we could be required to pay in excess of our pro rata share of remediation costs. We consider the financial strength of other PRPs in estimating our liabilities. Accruals for these matters are included in the environmental reserve discussed above.

     For the remainder of 2011, we estimate that our total remediation expenditures will be approximately $1 million, most of which will be expended under government directed clean-up plans. In addition, we expect to make capital expenditures for environmental matters of approximately $9 million in the aggregate for the remainder of 2011 through 2015, including capital expenditures associated with the impact of the Environmental Protection Agency rule on emissions of hazardous air pollutants from reciprocating internal combustion engines which are subject to regulations with which we have to be in compliance by October 2013.

     It is possible that new information or future developments could require us to reassess our potential exposure related to environmental matters. We may incur significant costs and liabilities in order to comply with existing environmental laws and regulations. It is also possible that other developments, such as increasingly strict environmental laws, regulations and orders of regulatory agencies, as well as claims for damages to property and the environment or injuries to employees and other persons resulting from our current or past operations, could result in substantial costs and liabilities in the future. As this information becomes available, or other relevant developments occur, we will adjust our accrual amounts accordingly. While there are still uncertainties related to the ultimate costs we may incur, based upon our evaluation and experience to date, we believe our reserves are adequate.

  Other Commitments

     For a further discussion of our purchase obligations and other commercial commitments, see our 2010 Annual Report on Form 10-K.

5. Accounts Receivable Sales Program

     We participate in an accounts receivable sales program where we sell receivables in their entirety to a third party financial institution (through a wholly-owned special purpose entity). The sale of these accounts receivable (which are short-term assets that generally settle within 60 days) qualify for sale accounting. The third party financial institution involved in our accounts receivable sales program acquires interests in various financial assets and issues commercial paper to fund those acquisitions. We do not consolidate the third party financial institution because we do not have the power to control, direct, or exert significant influence over its overall activities since our receivables do not comprise a significant portion of its operations.

6

     In connection with our accounts receivable sales, we receive a portion of the sales proceeds up front and receive an additional amount upon the collection of the underlying receivables (which we refer to as a deferred purchase price). Our ability to recover the deferred purchase price is based solely on the collection of the underlying receivables. The tables below contain information related to our accounts receivable sales program.

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
			(In millions)
Accounts receivable sold to the third-party financial institution(1)	$	271	$	247	$	687	$	676
Cash received for accounts receivable sold under the program		135		117		375		390
Deferred purchase price related to accounts receivable sold		136		130		312		286
Cash received related to the deferred purchase price		135		128		301		306
Amount paid in conjunction with terminated program(2)		—		—		—		40

(1)	During the quarters and nine months ended September 30, 2011 and 2010, losses recognized on the sale of accounts receivable were immaterial.
(2)	In January 2010, we terminated our previous accounts receivable sales program and paid $40 million to acquire the related senior interests in certain receivables under that program. See our 2010 Annual Report on Form 10-K for further information.

	September 30,		December 31,
	2011		2010
	(In millions)
Accounts receivable sold and held by third-party financial institution	$	91	$	75
Uncollected deferred purchase price related to accounts receivable sold(1)		46		35

⁽¹⁾   Initially recorded at an amount which approximates its fair value using observable inputs other than quoted prices in active markets.

     The deferred purchase price related to the accounts receivable sold is reflected as other accounts receivable on our balance sheet. Because the cash received up front and the deferred purchase price relate to the sale or ultimate collection of the underlying receivables, and are not subject to significant other risks given their short term nature, we reflect all cash flows under the accounts receivable sales program as operating cash flows on our statement of cash flows. Under the accounts receivable sales program, we service the underlying receivables for a fee. The fair value of this servicing agreement, as well as the fees earned, were not material to our financial statements for the quarters and nine months ended September 30, 2011 and 2010.

6. Investment in Unconsolidated Affiliate and Transactions with Affiliates

  Investment in Unconsolidated Affiliate

     We have a 50 percent ownership interest in Bear Creek Storage Company, L.L.C. (Bear Creek), a joint venture with Southern Natural Gas Company, L.L.C., our affiliate. For the nine months ended September 30, 2011 and 2010, we received $9 million and $10 million in cash distributions from Bear Creek. Also, during the third quarter of 2010, Bear Creek utilized its note receivable balance under the cash management program with El Paso to pay a cash distribution to its partners, including $23 million to us.

     Summarized financial information for our proportionate share of Bear Creek is presented as follows:

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
			(In millions)
Operating results data:
Operating revenues	$	5	$	5	$	15	$	15
Operating expenses		1		1		4		4
Income from continuing operations and net income		4		4		11		11

7

  Transactions with Affiliates

     Cash Management Program. We participate in El Paso’s cash management program which matches short-term cash surpluses and needs of participating affiliates, thus minimizing total borrowings from outside sources. El Paso uses the cash management program to settle intercompany transactions between participating affiliates. We have historically advanced cash to El Paso in exchange for an affiliated note receivable that is due upon demand. At September 30, 2011 and December 31, 2010, we had a note receivable from El Paso of $702 million and $976 million. At September 30, 2011, we have classified $52 million of this receivable as current on our balance sheet based on the net amount we anticipate using in the next twelve months considering available cash sources and needs. The interest rate on this note is variable and was 2.5% and 1.5% at September 30, 2011 and December 31, 2010.

     Distributions. In October 2011, we distributed our corporate facilities and certain other assets and liabilities to our parent. The net distributions were approximately $325 million.

     Income Taxes. El Paso files consolidated U.S. federal and certain state tax returns which include our taxable income. Prior to our conversion to a limited liability company which is further discussed below, we filed and paid taxes directly to certain state taxing authorities. At September 30, 2011, we had federal and state income taxes payable of $46 million and a net federal and state income taxes receivable of $4 million at December 31, 2010. The majority of these balances, as well as deferred income taxes and amounts associated with the resolution of unrecognized tax benefits, will become payable to or receivable from El Paso.

     Effective October 1, 2011, we changed our tax entity status from a corporation to a limited liability company. As a single member limited liability company, we will continue to record income taxes on a separate return basis and reflect current and deferred income taxes in our financial statements. We do not expect this entity status change to have a material impact on our financial statements.

     Other Affiliate Balances. At September 30, 2011 and December 31, 2010, we had contractual deposits from our affiliates of $10 million.

     Affiliate Revenues and Expenses. We enter into transactions with our affiliates within the ordinary course of business. For a further discussion of our affiliated transactions, see our 2010 Annual Report on Form 10-K. The following table shows revenues and charges from our affiliates.

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
			(In millions)
Revenues(1)	$	9	$	5	$	82	$	15
Operation and maintenance expenses		18		17		53		58
Reimbursement of operating expenses		19		14		53		44

⁽¹⁾  During the nine months ended September 30, 2011, we sold 9.5 TBtu of natural gas not used in operations to our affiliate, El Paso Marketing, L.P. In June 2011, we terminated our contract to sell gas to El Paso Marketing, L.P. in connection with the implementation of a fuel volume tracker as part of our rate case filed with the FERC.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     The information required by this Item is presented in a reduced disclosure format pursuant to General Instruction H to Form 10-Q. In addition, this Item updates, and should be read in conjunction with, the information disclosed in our 2010 Annual Report on Form 10-K, and the financial statements and notes presented in Item 1 of this Quarterly Report on Form 10-Q.

