UNITED STATES
                              Washington, D.C.

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                   EXCHANGE ACT OF 1934 (AMENDMENT NO. )

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                            EL PASO CORPORATION
                          MODERATOR: BRUCE CONNERY
                               MARCH 21, 2003
                               10:00 A.M. EST

OPERATOR: Good morning, ladies and gentlemen, and welcome to the El Paso
Corporation Settlement conference call. At this time, all participants have
been placed on a listen-only mode and the floor will be open for your
questions after today's presentation.

It is now my pleasure to introduce today's host, Mr. Bruce Connery. Sir,
you may begin.

Good morning, and thanks for joining our call. In just a moment, I will
turn the call over to Ron Kuehn, our Chairman and Chief Executive Officer,
but before I do, I need to make you aware of some forward-looking
statements we'll make during the call and also make you aware of proxy

During today's conference call, we will make a number of forward-looking
statements and projections that are made in reliance on the Safe Harbor
Provisions of the Private Securities Litigation Reform Act of 1995. The
Company's made every reasonable effort to ensure that the information and
assumptions on which these statements and projections are based are
current, reasonable and complete. However, a variety of factors could cause
actual results to differ materially from the projections, anticipated
results or other expectations expressed in this call, including, without
limitation: actions by credit rating agencies; the successful
implementation of settlement announced in today's release; receipt of all
necessary judicial and regulatory approvals of the settlement; our ability
to divest certain non-core assets; changes in commodity prices for oil;
natural gas and power; general economic and weather conditions and
geographic regions or markets served by El Paso Corporation and its
affiliates or where operations of the company and its affiliates are
located; the uncertainties associated with governmental regulations;
competition; the successful implementation of the 2003 business plan; and
other factors described in the Company's and its affiliates Securities and
Exchange Commission's filings. While the Company makes these statements and
projections in good faith, neither the Company nor its management can
guarantee that the anticipated future results will be achieved. Reference
must be made to these filings for additional important factors that may
affect actual results.

Prior to its 2003 annual meeting, El Paso will furnish to its shareholders
El Paso's definitive proxy statement related to this meeting, together with
a WHITE proxy card. Shareholders are strongly advised to read this
proxy statement when it becomes available as it will contain important
information. Shareholders will be able to obtain El Paso's proxy statement
in the amendments or supplements to the proxy statement and any other
documents filed by El Paso with the SEC for free at the Internet Web site
maintained by the SEC at www.sec.gov. Copies of the proxy statement and any
of the amendments or supplements to the proxy statement will also be
available for free at El Paso's Internet Web site at www.elpaso.com or by
writing to El Paso Corporation Investor Relations, PO Box 2511, Houston,
Texas, 77252.

In addition, copies of the proxy materials may be requested by contacting
our proxy solicitor, MacKenzie Partners, Inc., at 800-322-2885 toll free,
or by mail at proxy@mackenziepartners.com. To the extent the individuals,
customers, independent industry researchers, financial analysts or El Paso
commissioned research are quoted, it is El Paso's policy to use reasonable
efforts to verify the source and accuracy of the quote. El Paso has not,
however, sought or obtained the consent of the quoted source to the use of
such quotes as proxy soliciting material.

Also, El Paso may express opinions and beliefs, except as otherwise
expressed, attributed to another individual or entity. These opinions and
beliefs are the opinions and beliefs of El Paso. Information regarding the
names and affiliation and interests of individuals who may be deemed
participants in the solicitation of proxies of El Paso shareholders is
contained in Schedule 14a filed by El Paso with the SEC on February 18th,
2003, as amended by Schedule 14a filed by El Paso on March 18th, 2003.

With that aside, I'll turn the call over to Ron Kuehn.

Good morning, everyone, and thank you all for joining us on such short
notice. With me here today from El Paso's management team are: Peggy Heeg,
General Counsel of El Paso Corporation; Brent Austin, President and Chief
Operating Officer; John Somerhalder, President of El Paso's Pipeline Group;
and Dan Collins, Deputy General Counsel for the El Paso Pipeline Group.

This has been an eventful period of time at El Paso. Since this is the
first opportunity that I have had to speak with you in my new role, I
wanted to take a few minutes to give you a brief update on our progress. We
believe we have a solid operational and financial plan in place to address
our challenges. So far, the execution of that plan has been better than
expected. The plan includes focusing on our core businesses. In that
regard, 35-percent of our capital expenditures this year are committed to
maintaining and expanding our pipelines, 52-percent devoted to production,
and the remainder to our other businesses.

