Tres Palacios Gas Storage LLC

Original Volume No. 1

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Effective Date: 08/01/2008, Docket: RP08-424-000, Status: Effective

Original Sheet No. 120 Original Sheet No. 120

GENERAL TERMS AND CONDITIONS

(Continued)

accordance with the provisions of Section 4.7 and determine the

best bid in accordance with the timelines set forth in Section 4.3

herein. TRES PALACIOS shall notify Releasing Customer, the best

bidder, and any designated Pre-arranged Replacement Customer of

such determination in accordance with the timelines set forth in

Section 4.3 herein. If there is a designated Pre-arranged

Replacement Customer, it may exercise its right to match such best

bid by providing written notice of such exercise to TRES PALACIOS

and Releasing Customer in accordance with the timelines set forth

in Section 4.3 herein. After the Replacement Customer is

selected, TRES PALACIOS will finalize an appropriate Addendum to

the Capacity Release Umbrella Agreement in the form contained in

this FERC Gas Tariff. TRES PALACIOS will provide a copy of this

Addendum to the Replacement Customer via facsimile, at which time

the Replacement Customer will have the same rights and obligations

as any other existing Customer on TRES PALACIOS' system. Following

implementation of the release, TRES PALACIOS shall post notice of

the winning bidder on the Internet Web Site.

4.7 Best Bid. When TRES PALACIOS makes awards of

capacity for which there have been multiple bids meeting minimum

conditions, TRES PALACIOS shall award the bids, best bid first,

until all offered capacity is awarded. The capacity being awarded

represents the Maximum Daily Injection Quantity, Maximum Daily

Withdrawal Quantity, or Maximum Storage Quantity. These

quantities are separate parts of the capacity and are awarded

until one of the quantities is fully awarded, at which point all

capacity is deemed to be fully awarded. TRES PALACIOS shall

evaluate and determine the best bid among those otherwise

consistent with any terms and conditions specified by the

Releasing Customer as follows:

(a) TRES PALACIOS shall apply the standard or criteria

for such determination specified by the Releasing Customer,

including the standard to be used for breaking ties. Any standard

or criteria so specified must be objective, economic, not unduly

discriminatory, not contrary to applicable provisions of this FERC

Gas Tariff, applicable to all prospective Replacement Customers

and require TRES PALACIOS in applying such standard to exercise no

more than a ministerial function. The Releasing Customer shall

indemnify and hold TRES PALACIOS harmless from and against all

demands, losses, claims, expenses, causes of action and/or damages

suffered or incurred by TRES PALACIOS arising out of or related to

any determination of a "best bid" pursuant to a standard

specified, supplied, approved or provided by Releasing Customer.

(b) In default of Releasing Customer specifying a bid

evaluation standard, TRES PALACIOS shall determine the bid or bids

generating the highest net present value, using a 10% discount

factor, based on the rate bid (reservation or demand component),

the applicable quantity(ies) and term or period bid upon. In

default of Releasing Customer specifying a method to break ties

priority will be given first to the bid with the shortest term,

and next to the bid submitted first in time.