PRINCIPLES & PROCEDURES FOR OFFERINGS OF
	PRICE DIFFERENTIAL MECHANISM AND DAKOTA GAS BY
	ANR PIPELINE COMPANY

	ANR Pipeline Company ("ANR"), in compliance with the requirements of FERC Order No. 636 et al, and in order to fulfill its obligations under its gas purchase contracts that were not assigned in open seasons and reverse auctions, while at the same time endeavoring to minimize its gas supply realignment costs, will continue its efforts to reform its remaining gas purchase contracts as soon as practicable, especially those with take requirements above 500 Dth per day and will apply the following principles and procedures with respect to implementing a price differential mechanism for all its remaining gas purchase contracts:

Pricing Differential Mechanism

	Where ANR has no current obligation to purchase gas under an above-market (List A) contract covering Price Differential Mechanism Gas ("PDM Gas"), whether due to the producer's inability to deliver, or the producer's having found an alternate market or for any other reason, ANR will elect not to include the gas available under that contract as PDM Gas for the period for which there is no purchase obligation.

	All other PDM Gas will be offered for auction bidding.

	ANR will offer PDM Gas through assignment of purchase rights under ANR's gas purchase contract(s).  ANR will estimate the volumes of PDM Gas available for bid and will aggregate its PDM Gas by geographical areas and transporting pipeline (ANR, CIG, etc) within such areas and will post this information on the Electronic Bulletin Board (EBB) no later than the fifteenth calendar day of the month prior to flow.

	ANR will use reasonable best efforts to estimate the available volumes, but will not warrant availability or deliverability.  Any transportation imbalances resulting from daily or monthly variations between deliveries and nominations will be the responsibility of the assignee and will be resolved according to the imbalance mechanism of the transporting pipeline.  For PDM Gas where deliveries of gas under the gas purchase contract(s) are made at Receipt Points into gas supply facilities owned and operated by ANR which are directly connected to ANR's transmission lines, variations in deliveries will be subject to the cashout provisions of ANR's FERC tariff, but will always be cashed out at the 100% Cashout Price.

	For all assignments of PDM Gas, each bidder must meet the following pre-qualification conditions:

	(i)	must provide in writing or via ANR GEMS to ANR

		(a)	Name, address, representative, telephone and fax number of the proposed bidder;

		(b)	State of incorporation, if applicable, or other legal description of bidder and description of the principal business of the bidder; and

		(c)	A request for execution copies of the form of assignment and appointment agreement attached hereto, which provides for assignment of gas purchase rights per a confirmation form to be executed after confirmation of a bid and appoints ANR the assignee's agent to make nominations for the assignee, to bill the assignee and receive payments from the assignee for the gas delivered, to make payments to the producer(s) on behalf of the assignee (and ANR) and otherwise interface with the producer(s) and provide administrative services related to the contract(s) affected by the assignment;

	 (ii) must execute and return to ANR the form of assignment and appointment agreement;

    	(iii) must be able to satisfy the creditworthiness criteria of ANR's tariff;

	ANR requires that all bids for price differential gas be based on the "Future Prices, Natural Gas (NYM)", the "settled" quote (the "NYMEX price").  For evaluating bids, the applicable "settled" quote(s) on the bid date will be used.  For pricing gas delivered in each delivery month covered by an awarded bid based on NYMEX prices, the "settled" quote used will be the "settled" quote on the bid date in the immediately preceding month.

	Bids must be submitted on the form of bid attached and must include:  proposed transporting pipeline(s), supply area and/or source, desired MMBTU/day, effective start and end dates, and a price/MMBTU.

	Bids, at a minimum, will be for an entire calendar month and may extend for additional months. Unless specified otherwise by the bidder, bids for periods of more than one month shall also be considered as separate bids for each single month up to the expiration of the multi-month period stated in the bid.  With respect to bids for more than one calendar month, if the supply available for a bid will not be available for the full period bid for, ANR will so advise the successful bidder and allow the successful bidder to withdraw its bid or accept the volumes bid for the time period available.

	ANR reserves the right to reject any bid that contains terms unacceptable to ANR.

