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.