The second part of our plan is to exit our non-core businesses quickly and
prudently which we have been doing through a series of asset sales. These
asset sales are crucial to improving the Company's financial liquidity and
our financial flexibility. The effort is going very well. To date we have
closed or signed agreements to sell $1.5 billion of assets so you can see
we are well on the way to achieving our goal of monetizing 3.4 billion of
assets. We recently raised this target from 2.9 billion to 3.4 billion with
the completed sale of our Midcotton (ph) gas reserves for $500 million.

Another tenet of the plan is to simplify our balance sheet while improving
our liquidity. As you know, we recently closed a 1.2 billion two-year
secured loan and used the proceeds to pay off the balance of the Trinity
River financing. This freed up substantial cash which is being generated by
the assets used to secure the Trinity River financing, thus greatly
improving our liquidity. This transaction also enabled us to use the freed
up cash from Trinity River plus cash on hand to retire the $1 billion
Limestone Electron notes. Finally, we also just issued a total of $700
million of bonds at Southern Natural and ANR.

The fourth leg of the plan is to aggressively move forward with getting our
costs inline with what we will be on an ongoing basis. We have to bring our
costs inline with what we are going to be, not what we were. We've made
great progress here, but there is a lot more to be done. Last year, we
reduced annual expenses by $300 million; this year, our target is to
achieve additional savings of at least $150 million.

The final leg of the plan is to resolve the regulatory and litigation
matters hanging over the Company, which leads us directly into today's
announcement. As you all know by now, we have reached a comprehensive
agreement in principle to resolve claims related to the Western Energy
Crisis from September 1996 to the present. This settlement will resolve the
principle litigation and claims against El Paso relating to the sale or
delivery of natural gas and/or electricity in or to California, Washington,
Oregon and Nevada. I am pleased we have secured a global settlement that
will minimize current demands on our liquidity. We will be taking an
estimated after-tax charge of approximately $650 million in the fourth
quarter of 2002 to cover this settlement. Getting these issues behind us
and moving ahead with our business plan is and has been our top priority.

Before I get to the details of the settlement, I want to reiterate that El
Paso's actions were at all times consistent with both the letter and the
spirit of the law. I am convinced the Company and its people have done
nothing wrong, absolutely convinced. However, this litigation has been the
subject of great concern in the financial markets. As objectionable as any
settlement in these circumstances is, it allows us to put the uncertainties
surrounding these issues behind us and move ahead with executing our plan.

This settlement is the result of many hours of hard work involving a very
large number of parties. The parties to this settlement include: private
class action litigants in California; the Governor and Lieutenant Governor
of California; the Attorney Generals of California, Washington, Oregon and
Nevada; the California Public Utilities Commission; the California
Electricity Oversight Board; the California Department of Water Resources;
Pacific Gas and Electric; and Southern California Edison Company. I
particularly want to thank the El Paso team led by Peggy Heeg that helped
navigate this very complex negotiation process.

This settlement is subject to the negotiation of definitive documents. In
addition, the settlement requires the review and approval of the courts and
the FERC. With regard to the FERC, El Paso, the CPUC, PG&E and SoCal Edison
will file a joint request with the FERC to stay the issuance of a decision
in the pending complaint proceeding. I want to be clear that this is an
agreement in principle which means there is still work to be done. We
anticipate that the settlement process can be completed by year end. I want
to reiterate my belief in this Company and its people. El Paso is a great
company with the best employees and assets in the business. I look forward
to getting this settlement approved, moving ahead with our business, and
continuing the impressive progress that we have made on our plans.

I'm going to turn the call over to Peggy Heeg now. Peggy is our General
Counsel and, as I said earlier, was very involved in the negotiation
process. Peggy will review the details of the settlement and then Brent
Austin will follow with financial details. Peggy?

very pleased to be able to announce this comprehensive settlement today.
I'd like to first thank all of the participants who worked so hard to
achieve a settlement that was structured to minimize the current demands on
the Company's liquidity. Today's agreement in principle includes a number
of key elements that I will go over with you.

