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 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.

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, (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                $    141     $   145
Operating expenses                     (81 )       (75 )
  Operating income                      60          70
Other income, net                        1           1
  EBIT                                  61          71
Interest and debt expense              (23 )       (25 )
Affiliated interest income, net         15          16
Income taxes                           (20 )       (23 )
  Net income                      $     33     $    39

Throughput volumes (BBtu/d)(1)       4,125       4,226


____________

 EBIT Analysis:                                                                   EBIT
                                                     Revenue       Expense       Impact
                                                          Favorable/(Unfavorable)
                                                               (In millions)
Reservation and other services revenues             $      (4 )   $       -     $     (4 )
Operating and general and administrative expenses           -            (5 )         (5 )
Operational gas                                             -            (3 )         (3 )
Depreciation and amortization expense                       -             2            2
 Total impact on EBIT                               $      (4 )   $      (6 )   $    (10 )

Reservation and Other Services Revenues. Reservation and other services revenues on our Mojave system were lower in 2008 compared to the same period in 2007, primarily due to a decrease in tariff rates under its rate case settlement and the expiration of certain firm contracts, both effective March 1, 2007. For a further discussion of our Mojave rate case, see our 2007 Annual Report on Form 10-K.

Operating and General and Administrative Expenses. During the quarter ended March 31, 2008, our operating and general and administrative expenses increased primarily as a result of increased repair, maintenance and payroll costs.

Operational Gas. During the quarter ended March 31, 2008, we established an allowance for uncollectible gas imbalances.

Depreciation and Amortization Expense. During the quarter ended March 31, 2008, our depreciation and amortization expense and related rates were lower than the same period in 2007 primarily resulting from the Mojave rate case that was settled in 2007. For a further discussion of our Mojave rate case, see our 2007 Annual Report on Form 10-K.

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 interest recorded in 2007 on EPNG's rate refund and lower average interest rates on outstanding debt.

Income Taxes

Our effective tax rate of 38 percent and 37 percent for the quarter ended March 31, 2008 and 2007 were higher than the statutory rate of 35 percent primarily due to the effect of state income taxes.

Liquidity Overview. Our liquidity needs are provided by cash flows from operating activities. In addition, we participate in El Paso's cash management program and depending on whether we have short-term cash surpluses or requirements, we either advance cash to El Paso or El Paso advances cash to us in exchange for an affiliated note receivable or payable that is due upon demand. We have historically advanced cash to El Paso, which we reflect in investing activities in our statement of cash flows. During the first quarter of 2008, we utilized $150 million of our note receivable from the cash management program to pay a dividend to our parent. At March 31, 2008, we had a note receivable from El Paso of approximately $1.0 billion of which approximately $7 million was classified as current as we anticipate settlement of this amount during the next twelve months. See Item 1, Financial Statements, Note 3, for a further discussion of El Paso's cash management program.

In addition to the cash management program, we are eligible to borrow amounts available under El Paso's $1.5 billion credit agreement and are only liable for amounts we directly borrow. As of March 31, 2008, El Paso had approximately $0.3 billion of letters of credit issued and $0.3 billion of debt outstanding under this facility, none of which was issued or borrowed by us. For a further discussion of this credit agreement, see our 2007 Annual Report on Form 10-K.

We believe that cash flows from operating activities combined with amounts available to us under El Paso's cash management program and its credit agreement, if necessary, will be adequate to meet our capital requirements and our existing operating needs.

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 systems are listed below. We expect to fund these capital expenditures through a combination of internally generated funds and repayments by El Paso of amounts we advanced under its cash management program.

               Quarter Ended          2008
               March 31, 2008       Remaining        Total
                              (In millions)
Maintenance   $             26     $       133     $    159
Expansion                    8              42           50
              $             34     $       175     $    209

See Item 1, Financial Statements, Note 2, which is incorporated herein by reference.