     On October 16, 2011, El Paso announced a definitive agreement with KMI whereby KMI will acquire El Paso in a transaction that values El Paso at approximately $38 billion including the assumption of debt. The transaction has been approved by each company’s board of directors but remains subject to the approvals of El Paso shareholders, the FTC and other customary regulatory and other approvals. The approval of KMI shareholders will also be required, but a voting agreement has been executed by the majority of the shareholders of KMI to support the transaction. The completion of the merger may trigger change in control provisions in certain agreements (e.g. debt) to which we are a party.

Results of Operations

     Beginning January 1, 2011, our management uses segment earnings before interest expense and income taxes (Segment EBIT) as a measure to assess the operating results and effectiveness of our business, which consists of consolidated operations as well as an investment in an unconsolidated affiliate. We believe Segment EBIT is useful to investors to provide them with the same measure used by our management to evaluate our performance and so that investors may evaluate our operating results without regard to our financing methods. Segment EBIT is defined as net income adjusted for items such as (i) interest and debt expense, (ii) affiliated interest income, and (iii) income taxes. Segment EBIT may not be comparable to measures used by other companies. Additionally, Segment EBIT should be considered in conjunction with net income, income before income taxes and other performance measures such as operating income or operating cash flows. Below is a reconciliation of our Segment EBIT to net income, our throughput volumes and an analysis and discussion of our results for the nine months ended September 30, 2011 compared with the same period in 2010.

Operating Results:

	2011			2010
	(In millions,
	except for volumes)
Operating revenues	$	674		$	637
Operating expenses		(431	)		(424	)
Operating income		243			213
Earnings from unconsolidated affiliate		11			11
Other income, net		34			16
Segment EBIT		288			240
Interest and debt expense		(98	)		(113	)
Affiliated interest income, net		12			11
Income tax expense		(77	)		(51	)
Net income	$	125		$	87
Throughput volumes (BBtu/d)		6,076			4,950

Segment EBIT Analysis:

	Variance
	Operating			Operating
	Revenue			Expense			Other		Total
	Favorable/(Unfavorable)
	(In millions)
Reservation and usage revenues	$	72		$	—		$	—	$	72
Gas not used in operations and other natural gas sales		(35	)		5			—		(30	)
Expansions		—			—			16		16
Operating and general and administrative expenses		—			(11	)		—		(11	)
Other(1)		—			(1	)		2		1
Total impact on Segment EBIT	$	37		$	(7	)	$	18	$	48

⁽¹⁾  Consists of individually insignificant items.

9

     Reservation and Usage Revenues. During the nine months ended September 30, 2011, our reservation and usage revenues increased by $72 million primarily due to higher tariff rates, which became effective June 1, 2011 as a result of our rate case that is further discussed below. This increase was partially offset by lower revenues from gas not used in operations. Additionally, our throughput volumes continued to increase during 2011 due to colder weather in our market area during January and March 2011 and increased supply in the Haynesville and Marcellus shale basins.

     Gas Not Used in Operations and Other Natural Gas Sales. Prior to June 1, 2011 and the implementation of our fuel volume tracker, gas not used in operations resulted in revenues to us, which we recognized when the volumes were retained, valued at the market price specified in our tariff. Prior to the implementation of our tracker, we experienced lower retained fuel volumes in excess of fuel used in operations primarily due to the shift in flow patterns, which unfavorably impacted our Segment EBIT by $10 million. Subsequent to the implementation of our tracker, our Segment EBIT was lower by $30 million offset by increased reservation revenues discussed above. Partially offsetting the effects of these unfavorable items were $4 million of lower electric compression expenses from decreased utilization and $4 million of natural gas processing revenues recognized during the nine months ended September 30, 2011 compared to the same period in 2010. The financial impacts associated with these operational activities were largely eliminated as a result of the tracker implementation.

     Expansions. We capitalize a carrying cost (an allowance for equity funds used during construction or AFUDC) on funds related to our construction of long-lived assets that is recorded as other income on our income statements. During the nine months ended September 30, 2011, we benefited from an increase in other income of approximately $16 million associated with the equity portion of AFUDC, primarily related to our 300 Line Project.

     Listed below is a discussion of our expansion projects, including significant updates to our backlog of projects discussed further in our 2010 Annual Report on Form 10-K.

• MPP Project. The MPP project consists of approximately 8 miles of 30-inch pipeline looping and modifications to four existing compressor stations in Pennsylvania which will provide natural gas transportation from the Marcellus shale supply area to existing delivery points on our system. Upon completion, we expect the MPP project to increase natural gas delivery capacity in the region by approximately 235 MMcf/d. All of the firm transportation capacity resulting from this project is fully subscribed with two shippers through executed precedent agreements. We anticipate filing a certificate application with the FERC in late 2011. Pending regulatory approvals, construction is expected to begin in 2013, with a November 1, 2013 in-service date. The expected cost for this project is less than $100 million.

• 300 Line Project. In March 2011, we began construction on the pipeline and the remaining compressor facilities and we placed the project in service on November 1, 2011.

• Northeast Upgrade Project. In March 2011, we filed an application with the FERC for certificate authorization to construct this project and we anticipate receiving approval in the first quarter of 2012. The project is anticipated to be placed in service in November 2013.

     With our recently announced MPP project discussed above, our total expansion capital in the Marcellus shale area will be approximately $1.3 billion.

     Operating and General and Administrative Expenses. During the nine months ended September 30, 2011, our operating and general and administrative expenses were overall $11 million higher compared to the same period in 2010 primarily due to higher benefits and payroll costs.

Regulatory Matters

     In November 2010, we filed a rate case with the FERC proposing an increase in our base tariff rates and the implementation of a fuel volume tracker with a reduction in our fuel retention rates, among other things. In December 2010, the FERC issued an order accepting and suspending the effective date of the proposed rates to June 1, 2011, subject to refund, the outcome of a hearing and other proceedings. In September 2011, we filed a proposed settlement with the FERC, which was uncontested by our customers. The proposed settlement provides for, among other things, an increase in our revenues of approximately $60 million to $70 million annually, net of revenues from excess fuel retention, significant contract extensions until October 2014 and a requirement to file new rates to be effective no earlier than April 2014 but no later than November 2015. Although the FERC has not yet approved the proposed settlement, we believe our accruals established for this matter are adequate.

     In November 2011, the FERC issued an order approving, in part, and rejecting certain portions of our abandonment application related to our October 2010 agreement to sell certain of our offshore pipeline assets and related facilities. The sale was contingent upon receiving approval to collect in our future rates the difference between the regulatory net book value and the purchase price (loss) as well as the designation of certain facilities as non-jurisdictional. We are currently evaluating our response to the FERC order.

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Interest and Debt Expense

     Interest and debt expense for the nine months ended September 30, 2011, was $15 million lower than the same period in 2010 due to an increase in capitalized AFUDC related to debt on our 300 Line Project and lower accruals related to our PCB refund obligations. Additionally, we received a favorable franchise tax settlement in the third quarter of 2011 and as a result our accrued interest related to these taxes was lower compared to the same period in 2010.

Affiliated Interest Income, Net

     The following table shows the average advances due from El Paso and the average short-term interest rates for the nine months ended September 30:

	2011			2010
	(In millions, except for rates)
Average advance due from El Paso	$	919		$	1,009
Average short-term interest rate		1.8	%		1.5	%

Income Tax Expense

     Our effective tax rates of 38 percent and 37 percent for the nine months ended September 30, 2011 and 2010 were higher than the statutory rate of 35 percent primarily due to the effect of state income taxes. Effective October 1, 2011, we changed our tax entity status from a corporation to a limited liability company. As a single member limited liability company, we will continue to record income taxes on a separate return basis and reflect current and deferred income taxes in our financial statements. We do not expect this entity status change to have a material impact on our financial statements.