There are primarily four components to the settlement; up-front payments of
cash and stock, non-cash consideration, additional payments over time, and
certain structural arrangements. Before I turn to the specific components
of the settlement, I want to make clear that we negotiated this settlement
as a package with the settling parties. They have agreed among themselves,
and without our involvement, how they will allocate the package.

Turning first to the up-front payments. El Paso has agreed to pay the
settling parties $100 million in cash. This payment will be made into an
escrow account upon execution of a definitive settlement agreement. El Paso
will also make a $2 million payment from the Company's officer bonus pool.
We will issue $125 million in El Paso common stock to the parties once the
settlement is effective. The number of shares that will be issued will be
based on the average stock price for the 30 trading days prior to
yesterday, the day of the announcement of the settlement. These shares will
be sold within 90 days after issuance.

As to the second element, the non-cash consideration, El Paso will deliver
to California border $45 million worth of natural gas annually for 20 years
commencing in 2004. We have also agreed to reduce the pricing our long-term
power contracts with the California Department of Water Resources by $125
million over the remaining terms of those contracts which run through the
end of 2005.

The third component of the settlement, additional payments over time, the
Company has agreed to make annual payments of $22 million a year for 20
years. This obligation will commence 12 months after execution of a
settlement agreement. El Paso has the option to make 50-percent of any
annual payment in stock.

As to the fourth component of the settlement, the structural agreement, El
Paso's natural gas pipeline system has agreed to maintain its existing
delivery capacity at the California border of 3,290 million cubic feet per
day over a five year period. El Paso will seek FERC authority to assure
that its customers have the contractual right to utilize that capacity on
primary delivery point basis. El Paso has also agreed that no affiliates of
El Paso will subscribe to new capacity on the El Paso natural gas pipeline

As Ron mentioned, El Paso, the CPUC, Pacific Gas and Electric and So Cal
Edison will file a joint request with the FERC today to stay the issuance
of a decision in the pending complaint proceeding at the FERC. The
settlement is subject to review and approval by the courts and the FERC. We
are hopeful that the settlement will be finalized by year end. Although
there is still work to be done to implement this settlement, the agreement
we're announcing today represents a significant milestone for the Company
for the resolution of the Company's litigation and regulatory issues
related to the Western Energy Crisis. This is a major accomplishment given
the number of parties, the complexity of the issues involved and the
financial exposure this settlement eliminates.

Brent Austin is now going to walk you through the financial implications of
the settlement.

very much. This settlement helps our Company with every constituency. It
removes significant market uncertainties surrounding the Company. We are
also pleased that we were able to achieve our primary goal in this
settlement, mainly minimal demands on the Company's current liquidity. This
settlement results in an estimated pre-tax charge of approximately $900
million, which translates into an estimated after-tax charge of
approximately $650 million at a 28-percent tax rate. These amounts
represent the present value of the settlement components, discounted at
10-percent. We will take this charge in the fourth quarter of 2002 as you
will see in the 10-K that we file at the end of this month. In 2003 and
future years, we will record an annual imputed interest charge on the
declining present value of the ongoing elements of the settlement. This
annual cost is expected to be on the order of eight cents per share and
will decline over time.

With respect to the stock component of the settlement, we would expect to
issue approximately 26.4 million common shares once the settlement is
effective. There is also a provision in the settlement that El Paso will
supply natural gas valued at $45 million annually to the California border
for 20 years beginning in January 2004. The actual volume of the gas to be
delivered per year will vary depending upon the level of future gas prices.
However, it is important to note that El Paso's obligation is fixed at $45
million per year. As a result, the Company has no need or plan to hedge
this future obligation. Additional details regarding the settlement will be
included in the Company's Form 10-K which we plan to file at the end of the

With that, we'll now move to the Q&A. The primary purpose of today's call
is to talk about the settlement, so we will only be answering questions
relating to today's announcement. As Ron said earlier, we also have John
Somerhalder and Dan Collins here with us today to help us answer your
questions regarding the settlement. Operator, we're now ready to take

OPERATOR: Thank you. The floor is now open for questions. If you do have a
question, you may press the number one, followed by four on your telephone
keypad at this time. If at any point your question is answered, you may
remove yourself from the queue by pressing the pound key. We do ask that
while you pose your question to please utilize your handset to provide
optimum sound quality. Once again, that is one, followed by four for any
questions at this time. One moment while I poll for questions.

Our first question is coming from Carol Cole of Prudential Securities.
Please go ahead with your question.

