Eastern Shore Natural Gas Company

Second Revised Volume No. 1

Effective Date: 11/01/1997, Docket: CP96-128-004, Status: Effective

Original Sheet No. 117 Original Sheet No. 117 : Effective

EASTERN SHORE NATURAL GAS COMPANY

GENERAL TERMS AND CONDITIONS

(Continued)

12. Construction of Facilities (Continued)

(b) If the facilities existing at the Point(s) of Receipt

and/or the Point(s) of Delivery and/or Delivery Point

Area(s) are deemed adequate and operable by Seller, then

such facilities shall be used; however, if any

modification or expansion of any such existing facilities

is deemed necessary by Seller, then such modification or

expansion shall be performed by Seller with the consent

of Buyer in accordance with Section 12 of these General

Terms and Conditions.

reimbursement for the costs of new facilities based on

the determination that the facilities will generate

sufficient transportation throughput or other revenues to

make the facilities economical to Seller. Waivers of

reimbursement will be granted in a not unduly

discriminatory manner based on an evaluation of the

potential costs and revenues related to the facilities

and other relevant economic factors.

(d) Seller may invest in lateral and appurtenant facilities

necessary to increase service to an existing Buyer or to

allow Seller to provide service to a new Buyer in a not

unduly discriminatory manner under the following

conditions:

(1) Annual service revenues generated from such new or

increased service shall be sufficient to compensate

Seller for the cost of service associated with such

facilities. Such cost of service shall be

calculated to include, without limitation, the

following:

(i) The cost of service associated with

transporting gas to the proposed facilities on

Seller's mainline;

(ii) The incremental operating expenses Seller may

incur in operating the proposed facilities,

including but not limited to administrative,

operation and maintenance, and ad valorem and

other taxes;