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Liquidity and Capital Resources

     Our primary sources of liquidity are cash flows from operating activities and amounts available to us under El Paso’s cash management program while our primary uses of cash are for working capital, capital expenditures and debt service requirements. At September 30, 2011, we had a note receivable from El Paso of $702 million of which $52 million was classified as current based on the net amount we anticipate using in the next twelve months considering available cash sources and needs. See Item 1, Financial Statements, Note 6 for a further discussion of El Paso’s cash management program.

     For the nine months ended September 30, 2011 compared to the same period in 2010, our operating cash flows increased by $70 million primarily due to an increase in our reservation revenues as a result of higher tariff rates effective June 1, 2011, and a change in the timing of income tax payments from the third quarter of 2010 to the fourth quarter of 2011. Partially offsetting these cash inflows were settlements of refund obligations associated with our PCB liability.

     Our cash capital expenditures for the nine months ended September 30, 2011 and our estimated capital expenditures for the remainder of this year to expand and maintain our system are listed below.

	Nine Months Ended		2011
	September 30, 2011		Remaining		Total
	(In millions)
Expansion	$	397	$	140	$	537
Maintenance		101		49		150
Other(1)		45		18		63
	$	543	$	207	$	750

⁽¹⁾  Relates to building renovations at our corporate facilities.

     We believe we have adequate liquidity available to us to meet our capital requirements and our existing operating needs through cash flows from operating activities and amounts available to us under El Paso’s cash management program. In addition, we are eligible to borrow amounts available under an El Paso revolving credit facility and are only liable for amounts we directly borrow. During the first half of 2011, El Paso refinanced this credit facility and reduced its overall borrowing capacity from $1.5 billion to $1.25 billion. Certain collateral restrictions under the facility have been modified providing El Paso’s master limited partnership the ability to acquire up to 100 percent ownership interests in us or another El Paso subsidiary, or some combination thereof. This credit facility provides for an elimination of collateral support upon El Paso achieving investment grade status by one of the rating agencies. There were no other significant changes to our restrictive covenants from those reported in our 2010 Annual Report on Form 10-K, other than a change in pricing. Our current cost to borrow under the El Paso credit facility has increased to LIBOR plus 2.25. As of September 30, 2011, El Paso had $472 million of capacity remaining and available to us and our affiliates under this credit agreement, and none of the amount outstanding under the facility was issued or borrowed by us. While we do not anticipate a need to directly access the financial markets in the remainder of 2011 for any of our operating activities or expansion capital needs based on liquidity available to us, market conditions may impact our ability to act opportunistically. Our future plans could also be impacted by the completion of El Paso’s announced acquisition by KMI.

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Commitments and Contingencies

     For a further discussion of our commitments and contingencies, see Item 1, Financial Statements, Note 4, which is incorporated herein by reference and our 2010 Annual Report on Form 10-K.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     Omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

     As of September 30, 2011, we carried out an evaluation under the supervision and with the participation of our management, including our President and Chief Financial Officer (CFO), as to the effectiveness, design and operation of our disclosure controls and procedures. This evaluation considered the various processes carried out under the direction of our disclosure committee in an effort to ensure that information required to be disclosed in the U.S. Securities and Exchange Commission reports we file or submit under the Securities Exchange Act of 1934, as amended (Exchange Act) is accurate, complete and timely. Our management, including our President and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent and/or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our President and CFO concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of September 30, 2011.

Changes in Internal Control Over Financial Reporting

     There were no changes in our internal control over financial reporting during the third quarter of 2011 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

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PART II — OTHER INFORMATION

Item 1. Legal Proceedings

     See Part I, Item 1, Financial Statements, Note 4, which is incorporated herein by reference.

Item 1A. Risk Factors

CAUTIONARY STATEMENTS FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

     This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions or beliefs that we believe to be reasonable; however, assumed facts almost always vary from actual results, and differences between assumed facts and actual results can be material, depending upon the circumstances. Where, based on assumptions, we or our management express an expectation or belief as to future results, that expectation or belief is expressed in good faith and is believed to have a reasonable basis. We cannot assure you, however, that the stated expectation or belief will occur, be achieved or accomplished. The words “believe,” “expect,” “estimate,” “anticipate,” and similar expressions will generally identify forward-looking statements. All of our forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report.

     Important factors that could cause actual results to differ materially from estimates or projections contained in forward-looking statements are described in our 2010 Annual Report on Form 10-K under Part I, Item 1A, Risk Factors. Below is an additional risk factor as a result of the recent announcement of KMI’s proposed merger with El Paso.

Risk Related to the Proposed Merger between Kinder Morgan and El Paso

     Closing of the proposed transactions may trigger change in control provisions in certain agreements to which we are a party.

     On October 16, 2011, El Paso announced a definitive agreement with KMI whereby KMI will acquire El Paso. As a result of the announcement, we were placed on negative outlook by Moody’s. During the pendency of the proposed transaction, a decrease in El Paso’s or Kinder Morgan’s perceived creditworthiness may have an adverse effect on our perceived creditworthiness, possibly resulting in a downgrade of credit ratings, tightening of credit under our existing credit facilities, increasing our borrowing costs or, upon completion of the transactions with KMI could trigger certain change of control provisions to certain agreements to which we are a party. If we are unable to negotiate waivers of those change of control provisions, the counterparties may exercise their rights and remedies under the agreements, potentially terminating the agreements or seeking monetary damages. Even if we are able to negotiate waivers, the counterparties may require a fee for such waiver or seek to renegotiate the agreements on less favorable terms.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

     Omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

Item 3. Defaults Upon Senior Securities

     Omitted from this report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

Item 4. (Removed and Reserved)

Item 5. Other Information

     None.

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Item 6. Exhibits

     The Exhibit Index is incorporated herein by reference.

     The agreements included as exhibits to this report are intended to provide information regarding their terms and not to provide any other factual or disclosure information about us or the other parties to the agreements. The agreements may contain representations and warranties by the parties to the agreements, including us, solely for the benefit of the other parties to the applicable agreement and:

• should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;

• may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;

• may apply standards of materiality in a way that is different from what may be viewed as material to certain investors; and

• were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.

     Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, Tennessee Gas Pipeline Company, L.L.C. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TENNESSEE GAS PIPELINE COMPANY, L.L.C.
Date: November 7, 2011	/s/ Norman G. Holmes
	Norman G. Holmes
	President (Principal Executive Officer)
Date: November 7, 2011	/s/ John R. Sult
	John R. Sult
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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TENNESSEE GAS PIPELINE COMPANY, L.L.C.

EXHIBIT INDEX

     Each exhibit identified below is filed as a part of this Report.

Exhibit
Number	Description
3.A	Limited Liability Company Agreement of Tennessee Gas Pipeline Company, L.L.C., dated October 1, 2011.
31.A	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.B	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.A	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.B	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document.
101.SCH	XBRL Schema Document.
101.CAL	XBRL Calculation Linkbase Document.
101.LAB	XBRL Labels Linkbase Document.
101.PRE	XBRL Presentation Linkbase Document.

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EX-3.A

Exhibit 3.A

LIMITED LIABILITY COMPANY AGREEMENT
OF
TENNESSEE GAS PIPELINE COMPANY, L.L.C.