CAROL COALE, PRUDENTIAL SECURITIES: Hi, thanks. Good morning. My question
was related to the expected earnings impact to El Paso natural gas on
having to deliver the fixed price of gas. Is this going to be--is there
going to be any impact to revenues or EBIT related to this settlement going
forward that we need to factor into our earnings estimate?

H. BRENT AUSTIN: Carol, I think in terms of the overall costs going
forward, we'll have this imputed interest factor on the declining present
value of the charge. That'll amount to about eight cents a share in 2003
based on our expected number of shares outstanding and that'll decline
gradually over time, seven cents, six cents, six cents, five cents, that
kind of thing.

CAROL COALE: OK, really more the question I was asking is are you going to
be impaired in any way by delivering a fixed price of gas of $45 million a
year on EPNG? Is that going to be a discount to what you're delivering
today since, you know, currently your contract is with other shippers? Is
there any impact to your revenue line or your earnings line? I'm not really
looking at below the line type of...

H. BRENT AUSTIN: No, this will basically be a dollar cost that'll amortize
the liability and it won't necessarily--in fact, I don't expect it will be
incurred at El Paso Natural Gas. That element, the gas--the $45 million of
annual gas value will be likely sourced through El Paso Merchant Energy and
it's not--and it's not definitive. It's exactly how that gas is going to be
supplied at this point in time.

CAROL COALE: OK. All right. That's really the only specific question that I
had. Most of them were answered yesterday. I appreciate it. Thank you.

OPERATOR: Our next question is coming from Jay Yanello of UBS Warburg
(Company: UBS AG; Ticker: UBS; URL: http://www.ubs.com/). Please go ahead
with your question.

JAY YANNELLO, UBS WARBURG: Good morning. I hate to ask this on such a
positive day, but...


JAY YANNELLO:... what could go wrong here? Where are the risks in actually
getting this thing finalized? I would hope that FERC is going to approve
it. Where do you see some of the risks? If you can comment on that, that
would be great.

PEGGY A. HEEG: Yes, we do have quite a few steps that need to be taken. We
have to finalize a definitive agreement; what we have now is a memorandum
of understanding with quite a bit of detail. We also will have to go to the
courts and get class certification and go through this certification
process. And we will also need to get FERC to approve this. The FERC all
along has been encouraging parties to resolve the Western Energy Crisis
litigation and we're optimistic that they'll do so.

JAY YANNELLO:  Thank you.

OPERATOR: Our next question is coming from Anatol Feygin of JP Morgan
(Company: J.P. Morgan Chase & Co. ; Ticker: JPM ; URL:
tttp://www.chase.com/). Please go ahead with your question.

ANATOL FEYGIN, JP MORGAN CHASE: Good morning, everyone. Can you give us a
feel for Arizona and its role in this settlement? Obviously they were--they
were late in filing their complaint. Can you just comment on that?

PEGGY A. HEEG: Yes. As you picked up in the press, Arizona has filed a
lawsuit against El Paso. We have not even been served with that complaint
yet so that lawsuit will continue. We believe that the Arizona lawsuit is
significantly different than the lawsuit we faced in California and
exposure underlying that litigation is significantly different.

If you follow the Firk (ph) case, you realize that one of the big issues
was that the full requirements customers east of California were able to
move more gas away from the California border. So the Arizona customers
were basically able to get the capacity they needed, and were able to buy
the gas in the production area at the lower rates and give it to Arizona.
So we believe the exposure is significantly less.

ANATOL FEYGIN: Right. And one quick follow-up, I guess, to John. Can you
just give us an update on the status of project 2000 and where EPNG
capacity stands right now, and you know, products coming on to expand
capacity east of California and into California?

JOHN W. SOMERHALDER II: Yes, this is John Somerhalder. Where we stand
today, over the last two years we have placed and serviced two additional
blocks of capacity first. As you all know we had some capacity out of
service with the Carlsbad (ph) situation and the reduced pressures that we
were required to operate at. That pressure has now been restored to the
higher-pressure level. That returned in the range of 200 to 250 million a
day of new, existing capacity back to service.

Additionally we have placed in service the all-American line. That has put
on line about 230 million a day of capacity. We also are in the process now
of buying compression equipment for the power up, which we have filed at
Firk (ph), and it's 320 million a day of expansion. That will start coming
online very late this year, early next year, and it will come over a time
period of several months after that.