	ANR also reserves the right to reject any bid for gas covered by a contract providing for a two part rate with no minimum take requirement where the highest total bid amount is less than the variable costs.  In the event that there is no bid exceeding such variable costs, ANR will charge the fixed costs for the month(s) involved under such contract(s) to its pricing differential mechanism accounts.

	The minimum acceptable bid will be a daily volume of 1,000 DTH, unless otherwise specified on the EBB.

	Bids must be submitted to ANRPL Transportation Services/Volume Management department by fax (832) 676-1901.  Bids that are to be effective the first of the month are to be submitted no later than two (2) days prior to the closing of the Future Prices for said month (4:00 PM CST/CDT five (5) working days prior to start of said month).

	All bids will be awarded by telephone and followed by a confirmation letter detailing supply points, quantities, effective dates, accepted bid price, and bidder's transporter(s).  Bids effective the first of the month will be awarded four (4) working days prior to the start of said month, all other bids will be awarded within one business day, unless noted otherwise on the Electronic Bulletin Board.

	Bids will be evaluated on the basis of the price/MMBTU bid, restated as a percentage of the applicable NYMEX prices. In the event of multiple month bids, the price/MMBTU bid by month will be restated as a percentage of the then available NYMEX prices and an average percentage for the period calculated.  The gas supply available under the price differential mechanism will be awarded to the bidder with the highest percentage first and continue until all volumes are allocated.

	In the event that two bidders have equal percentages and there is insufficient volume available to allocate to both bidders, the gas that is available will be allocated pro rata, based on their respective volumetric bid.  

	After completion of evaluation and award of all bids for supply submitted before the close of bids in a month, a notice will be posted on the Electronic Bulletin Board detailing any remaining supply available for bid.

	On or before the fifteenth day of each month following a bid month, ANR will post on its EBB the prices of the accepted bids.

	Successful bidders will be responsible for arranging all transportation from the gas purchase contract delivery point(s).  

	Upon a failure to execute a confirmation or to make an appropriate nomination or to take available nominated quantities, that is not excused by force majeure as defined in the assignment and appointment agreement, bidder shall be in default and shall remain liable for all amounts due up to the date of termination of the assignment and, notwithstanding any mitigation steps taken by ANR in the provision below, for any remaining loss, liability, cost, damage, or expense (including, without limitation, reasonable attorneys fees) to ANR arising in any way from such failure.

	In the event of failure by a bidder, ANR may, but shall not be required to, cancel the assignment by giving 24 hours prior notice and will seek to assign the gas to the next lower bidder or will put the gas up for rebid.  Until a reassignment is made, ANR will continue to take deliveries under the affected gas purchase contract(s) relating to the defaulted assignment, and will charge to the price differential mechanism the difference between the applicable spot index price, as defined in ANR's FERC tariff, and the unit amount due, including any taxes and assessments, for gas delivered under the applicable gas purchase contract(s).

	In the month following deliveries under an assignment, ANR will render an invoice to the successful bidder for the amount due for the gas delivered.  Payments by the assignee to ANR for such gas will be due by wire transfer within ten (10) days from receipt of invoice.  ANR will be responsible to pay all amount due under the gas purchase contract(s) covered by the assignment to the contract seller, including amounts due in excess of the applicable bid price.  ANR will charge an amount equal to such excess to it price differential mechanism accounts.  Any bid amounts paid that exceed the amounts due under the assigned gas purchase contract(s) will be credited to such accounts.

	ANR will charge/credit to ANR's price differential mechanism accounts in the month paid or received any charges or credits under assigned gas purchase contracts resulting from out of period adjustments.

Dakota Cost Recovery Mechanism

	ANR will auction its share of the gas available from the Dakota Gasification Plant according to the preceding Pricing Differential Mechanism, subject to the following changes:

	Unless otherwise agreed, successful bidders will be responsible for arranging all transportation of Dakota Gas from the interconnection of ANR's facilities with those of Northern Natural Gas Company near Janesville, Wisconsin.  In arranging such transportation, the successful bidder shall have the highest priority to ANR capacity from the Janesville Receipt Point.

	The difference between amounts paid to ANR in any month for coal gas and ANR's "Dakota Costs" as defined in ANR's FERC tariff for that month will be recovered in accordance with Section 28.1 (c) of ANR's FERC tariff.