A DELAWARE LIMITED LIABILITY COMPANY

PREAMBLE

     This LIMITED LIABILITY COMPANY AGREEMENT of Tennessee Gas Pipeline Company, L.L.C. (the “Company”) is entered into effective as of the 1st day of October, 2011, by El Paso TGPC Investments, L.L.C..

     WHEREAS, the Company was formed as a Delaware corporation under the Delaware General Corporation Law on June 9, 1947; and

     WHEREAS, the Company converted to a limited liability company under the Act pursuant to the filing of the Certificate of Conversion (as hereinafter defined) and the Certificate of Formation (as hereinafter defined), each effective on October 1, 2011;

     NOW, THEREFORE, the Member (as hereinafter defined) hereby adopts the following:

ARTICLE I
DEFINITIONS AND TERMS

     SECTION 1.01. Definitions. Unless the context otherwise requires, the following terms shall have the following meanings for the purposes of this Agreement:

     “Act” means the Delaware Limited Liability Company Act, 6 Del C. §§ 18-101, et seq., as amended from time to time (or any corresponding provisions of succeeding Law).

     “Agreement” means this Limited Liability Company Agreement, as the same may be amended from time to time.

     “Capital Contribution” means a capital contribution made by the Member pursuant to Section 3.01 or Section 3.02.

     “Certificate of Conversion” means the Certificate of Conversion filed with the Secretary of State of the State of Delaware effective as of October 1, 2011, to convert the Company from a Delaware corporation to a Delaware limited liability company pursuant to the Act, as originally executed by Stacy J. James (as an authorized person within the meaning of the Act).

     “Certificate of Formation” means the Certificate of Formation filed with the Secretary of State of the State of Delaware effective as of October 1, 2011, to form the Company pursuant to the Act, as originally executed by Stacy J. James (as an authorized person within the meaning of the Act) and as amended, modified, supplemented or restated from time to time, as the context requires.

     “Claim” means any and all losses, claims, damages, liabilities (joint or several), expenses (including reasonable legal fees and expenses), judgments, penalties, interest, settlements or other amounts arising from any and all claims, demands, actions, suits or proceedings (whether civil, criminal, administrative or investigative), deficiencies, levies, duties, imposts, remediation and cleanup costs and natural resources damages.

     “Distributable Cash” means cash (in U.S. dollars) of the Company that the Member determines is available for distribution.

     “Interest” means, with respect to any Member the ownership interest in the Company at any time, as set forth on Exhibit A, including the right of the Member to any and all benefits to which the Member may be entitled as provided in this Agreement, together with the obligations of the Member to comply with all the terms and provisions of this Agreement.

     “Law” means any applicable constitutional provision, statute, act, code (including the Internal Revenue Code of 1986, as amended and in effect from time to time), law, regulation, rule, ordinance, order, decree, ruling, proclamation, notice, resolution, judgment, decision, declaration, policy statement or interpretative or advisory opinion or letter of a Governmental Authority having valid jurisdiction.

     “Member” means El Paso TGPC Investments, L.L.C., and any other member or members admitted to the Company in accordance with this Agreement or any amendment or restatement hereof.

     “Person” has the meaning set forth in the Act.

     SECTION 1.02. Terms Generally. The definitions in Section 1.01 shall apply equally to both the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. All references herein to Articles, Sections and Exhibits shall be deemed to be references to Articles and Sections of, and Exhibits to, this Agreement unless the context shall otherwise require. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation.”

ARTICLE II
FORMATION

     SECTION 2.01. Name. The name of the Company shall be as set forth in the Preamble hereof. All business of the Company shall be conducted under such name and title to all property, real, personal, or mixed, owned by or leased to the Company shall be held in such name. Notwithstanding the preceding sentence, the Member may change the name of the Company or adopt such trade or fictitious names as it may determine.

     SECTION 2.02. Formation and Term. The Company was first incorporated as a Delaware corporation under Delaware General Corporation Law on June 9, 1947. By filing the Certificate of Conversion and the Certificate of Formation, the Company has been converted and

2

continued as a Delaware limited liability company under the Act. The term of the Company shall continue until terminated as provided in Article VIII hereof.

     SECTION 2.03. Principal Place of Business. The principal place of business of the Company shall be located at 1001 Louisiana, Houston, Texas 77002. The Member may establish other offices at other locations.

     SECTION 2.04. Agent for Service of Process. The Corporation Trust Company shall be the registered agent of the Company upon whom process against it may be served. The address of such agent within the State of Delaware is: Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801.

     SECTION 2.05. Purposes of the Company. The Company has been organized to engage in any lawful act or activity for which a Delaware limited liability company may be formed.

ARTICLE III
CAPITAL CONTRIBUTIONS

     SECTION 3.01. Capital Contribution. The Member made contributions in the amounts shown in the records of the Company.

     SECTION 3.02. Additional Capital Contributions. If at any time the Member shall determine that additional funds or property are necessary or desirable to meet the obligations or needs of the Company, the Member may make additional Capital Contributions.

     SECTION 3.03. Limitation on Liability. The liability of the Member shall be limited to its Interest in the Company, and the Member shall not have any personal liability to contribute money to, or in respect of, the liabilities or the obligations of the Company, except as set forth in the Act.

     SECTION 3.04. Withdrawal of Capital; Interest. The Member may not withdraw capital or receive any distributions, except as specifically provided herein. No interest shall be paid by the Company on any Capital Contributions.

ARTICLE IV
DISTRIBUTIONS

     SECTION 4.01. Distributions. Except as otherwise provided in the Act, all Distributable Cash of the Company shall be distributed to the Member, or distributions in kind may be made to the Member at such times as the Member shall determine.

ARTICLE V
BOOKS AND RECORDS

     SECTION 5.01. Books and Records. The Member shall keep or cause to be kept complete and accurate books of account and records that shall reflect all transactions and other matters and include all documents and other materials with respect to the Company’s business

3

that are usually entered into and maintained by Persons engaged in similar businesses. All Company financial statements shall be accurate in all material respects, shall fairly present the financial position of the Company and the results of its operations and Distributable Cash and transactions in its reserve accounts, and shall be prepared in accordance with generally accepted accounting principles, subject, in the case of quarterly statements, to year-end adjustments. The books of the Company shall at all times be maintained at the principal office of the Company or at such other location as the Member decides.

ARTICLE VI
MANAGEMENT OF THE COMPANY

     SECTION 6.01. Management. The management of the Company shall be under the direction of the Member, who may, from time to time, designate one or more persons to be officers of the Company, with such titles as the Member may determine, including those positions set forth in Section 6.02.

     SECTION 6.02. Officers. Such of the following officers shall be elected as the Member deems necessary or appropriate: a President, one or more Executive Vice Presidents, one or more Senior Vice Presidents, one or more Vice Presidents, a Secretary, a Treasurer, a Controller, one or more Assistant Vice Presidents, Assistant Secretaries, Assistant Treasurers and Assistant Controllers, and such other officers with such titles and powers and/or duties as the Member shall from time to time determine. Officers may be designated for particular areas of responsibility and simultaneously serve as officers of subsidiaries or divisions. Any officer so elected may resign at any time upon written notice to the Member. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein, no acceptance of such resignation shall be necessary to make it effective. Any officer may be removed, with or without cause, by the Member. Any such removal shall be without prejudice to the contractual rights of such officer, if any, with the Company, but the election or appointment of any officer shall not of itself create contractual rights. Any number of offices may be held by the same person. Any vacancy occurring in any office by death, resignation, removal or otherwise may be filled for the unexpired portion of the term by the Member.