The net result is we will have added over 500 million a day of new capacity
to serve these markets in addition to putting the capacity at Carlsbad (ph)
back in service. So considerably more capacity available to serve both our
east California customers and our California customers moving forward.

ANATOL FEYGIN: Right, and so maintaining the 32 90 shouldn't be a problem
in any way?

JOHN W. SOMERHALDER II: No, with this level of capacity in service we have
physical capability greater than the 32 90, so this works very well not
only for California, but also it allows the east California customers to
get the capacity they need for their growing markets as well.

ANATOL FEYGIN:  Great.  Thanks very much everyone.


OPERATOR: Our next question is coming from Curt Lawner of CSFB (Company:
Credit Suisse Group; Ticker: CSGKY; URL: http://www.credit-suisse.com/).
Please go ahead with your question.

CURT LAWNER, CREDIT SUISSE FIRST BOSTON: Good morning. My questions were
already asked by Jay and Anatol. Just echo the sentiments of many by
congratulating the whole team for getting this done, including those that
aren't on the call today. Thank you.

PEGGY A. HEEG:  Thank you, Curt.

OPERATOR: Our next question is coming from Charles Wyman of PIMCO. Please
go ahead with your question.

CHARLES WYMAN, PIMCO: Thank you very much. There was standing around in the
press the number of $100 million that was going to be given to the other
states. And Peggy, based on your comments, where the states - that the
states will be making the decision as to how the money will be allocated
can you confirm that you're not paying another $100 million there?

PEGGY A. HEEG:  Yes, I can, I will confirm that.

CHARLES WYMAN: And your net present value based on the 28-percent tax rate
of the settlement is somewhere around 850, Brent?

H. BRENT AUSTIN: No, the pre-tax net present value at a 10-percent discount
rate is about 900 million at a 28-percent tax rate that turns into about
650 million after tax.

CHARLES WYMAN:  Great.  Thank you very much.

OPERATOR: Our next question is coming from Howard Kaminski of Duquesne
Capital. Please go ahead with your question.

HOWARD KAMINSKI, DUQUESNE CAPITAL: Good morning. Two questions, one is just
to confirm - a confirmation. So, the settlement - or the terms of the
settlement will have no financial impact on the operating performance of El
Paso Natural Gas. Is that correct?

RONALD L. KUEHN, JR. (?): Well it will in the sense that a piece of this
settlement effectively will be pushed down, the cost of the piece of the
settlement will be pushed down to EPNG. I would expect that El Paso Natural
Gas, for example, will actually be making the - will be making the up front
payments as well as the annual payments of 22 million a year. I expect that
piece of the settlement to be incurred by EPNG, and when we book the $650
million charge for this in the fourth quarter of 2002 a portion of that
will be reflected on El Paso Natural Gas's books.

HOWARD KAMINSKI: Approximately how much of the, on a going forward basis do
you expect that this will impact the profitability of El Paso Natural Gas?

RONALD L. KUEHN, JR. (?): It won't affect the profitability, you know,
going forward in terms of revenues and expenses. It's basically going to be
a liability. I would estimate about 300 million of the 650 million charge
will be booked at El Paso Natural Gas.

HOWARD KAMINSKI:  Is it - won't that amortize?

RONALD L. KUEHN, JR. (?): That will be amortized in over time like the
whole charge.

HOWARD KAMINSKI: So, there will be an incremental $300 million liability?

RONALD L. KUEHN, JR. (?): There will be an other liability booked at El
Paso Natural Gas and there will be imputed interest on the amortization of
that liability going forward.

HOWARD KAMINSKI: OK. That's the first question. Second question, the
settlement in principle - and let's just assume that the agreement is
signed - will this have any positive implications on your ability to
negotiate with your banks?

RONALD L. KUEHN, JR. (?): I think - I think, you know - I think removing
the uncertainty surrounding the company is definitely a positive factor,
you know, we would expect this to have a positive overall impact on those

HOWARD KAMINSKI: But what do you think the timing of that would be for an
announcement of the banks?

RONALD L. KUEHN, JR. (?): We're still in progress on that. You need to stay


OPERATOR: Our next question is coming from John Edwards of Deutsche Bank
(Company: Deutsche Bank AG; Ticker: DB; URL: http://www.detsche-bank.de/).
Please go ahead with your question.

