The information contained in Item 2 updates, and should be read in conjunction with, the information disclosed in our 2007 Annual Report on Form 10-K, and our condensed consolidated financial statements and the accompanying footnotes presented in Item 1 of this Quarterly Report on Form 10-Q.

In November 2007, we distributed 100 percent of WIC to the MLP and certain other assets to El Paso. We have reflected these operations as discontinued operations in our financial statements for periods prior to their distribution. For a further discussion of these discontinued operations, see Item 1, Financial Statements, Note 2. In addition, effective November 1, 2007, we converted our legal structure into a general partnership, which is not subject to income taxes.

Updates of Significant Growth Projects. In 2008, we expect to spend approximately $99 million on joint investments to develop new transmission and storage facilities in Colorado through our 50 percent ownership in WYCO Development LLC (WYCO). These projects include:

· High Plains Pipeline. The FERC approved this project in March 2008 and construction began in April. The estimated total cost of this project is $198 million ($99 million to be paid by us), and the estimated in-service date is November 2008.

· Totem Gas Storage. The FERC approved this project in April 2008 and construction is expected to begin by June 2008. The estimated total cost of this project is $133 million ($67 million to be paid by us), and the estimated in-service date is July 2009.

For a further discussion of our various regulatory, development and operational risks, see our 2007 Annual Report on Form 10-K.

Our management uses earnings before interest expense and income taxes (EBIT) as a measure to assess the operating results and effectiveness of our business. We believe EBIT is useful to investors because it allows them to evaluate more effectively our operating performance using the same performance measure analyzed internally by our management. We define EBIT as net income adjusted for
(i) items that do not impact our income from continuing operations, such as discontinued operations, (ii) income taxes, (iii) interest and debt expense and (iv) affiliated interest income. We exclude interest and debt expense from this measure so that investors may evaluate our operating results without regard to our financing methods. EBIT may not be comparable to measurements used by other companies. Additionally, EBIT should be considered in conjunction with net income and other performance measures such as operating income and operating cash flows. Below is a reconciliation of our EBIT to net income, our throughput volumes and an analysis and discussion of our results for the quarter ended March 31, 2008 compared to the same period in 2007.

Operating Results:                               2008        2007
                                                  (In millions,
                                                 except volumes)
Operating revenues                             $     90     $    84
Operating expenses                                  (40 )       (44 )
  Operating income                                   50          40
Other income, net                                     1           1
  EBIT                                               51          41
Interest and debt expense                           (10 )       (12 )
Affiliated interest income, net                       9          11
Income taxes                                          -         (15 )
Income from continuing operations                    50          25
Discontinued operations, net of income taxes          -           8
Net income                                     $     50     $    33

Throughput volumes (BBtu/d)                       2,126       2,301




EBIT Analysis:                                                                              EBIT
                                                          Revenue          Expense         Impact
                                                                  Favorable/(Unfavorable)
                                                                       (In millions)
Reservation revenues                                    $          2     $         -     $        2
Operational gas, revaluations and processing revenues              3               5              8
Other(1)                                                           1              (1 )            -
Total impact on EBIT                                    $          6     $         4     $       10


____________

(1) Consists of individually insignificant items.

Reservation Revenues. Increased demand for our off-system capacity during the quarter ended March 31, 2008, resulted in higher reservation revenues as compared to the same period in 2007.

Operational Gas, Revaluations and Processing Revenues. In February 2008, the FERC approved certain tariff changes to modify our fuel recovery mechanism. We recorded a favorable fuel cost and revenue tracker adjustment to reflect the estimated effect of the order on our current fuel recovery filing period. The FERC's approval of this fuel and related gas cost recovery mechanism is expected to reduce future earnings volatility resulting from these items. The FERC order, which became effective March 1, 2008, includes a true-up mechanism to recover all cost impacts, or flow through to shippers any revenue impacts, of fuel imbalance revaluations and related gas balance items.

Interest and Debt Expense

Interest and debt expense for the quarter ended March 31, 2008, was $2 million lower than the same period in 2007 primarily due to a lower average outstanding debt balance as a result of repurchasing approximately $125 million of our 5.95% notes in December 2007.

Affiliated Interest Income, Net

Affiliated interest income, net for the quarter ended March 31, 2008, was $2 million lower than the same period in 2007 due to lower short-term interest rates and lower average advances to El Paso under the cash management program. The average short-term interest rate for the first quarter decreased from 5.9% in 2007 to 5.6% for the same period in 2008. In addition, the average advances due from El Paso of $793 million for the first quarter of 2007 decreased to $702 million for the same period in 2008.

Income Taxes

Our effective tax rate of 38 percent for the quarter ended March 31, 2007 was higher than the statutory rate of 35 percent primarily due to the effect of state income taxes. Effective November 1, 2007, we no longer pay income taxes as a result of our conversion to a partnership. For a further discussion of these transactions, see our 2007 Annual Report on Form 10-K.

Liquidity Overview. Our primary sources of liquidity are cash flows from operating activities and El Paso's cash management program. Our primary uses of cash are for working capital, capital expenditures, and for required distributions to our partners. We are required to make distributions of available cash as defined in our partnership agreement on a quarterly basis to our partners. We have historically advanced cash to El Paso under its cash management program, which we reflect in investing activities in our statement of cash flows. At March 31, 2008, we had notes receivable from El Paso of approximately $674 million of which approximately $138 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 5, for a further discussion of El Paso's cash management program and our other affiliate note receivable. We believe that cash flows from operating activities combined with amounts available to us under El Paso's cash management program or contributions from our partners, will be adequate to meet our capital requirements and our existing operating needs.

Overview of Cash Flows. Our cash flows for the quarters ended March 31 were as follows:

                                                    2008        2007
                                                     (In millions)
Cash provided by continuing operating activities   $    47      $  31
Cash used in continuing investing activities           (32 )      (31 )
Cash used in continuing financing activities           (15 )        -

For the first quarter of 2008 as compared to the same period in 2007, operating cash flow increased primarily due to higher operating revenues in 2008. We used our operating cash flow primarily to fund capital maintenance and growth projects and make distributions to our partners.

Capital Expenditures. Our cash capital expenditures for the quarter ended March 31, 2008, and our estimates of capital expenditures for the remainder of this year to expand and maintain our system are listed below.

                               Quarter Ended          2008
                               March 31, 2008       Remaining      Total
                                             (In millions)
                Maintenance   $              4     $        33     $   37
                Expansion                    8             106        114
                              $             12     $       139     $  151

In the first quarter of 2008, our capital expenditures included amounts spent on our joint investment in projects with Xcel Energy through our 50 percent ownership in WYCO to develop new transmission and storage facilities in Colorado.

Cash Distributions. We are required to make distributions of available cash as defined in our partnership agreement on a quarterly basis to our partners. In January 2008, we paid a cash distribution of approximately $15 million. In addition, in April 2008 we paid a cash distribution of $42 million.

Debt. As previously announced, we anticipate repurchasing approximately $100 million of debt in 2008 with recoveries of receivables from El Paso under its cash management program.

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