     (a) President. The President shall have general control of the business, affairs, operations and property of the Company, subject to the supervision of the Member. He may sign or execute, in the name of the Company, all deeds, mortgages, bonds, contracts or other undertakings or instruments, except in cases where the signing or execution thereof shall have been expressly delegated by the Member to some other officer or agent of the Company. He shall have and may exercise such powers and perform such duties as may be provided by Law or as are incident to the office of President of a company (as if the Company were a Delaware corporation) and such other duties as are assigned from time to time by the Member.

     (b) Vice Presidents. Each Executive Vice President, Senior Vice President, Vice President and Assistant Vice President shall have such powers and perform such duties as may be provided by Law or as may from time to time be assigned to him, either generally or in specific instances, by the Member or the President. Any Executive Vice President or Senior Vice President may perform any of the duties or exercise any of the

4

powers of the President at the request of, or in the absence or disability of, the President or otherwise as occasion may require in the administration of the business and affairs of the Company.

     Each Executive Vice President, Senior Vice President, Vice President and Assistant Vice President shall have authority to sign or execute all deeds, mortgages, bonds, contracts or other instruments on behalf of the Company, except in cases where the signing or execution thereof shall have been expressly delegated by the Member to some other officer or agent of the Company.

     (c) Secretary. The Secretary shall keep the records of the Company, in books provided for the purpose; he shall be custodian of the seal or seals of the Company; he shall see that the seal is affixed to all documents requiring same, the execution of which, on behalf of the Company, under its seal, is duly authorized, and when said seal is so affixed he may attest same; and, in general, he shall perform all duties incident to the office of the secretary of a company (as if the Company were a Delaware corporation), and such other duties as from time to time may be assigned to him by the Member or the President or as may be provided by Law. Any Assistant Secretary may perform any of the duties or exercise any of the powers of the Secretary at the request of, or in the absence or disability of, the Secretary or otherwise as occasion may require in the administration of the business and affairs of the Company.

     (d) Treasurer. The Treasurer shall have charge of and be responsible for all funds, securities, receipts and disbursements of the Company, and shall deposit, or cause to be deposited, in the name of the Company, all moneys or other valuable effects in such banks, trust companies or other depositories as shall, from time to time, be selected by or under authority of the Member; if required, he shall give a bond for the faithful discharge of his duties, with such surety or sureties as the Member may determine; he shall keep or cause to be kept full and accurate records of all receipts and disbursements in books of the Company and shall render to the Member or the President, whenever requested, an account of the financial condition of the Company (as if the Company were a Delaware corporation); and, in general, he shall perform all the duties incident to the office of treasurer of a company, and such other duties as may be assigned to him by the Member or the President or as may be provided by Law.

     (e) Controller. The Controller shall be the chief accounting officer of the Company. He shall keep full and accurate accounts of the assets, liabilities, commitments, receipts, disbursements and other financial transactions of the Company; shall cause regular audits of the books and records of account of the Company and supervise the preparation of the Company’s financial statements; and, in general, he shall perform the duties incident to the office of controller of a company (as if the Company were a Delaware corporation) and such other duties as may be assigned to him by the Member or the President or as may be provided by Law. If no Controller is elected by the Member, the Treasurer shall perform the duties of the office of controller.

     (f) Tax Officer. The Tax Officer shall have the authority to sign or execute on behalf of this Company any federal, foreign, Indian, state or local tax return or report,

5

claim for refund of taxes, extension of a statute of limitation, administrative tax appeals filings and any other document relating to this Company’s tax responsibilities.

ARTICLE VII
TRANSFERS OF COMPANY INTERESTS

     SECTION 7.01. Transfers. The Member may, directly or indirectly, sell, assign, transfer, pledge, hypothecate or otherwise dispose of all or any part of its Interest. Any Person acquiring the Member’s Interest shall be admitted to the Company as a substituted Member with no further action being required on the part of the Member.

ARTICLE VIII
DISSOLUTION AND TERMINATION

     SECTION 8.01. Dissolution. The Company shall be dissolved and its business wound up upon the decision made at any time by the Member to dissolve the Company, or upon the occurrence of any event of dissolution under the Act.

     SECTION 8.02. Liquidation. Upon dissolution, the Company’s business shall be liquidated in an orderly manner. The Member shall wind up the affairs of the Company pursuant to this Agreement and in accordance with the Act, including, without limitation, Section 18-804 thereof.

     SECTION 8.03. Distribution of Property. If in the discretion of the Member it becomes necessary to make a distribution of Company property in kind in connection with the liquidation of the Company, such property shall be transferred and conveyed to the Member subject to Section 18-804 of the Act.

ARTICLE IX
INDEMNIFICATION

     SECTION 9.01. General. Except to the extent expressly prohibited by the Act, the Company shall indemnify each Person made or threatened to be made a party to any action or proceeding, whether civil or criminal, by reason of the fact that such Person or such Person’s testator or intestate is or was a Member or officer of the Company, against Claims incurred in connection with such action or proceeding, or any appeal therefrom; provided that no such indemnification shall be made if a judgment or other final adjudication adverse to such Person establishes that his conduct did not meet the then applicable minimum statutory standards of conduct; and provided, further, that no such indemnification shall be required in connection with any settlement or other non-adjudicated disposition of any threatened or pending action or proceeding unless the Company has given its prior consent to such settlement or such other disposition, which consent shall not be unreasonably withheld.

     SECTION 9.02. Reimbursement. The Company shall advance or promptly reimburse, upon request, any Person entitled to indemnification hereunder for all expenses, including attorneys’ fees, reasonably incurred in defending any action or proceeding in advance of the final disposition thereof upon receipt of an undertaking by or on behalf of such Person (in form and

6

substance satisfactory to the Company) to repay such amount if such Person is ultimately found not to be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced or reimbursed exceed the amount to which such Person is entitled; provided that such Person shall cooperate in good faith with any request by the Company that common counsel be utilized by the parties to an action or proceeding who are similarly situated unless to do so would be inappropriate due to actual or potential conflicts of interest between or among such parties; and provided, further, that the Company shall only advance attorneys’ fees in respect of legal counsel approved by the Company, such approval not to be unreasonably withheld.

     SECTION 9.03. Availability. The right to indemnification and advancement of expenses under this provision is intended to be retroactive and shall be available with respect to any action or proceeding which relates to events prior to the effective date of this provision.

     SECTION 9.04. Indemnification Agreement. The Company is authorized to enter into agreements with any of its members or officers extending rights to indemnification and advancement of expenses to such Person to the fullest extent permitted by applicable Law, but the failure to enter into any such agreement shall not affect or limit the rights of such Person pursuant to this provision.

     SECTION 9.05. Enforceability. In case any provision in this Article IX shall be determined at any time to be unenforceable in any respect, the other provisions shall not in any way be affected or impaired thereby, and the affected provisions shall be given the fullest possible enforcement in the circumstances, it being the intention of the Company to provide indemnification and advancement of expenses to its members and officers, acting in such capacities, to the fullest extent permitted by Law.

     SECTION 9.06. No Amendments. No amendment or repeal of this provision shall apply to or have any effect on the indemnification of, or advancement of expenses to, the Member or any officer of the Company for, or with respect to, acts or omissions of such Member or officer occurring prior to such amendment or repeal.

     SECTION 9.07. Not Exclusive. The foregoing shall not be exclusive of any other rights to which the Member or any officer may be entitled as a matter of Law and shall not affect any rights to indemnification to which Company personnel other than the Member or officers may be entitled by contract or otherwise.

ARTICLE X
MISCELLANEOUS

     SECTION 10.01. Amendments and Consents. This Agreement may be modified or amended only by the Member.