JOHN EDWARDS, DEUTSCHE BANK: Yes, thanks. Just a couple questions on the
detail on the 125 million to the department of water resources at discount.
Is that in total or is that 125 million a year?

RONALD L. KUEHN, JR. (?): That's 125 million in total. And that will
basically be amortized over the remaining life of those power contracts
through year-end 2005, and that amortization will start once the settlement
is effective.

JOHN EDWARDS: OK, and then what's your expectation now for the effective
date of the settlement?

PEGGY A. HEEG: Yes, it's really difficult to answer that question. We
believe it will be by year-end.

JOHN EDWARDS: OK, and then, and just to - you know, Anatol asked about
this, but just to clarify, are there any other parties then that we should
be aware of that there may be other outstanding litigation or that you're
aware of, or potential litigation that you're aware of?

PEGGY A. HEEG:  Well ...

JOHN EDWARDS:  This then effectively has just closed the door ...

PEGGY A. HEEG: We believe this closes the door on all of the significant
financial exposure related to the California energy crisis. People can
continue to sue us if they want, if they opt out of the classes, for their
own individual damages. We also mentioned Arizona. It's a party to the
settlement, which are pretty significant, cannot bring any litigation
against El Paso or gas and electricity from 1996 to the present. They've
given us a full release.

JOHN EDWARDS: OK, and then on, in terms of, you know, where are we now in
terms of your total debt to capital, you know, with this charge, you know,
assuming that nicks (ph) your equity a bit? Where are we now in terms of

RONALD L. KUEHN, JR. (?): I'll tell you a couple of things. I don't want to
go into specific figures, being just a little over a week away from filing
our 10-K, but what I will tell you is that with this charge in the fourth
quarter it's well within, when you look at our debt to total capital
covenant for our revolving credit facilities which have the debt to total
capital covenant, 70-percent maximum. We are well within that covenant even
with this charge.

JOHN EDWARDS: OK, great. Thank you very much.

OPERATOR: Our next question is coming from Craig Shere of Standard and
Poor's. Please go ahead with your questions.

CRAIG SHERE, STANDARD AND POOR'S: Hi, two questions - one kind of a
clarification of what was just asked as far as quote unquote closing the
door. When you certify as a class does that mean that businesses and
private parties within the state either aren't allowed or don't have much
legal basis to demand separate remuneration?

And my second question is do I remember correctly that you all are still
owed 20 million in back receivables for power deliveries to California? And
if my memory is correct are you going to get that money now and are you
free of any other exposures relating to that?

PEGGY A. HEEG: The amount related to the power receivables, that is not
impacted by this settlement. As to the class certification process and the
impact on businesses, California law gives the parties, once you certify
the class, to opt out of the settlement on their own behalf. If they, so
the businesses will be in the settlement unless they opt out of the
settlement during the certification process. If a party opts out of the
settlement, they can pursue litigation for their own individual damages as
opposed to the damages of the class. The settlement - also, the agreement
we negotiated also provides that more than one-percent of the plaintiffs in
either number or size of load opt out of the settlement we can terminate

CRAIG SHERE: And the settlement sounds like it covers everything though. I
mean when you say it doesn't affect the receivables issue there's this
pending Firk (ph), I know it's not as big a deal for you all as for other
energy merchants, but the pending Firk (ph) decision about dealing with the
combination of the receivables and any refunds - so if I understand it this
eliminates all your liabilities from any refunds or anything more, and
hopefully you're going to collect whatever you're owed in receivables?

PEGGY A. HEEG: As to the electric Firk (ph) cases, some of them are
directly covered by this case to the extent it's the same parties. And some
of them are not because they involve different parties. In the case that I
believe you're referring to, which is the big refund case where we believe
we have a net receivable, that is not impacted by this case, this

CRAIG SHERE:  The receivable isn't or the refund ...

PEGGY A. HEEG:  That proceeding (ph).

CRAIG SHERE: OK.  Thank you.

OPERATOR: Our next question is coming from David Maccarrone of Goldman
Sachs (Company: The Goldman Sachs Group Inc.; Ticker: GS; URL:
http://www.gs.com/). Please go ahead with your question. Mr. Maccarrone,
your line is live.

Our next question is coming from Stuart Orel of UBS Warburg. Please go

STUART OREL, UBS WARBURG: Hi, it's Stuart Orel. And I had a question, just
some points of clarification first if I may. With these shares that are to
be delivered is the amount of stock, once you have a definitive settlement
based on the $125 million amount, or is it on a set number of shares based
on today's value?