     SECTION 10.02. Benefits of Agreement. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or the Member.

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     SECTION 10.03. Integration. This Agreement constitutes the entire agreement pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements in connection therewith. No covenant, representation or condition not expressed in this Agreement shall affect, or be effective to interpret, change or restrict, the express provisions of this Agreement.

     SECTION 10.04. Headings. The titles of Articles and Sections of this Agreement are for convenience only and shall not be interpreted to limit or amplify the provisions of this Agreement.

     SECTION 10.05. Severability. Each provision of this Agreement shall be considered separable and if for any reason any provision or provisions hereof are determined to be invalid and contrary to any existing or future Law, such invalidity shall not impair the operation of or affect those portions of this Agreement, which are valid.

     SECTION 10.06. Applicable Law. This Agreement shall be construed in accordance with, and governed by, the Laws of the State of Delaware, without regard to its conflict of law principles.

     SECTION 10.07. Security. Interest shall constitute “securities” within the meaning of, and governed by, (i) Article 8 of the Uniform Commercial Code (including Section 8-102(a)(15) thereof) as in effect from time to time in the State of Delaware and in the State of New York and (ii) Article 8 of the Uniform Commercial Code of any other applicable jurisdiction that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute and the National Conference of Commissioners on Uniform State Laws and approved by the American Bar Association on February 14, 1995.

[Remainder of page intentionally left blank; signature page follows.]

8

     IN WITNESS WHEREOF, this Agreement has been duly executed by El Paso TGPC Investments, L.L.C., effective as of the 1st day of October, 2011.

EL PASO TGPC INVESTMENTS, L.L.C.
By:	/s/ Marguerite Woung-Chapman Marguerite Woung-Chapman
	President and Chief Executive Officer

Exhibit A
Interests

Member	Percentage Interest
El Paso TGPC Investments, L.L.C.		100	%
1001 Louisiana Street Houston, Texas 77002

EX-31.A

Exhibit 31.A

CERTIFICATION

I, Norman G. Holmes, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tennessee Gas Pipeline Company, L.L.C.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2011

/s/ Norman G. Holmes  

Norman G. Holmes 

President
(Principal Executive Officer)
Tennessee Gas Pipeline Company, L.L.C. 

EX-31.B

Exhibit 31.B

CERTIFICATION

I, John R. Sult, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Tennessee Gas Pipeline Company, L.L.C.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; and

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; and

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 7, 2011

/s/ John R. Sult  

John R. Sult 

Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Tennessee Gas Pipeline Company, L.L.C.

EX-32.A

Exhibit 32.A

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q for the period ending September 30, 2011, of Tennessee Gas Pipeline Company, L.L.C. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Norman G. Holmes, President, certify (i) that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Norman G. Holmes  

Norman G. Holmes 

President
(Principal Executive Officer)
Tennessee Gas Pipeline Company, L.L.C.

November 7, 2011 

A signed original of this written statement required by Section 906 has been provided to Tennessee Gas Pipeline Company, L.L.C. and will be retained by Tennessee Gas Pipeline Company, L.L.C. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.B

Exhibit 32.B

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report on Form 10-Q for the period ending September 30, 2011, of Tennessee Gas Pipeline Company, L.L.C. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, John R. Sult, Executive Vice President and Chief Financial Officer, certify (i) that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ John R. Sult  

John R. Sult 

Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Tennessee Gas Pipeline Company, L.L.C.

November 7, 2011 

A signed original of this written statement required by Section 906 has been provided to Tennessee Gas Pipeline Company, L.L.C. and will be retained by Tennessee Gas Pipeline Company, L.L.C. and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Condensed Consolidated Balance Sheets (Unaudited) (USD $) In Millions	Sep. 30, 2011	Dec. 31, 2010
Current assets
Cash and cash equivalents	$ 0	$ 0
Accounts and note receivable
Customer, net of allowance	13	24
Affiliates	75	378
Other	51	51
Materials and supplies	56	44
Deferred income taxes	72	43
Other	15	5
Total current assets	282	545
Property, plant and equipment, at cost	5,356	4,951
Less accumulated depreciation and amortization	995	1,056
Property, plant and equipment before additional acquisition cost assigned to utility plant	4,361	3,895
Additional acquisition cost assigned to utility plant, net	1,893	1,923
Total property, plant and equipment, net	6,254	5,818
Other long-term assets
Note receivable from affiliate	650	617
Investment in unconsolidated affiliate	58	56
Other	82	76
Total other long-term assets	790	749
Total assets	7,326	7,112
Accounts payable
Trade	51	90
Affiliates	34	38
Other	97	57
Current maturities of long-term debt	86	86
Taxes payable	72	23
Contractual deposits	33	28
Asset retirement obligations	25	28
Accrued interest	47	33
Accrued liabilities	55	13
Regulatory liabilities	60	78
Other	13	25
Total current liabilities	573	499
Long-term debt, less current maturities	1,768	1,765
Other long-term liabilities
Deferred income taxes	1,473	1,422
Regulatory liabilities	56	90
Other	30	35
Total other long-term liabilities	1,559	1,547
Commitments and contingencies (Note 4)
Stockholder's equity
Common stock, par value $5 per share; 300 shares authorized; 208 shares issued and outstanding	0	0
Additional paid-in capital	2,209	2,209
Retained earnings	1,217	1,092
Total stockholder's equity	3,426	3,301
Total liabilities and stockholder's equity	$ 7,326	$ 7,112

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
Stockholder's equity
Common stock, par value	$ 5	$ 5
Common stock, shares authorized	300	300
Common stock, shares issued	208	208
Common stock, shares outstanding	208	208

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2011	Nov. 03, 2011
Document and Entity Information [Abstract]
Entity Registrant Name	Tennessee Gas Pipeline Company, L.L.C.
Entity Central Index Key	0000097142
Document Type	10-Q
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		208

XML

Credit Facilities

9 Months Ended

Sep. 30, 2011

Credit Facilities [Abstract]

Credit Facilities

3. Credit Facilities

     We are eligible to borrow amounts available under an El Paso revolving credit facility and are only liable for amounts we directly borrow. During the first half of 2011, El Paso refinanced this credit facility and reduced its overall borrowing capacity from $1.5 billion to $1.25 billion. Certain collateral restrictions under the facility have been modified providing El Paso’s master limited partnership the ability to acquire up to 100 percent ownership interests in us or another El Paso subsidiary, or some combination thereof. This credit facility provides for an elimination of collateral support upon El Paso achieving investment grade status by one of the rating agencies. There were no other significant changes to our restrictive covenants from those reported in our 2010 Annual Report on Form 10-K, other than a change in pricing. Our current cost to borrow under the El Paso credit facility has increased to LIBOR plus 2.25. As of September 30, 2011, El Paso had $472 million of capacity remaining and available to us and our affiliates under this credit agreement, and none of the amount outstanding under the facility was issued or borrowed by us.

XML

Basis of Presentation and Significant Accounting Policies

9 Months Ended

Sep. 30, 2011

Basis of Presentation and Significant Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

1. Basis of Presentation and Significant Accounting Policies

  Basis of Presentation

     We prepared this Quarterly Report on Form 10-Q under the rules and regulations of the United States Securities and Exchange Commission. As an interim period filing presented using a condensed format, it does not include all of the disclosures required by U.S. generally accepted accounting principles, and should be read along with our 2010 Annual Report on Form 10-K. The financial statements as of September 30, 2011, and for the quarters and nine months ended September 30, 2011 and 2010, are unaudited. The condensed consolidated balance sheet as of December 31, 2010 was derived from the audited balance sheet filed in our 2010 Annual Report on Form 10-K. In our opinion, we have made adjustments, all of which are of a normal, recurring nature, to fairly present our interim period results. Due to the seasonal nature of our business, information for interim periods may not be indicative of our operating results for the entire year. Our disclosures in this Form 10-Q are an update to those provided in our 2010 Annual Report on Form 10-K.

     Effective October 1, 2011, we converted our legal structure to a limited liability company and changed our name to Tennessee Gas Pipeline Company, L.L.C. For a further discussion of our conversion to a limited liability company, see Note 6.

     On October 16, 2011, El Paso Corporation (El Paso), our indirect parent, announced a definitive agreement with Kinder Morgan, Inc. (KMI) whereby KMI will acquire El Paso in a transaction that values El Paso at approximately $38 billion including the assumption of debt. The transaction has been approved by each company’s board of directors but remains subject to the approvals of El Paso shareholders, the Federal Trade Commission (FTC) and other customary regulatory and other approvals. The approval of KMI shareholders will also be required, but a voting agreement has been executed by the majority of the shareholders of KMI to support the transaction. The completion of the merger may trigger change in control provisions in certain agreements (e.g. debt) to which we are a party.

  Significant Accounting Policies

     There were no changes in the significant accounting policies described in our 2010 Annual Report on Form 10-K and no significant accounting pronouncements issued but not yet adopted as of September 30, 2011.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2011

Commitments and Contingencies [Abstract]

Commitments and Contingencies

4. Commitments and Contingencies

  Legal Proceedings

     We and our affiliates are named defendants in numerous legal proceedings and claims that arise in the ordinary course of our business. For each of these matters, we evaluate the merits of the case or claim, our exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If we determine that an unfavorable outcome is probable and can be estimated, we establish the necessary accruals. While the outcome of these matters cannot be predicted with certainty, and there are still uncertainties related to the costs we may incur, based upon our evaluation and experience to date, we had no accruals for our outstanding legal proceedings at September 30, 2011. It is possible, however, that new information or future developments could require us to reassess our potential exposure related to these matters and establish accruals accordingly.

  Rates and Regulatory Matter

     Rate Case. In November 2010, we filed a rate case with the Federal Energy Regulatory Commission (FERC) proposing an increase in our base tariff rates and the implementation of a fuel volume tracker with a reduction in our fuel retention rates, among other things. In December 2010, the FERC issued an order accepting and suspending the effective date of the proposed rates to June 1, 2011, subject to refund, the outcome of a hearing and other proceedings. In September 2011, we filed a proposed settlement with the FERC, which was uncontested by our customers. The proposed settlement provides for, among other things, an increase in our revenues of approximately $60 million to $70 million annually, net of revenues from excess fuel retention, significant contract extensions until October 2014 and a requirement to file new rates to be effective no earlier than April 2014 but no later than November 2015. Although the FERC has not yet approved the proposed settlement, we believe our accruals established for this matter are adequate.

  Environmental Matters

     We are subject to federal, state and local laws and regulations governing environmental quality and pollution control. These laws and regulations require us to remove or remedy the effect of the disposal or release of specified substances at current and former operating sites. At September 30, 2011, our accrual was approximately $4 million for expected remediation costs and associated onsite, offsite and groundwater technical studies and for related environmental legal costs; however, we estimate that our exposure could be as high as $9 million. Our accrual includes approximately $1 million for environmental contingencies related to properties we previously owned.

     Our environmental remediation projects are in various stages of completion. Our recorded liabilities reflect our current estimates of amounts we will spend to remediate these sites. However, depending on the stage of completion or assessment, the ultimate extent of contamination or remediation required may not be known. As additional assessments occur or remediation efforts continue, we may incur additional liabilities.

     Polychlorinated Biphenyls (PCB) Cost Recoveries and Refund. Since 1994, we have been conducting remediation activities at certain of our compressor stations associated with PCBs and other hazardous materials. We have collected amounts, substantially in excess of remediation costs to date, through a surcharge to our customers under a settlement approved by the FERC in November of 1995. In November 2009, the FERC approved an amendment to the 1995 settlement that provides for interim refunds over a three year period of approximately $157 million of our collected amounts plus interest of 8%. Through September 30, 2011, we have refunded approximately $122 million, including interest, to our customers. Our remaining refund obligations of approximately $60 million, including interest, are recorded as current regulatory liabilities on our balance sheet as of September 30, 2011, based on the timing of when these amounts are expected to be refunded to our customers.

     Superfund Matters. Included in our recorded environmental liabilities are projects where we have received notice that we have been designated or could be designated as a Potentially Responsible Party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund, or state equivalents for four active sites. Liability under the federal CERCLA statute may be joint and several, meaning that we could be required to pay in excess of our pro rata share of remediation costs. We consider the financial strength of other PRPs in estimating our liabilities. Accruals for these matters are included in the environmental reserve discussed above.

     For the remainder of 2011, we estimate that our total remediation expenditures will be approximately $1 million, most of which will be expended under government directed clean-up plans. In addition, we expect to make capital expenditures for environmental matters of approximately $9 million in the aggregate for the remainder of 2011 through 2015, including capital expenditures associated with the impact of the Environmental Protection Agency rule on emissions of hazardous air pollutants from reciprocating internal combustion engines which are subject to regulations with which we have to be in compliance by October 2013.

     It is possible that new information or future developments could require us to reassess our potential exposure related to environmental matters. We may incur significant costs and liabilities in order to comply with existing environmental laws and regulations. It is also possible that other developments, such as increasingly strict environmental laws, regulations and orders of regulatory agencies, as well as claims for damages to property and the environment or injuries to employees and other persons resulting from our current or past operations, could result in substantial costs and liabilities in the future. As this information becomes available, or other relevant developments occur, we will adjust our accrual amounts accordingly. While there are still uncertainties related to the ultimate costs we may incur, based upon our evaluation and experience to date, we believe our reserves are adequate.

  Other Commitments

     For a further discussion of our purchase obligations and other commercial commitments, see our 2010 Annual Report on Form 10-K.

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Accounts Receivable Sales Program

9 Months Ended

Sep. 30, 2011

Accounts Receivable Sales Program [Abstract]

Accounts Receivable Sales Program

5. Accounts Receivable Sales Program

     We participate in an accounts receivable sales program where we sell receivables in their entirety to a third party financial institution (through a wholly-owned special purpose entity). The sale of these accounts receivable (which are short-term assets that generally settle within 60 days) qualify for sale accounting. The third party financial institution involved in our accounts receivable sales program acquires interests in various financial assets and issues commercial paper to fund those acquisitions. We do not consolidate the third party financial institution because we do not have the power to control, direct, or exert significant influence over its overall activities since our receivables do not comprise a significant portion of its operations.

     In connection with our accounts receivable sales, we receive a portion of the sales proceeds up front and receive an additional amount upon the collection of the underlying receivables (which we refer to as a deferred purchase price). Our ability to recover the deferred purchase price is based solely on the collection of the underlying receivables. The tables below contain information related to our accounts receivable sales program.

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
			(In millions)
Accounts receivable sold to the third-party financial institution(1)	$	271	$	247	$	687	$	676
Cash received for accounts receivable sold under the program		135		117		375		390
Deferred purchase price related to accounts receivable sold		136		130		312		286
Cash received related to the deferred purchase price		135		128		301		306
Amount paid in conjunction with terminated program(2)		—		—		—		40

(1)	During the quarters and nine months ended September 30, 2011 and 2010, losses recognized on the sale of accounts receivable were immaterial.
(2)	In January 2010, we terminated our previous accounts receivable sales program and paid $40 million to acquire the related senior interests in certain receivables under that program. See our 2010 Annual Report on Form 10-K for further information.