PEGGY A. HEEG: The number of shares will be fixed, and is fixed based on
the value of the stock, $125 million worth of value based on the 30 days of
trading prior to yesterday. So the number of shares will be fixed.

STUART OREL:  OK, thank you.

RONALD L. KUEHN, JR. (?): And it's approximately 26.4 million shares.

STUART OREL: Thank you. And the 22 million cash payment per annum, is it
your option to pay half of that in stock over the entire term?

PEGGY A. HEEG:  Yes it is.

STUART OREL: OK, and the liability that's being booked at El Paso Natural
Gas, what portion of the settlement is it? I mean the reserves, the natural
gas reserves I assume aren't there so why are they taking half of this
liability? And where might the natural gas to be delivered to the state of
California, which entity would that impact?

RONALD L. KUEHN, JR. (?): Well, we're still working out how the various
elements of the settlement will be booked, and all that will be reflected
in the 10-Ks that we file at the end of the month, but my current
expectation is that El Paso Natural Gas would basically book a certain
portion of the settlement, the up front cash, the value of the stock, and
the additional payments of 22 million a year. And you can present value
those and tax effect them that's about 300 million out of the total 650
million of the settlement.

The gas payments and the CDWR (ph) contract, my expectation is those would
be booked at El Paso Merchant Energy.

STUART OREL:  OK, very good.  Thank you.

OPERATOR: Our next question is coming from Peter Glerum of Deep Haven
Capital. Please go ahead with your question.

PETER GLERUM, DEEP HAVEN CAPITAL: Hi, thanks for taking my call. Just a
real quick question, I've heard a lot of people ask sort of similar
questions, I just want to hear it real concretely. Minus the Arizona
potential claims, I mean if your minds are you done here with all of these
claims outstanding?

PEGGY A. HEEG: This settlement resolves all the litigation with respect to
all the parties to the settlement which, as we've listed earlier, Ron
listed who all those parties are - we believe that that's resolved once and
for all, or any significant financial exposure that we have related to the
western energy crisis.

PETER GLERUM:  Excellent.  Thank you.

OPERATOR: Our next question is coming from Mark Harris of Goldman Sachs.
Please go ahead with your question.

Our next question is coming from Paul Patterson of Glenrock Associates.
Please go ahead with your question.

PAUL PATTERSON, GLENROCK ASSOCIATES: Hi, good morning. Just wanted to get a
clarification on this, the $900 million pre-tax charge includes the
issuance of 125 million shares, is that correct? I mean $125 million worth
of stock?

RONALD L. KUEHN, JR. (?): For these purposes, yes it does, Paul. We've
included that just in the $125 million of value.

PAUL PATTERSON: OK and then, in terms of - you have a liability on your
balance and you're amortizing that, is that a non-cash benefit to net
income at all or you have imputed interest, I'm just a little confused as
to how that actually works.

RONALD L. KUEHN, JR. (?): Well, we'll book the $650 million liability.
There'll be a deferred tax piece, as well, that'll - that when you combine
the 650 and the deferred tax piece that'll total the $900 million and then
we'll, basically, amortize that liability over time and we'll apply what
amounts to an imputed interest factor on then declining value of the $650
million after tax.

PAUL PATTERSON: OK and then, in terms of the - just to clarify, if somebody
else is in California, I guess, is sort of the question and they haven't
signed on to this deal, let's say they're just not a party that's there and
somehow they now feel that they'd like to be, is there a potential that
others parties, in the West I guess, which is what the question seems to be
at, is there a potential that new litigation could come up if people are
not currently a party or are they, basically, as residents or businesses,
of the state that have signed on, are they, basically, not able to sue?

PEGGY A. HEEG: The - again, going back to the class action certification
product, people will have the right to opt out of the class and if they do,
they can sue us based on their individual damages. In addition, our
co-defendant in some of the proceedings, which is for us, is not a party to
this settlement.

PAUL PATTERSON:  OK.  I think I understand.  OK, thank you very much.

OPERATOR: Gentlemen, there appear to no further questions.

RONALD L. KUEHN, JR. (?):  Thank you very much.

OPERATOR: Thank you. This does conclude today's teleconference. You may
disconnect your lines at this time, and have a wonderful day.