	September 30,		December 31,
	2011		2010
	(In millions)
Accounts receivable sold and held by third-party financial institution	$	91	$	75
Uncollected deferred purchase price related to accounts receivable sold(1)		46		35

⁽¹⁾   Initially recorded at an amount which approximates its fair value using observable inputs other than quoted prices in active markets.

     The deferred purchase price related to the accounts receivable sold is reflected as other accounts receivable on our balance sheet. Because the cash received up front and the deferred purchase price relate to the sale or ultimate collection of the underlying receivables, and are not subject to significant other risks given their short term nature, we reflect all cash flows under the accounts receivable sales program as operating cash flows on our statement of cash flows. Under the accounts receivable sales program, we service the underlying receivables for a fee. The fair value of this servicing agreement, as well as the fees earned, were not material to our financial statements for the quarters and nine months ended September 30, 2011 and 2010.

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Investment in Unconsolidated Affiliate and Transactions with Affiliates

9 Months Ended

Sep. 30, 2011

Investment in Unconsolidated Affiliate and Transactions with Affiliates [Abstract]

Investment in Unconsolidated Affiliate and Transactions with Affiliates

6. Investment in Unconsolidated Affiliate and Transactions with Affiliates

  Investment in Unconsolidated Affiliate

     We have a 50 percent ownership interest in Bear Creek Storage Company, L.L.C. (Bear Creek), a joint venture with Southern Natural Gas Company, L.L.C., our affiliate. For the nine months ended September 30, 2011 and 2010, we received $9 million and $10 million in cash distributions from Bear Creek. Also, during the third quarter of 2010, Bear Creek utilized its note receivable balance under the cash management program with El Paso to pay a cash distribution to its partners, including $23 million to us.

     Summarized financial information for our proportionate share of Bear Creek is presented as follows:

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
			(In millions)
Operating results data:
Operating revenues	$	5	$	5	$	15	$	15
Operating expenses		1		1		4		4
Income from continuing operations and net income		4		4		11		11

  Transactions with Affiliates

     Cash Management Program. We participate in El Paso’s cash management program which matches short-term cash surpluses and needs of participating affiliates, thus minimizing total borrowings from outside sources. El Paso uses the cash management program to settle intercompany transactions between participating affiliates. We have historically advanced cash to El Paso in exchange for an affiliated note receivable that is due upon demand. At September 30, 2011 and December 31, 2010, we had a note receivable from El Paso of $702 million and $976 million. At September 30, 2011, we have classified $52 million of this receivable as current on our balance sheet based on the net amount we anticipate using in the next twelve months considering available cash sources and needs. The interest rate on this note is variable and was 2.5% and 1.5% at September 30, 2011 and December 31, 2010.

     Distributions. In October 2011, we distributed our corporate facilities and certain other assets and liabilities to our parent. The net distributions were approximately $325 million.

     Income Taxes. El Paso files consolidated U.S. federal and certain state tax returns which include our taxable income. Prior to our conversion to a limited liability company which is further discussed below, we filed and paid taxes directly to certain state taxing authorities. At September 30, 2011, we had federal and state income taxes payable of $46 million and a net federal and state income taxes receivable of $4 million at December 31, 2010. The majority of these balances, as well as deferred income taxes and amounts associated with the resolution of unrecognized tax benefits, will become payable to or receivable from El Paso.

     Effective October 1, 2011, we changed our tax entity status from a corporation to a limited liability company. As a single member limited liability company, we will continue to record income taxes on a separate return basis and reflect current and deferred income taxes in our financial statements. We do not expect this entity status change to have a material impact on our financial statements.

     Other Affiliate Balances. At September 30, 2011 and December 31, 2010, we had contractual deposits from our affiliates of $10 million.

     Affiliate Revenues and Expenses. We enter into transactions with our affiliates within the ordinary course of business. For a further discussion of our affiliated transactions, see our 2010 Annual Report on Form 10-K. The following table shows revenues and charges from our affiliates.

	Quarter Ended				Nine Months Ended
	September 30,				September 30,
	2011		2010		2011		2010
			(In millions)
Revenues(1)	$	9	$	5	$	82	$	15
Operation and maintenance expenses		18		17		53		58
Reimbursement of operating expenses		19		14		53		44

⁽¹⁾  During the nine months ended September 30, 2011, we sold 9.5 TBtu of natural gas not used in operations to our affiliate, El Paso Marketing, L.P. In June 2011, we terminated our contract to sell gas to El Paso Marketing, L.P. in connection with the implementation of a fuel volume tracker as part of our rate case filed with the FERC.

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Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $) In Millions	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities
Net income	$ 125	$ 87
Adjustments to reconcile net income to net cash from operating activities
Depreciation and amortization	148	148
Deferred income tax expense	22	49
Earnings from unconsolidated affiliate, adjusted for cash distributions	(2)	22
Other non-cash income items	(26)	(6)
Asset and liability changes	(4)	(107)
Net cash provided by operating activities	263	193
Cash flows from investing activities
Capital expenditures	(543)	(193)
Net change in note receivable from affiliate	274	327
Other	6	7
Net cash provided by (used in) investing activities	(263)	141
Cash flows from financing activities
Dividend paid to parent	0	(334)
Net cash used in financing activities	0	(334)
Net change in cash and cash equivalents	0	0
Cash and cash equivalents
Beginning of period	0	0
End of period	$ 0	$ 0

XML

Financial Instruments

9 Months Ended

Sep. 30, 2011

Financial Instruments [Abstract]

Financial Instruments

2. Financial Instruments

     At September 30, 2011 and December 31, 2010, the carrying amounts of cash and cash equivalents and trade receivables and payables represent fair value because of the short-term nature of these instruments. At September 30, 2011 and December 31, 2010, we had an interest bearing note receivable from El Paso of $702 million and $976 million due upon demand, with a variable interest rate of 2.5% and 1.5%. While we are exposed to changes in interest income based on changes to the variable interest rate, the fair value of this note receivable approximates its carrying value due to the note being due on demand and the market-based nature of the interest rate.

     In addition, the carrying amounts of our long-term debt and their estimated fair values, which are based on quoted market prices for the same or similar issues, are as follows:

	September 30, 2011				December 31, 2010
	Carrying		Fair		Carrying		Fair
	Amount		Value		Amount		Value
			(In millions)
Long-term debt, including current maturities	$	1,854	$	2,252	$	1,851	$	2,071

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Condensed Consolidated Statements of Income (Unaudited) (USD $) In Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2011	Sep. 30, 2010
Condensed Consolidated Statements of Income [Abstract]
Operating revenues	$ 224	$ 213	$ 674	$ 637
Operating expenses
Operation and maintenance	84	81	242	235
Depreciation and amortization	51	53	148	148
Taxes, other than income taxes	6	14	41	41
Total operating expenses	141	148	431	424
Operating income	83	65	243	213
Earnings from unconsolidated affiliate	4	4	11	11
Other income, net	17	7	34	16
Interest and debt expense	(26)	(38)	(98)	(113)
Affiliated interest income, net	5	4	12	11
Income before income taxes	83	42	202	138
Income tax expense	33	14	77	51
Net income	$ 50	$ 28	$ 125	$ 87