Kern River Gas Transmission Company

Second Revised Volume No. 1

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Effective Date: 10/01/2002, Docket: RP02-482-000, Status: Effective

Second Revised Sheet No. 734 Second Revised Sheet No. 734 : Effective

Superseding: Sub First Revised Sheet No. 734

RATE SCHEDULE MO-1

Kern River Firm Transportation Services

(Continued)

ARTICLE VII - TERM OF AGREEMENT (Continued)

7.3 Right of First Refusal (Continued)

Rate that meets or exceeds the lowest rate Transporter is willing

to accept for such service, the existing Shipper may retain its

capacity by matching the bid on either a Negotiated Rate basis or

a Recourse Rate basis as provided in Section 23.2(c) of the

General Terms and Conditions; provided, however, that nothing

herein shall obligate Transporter to render service to Shipper or

to any competing prospective shipper if such persons do not agree

to pay the maximum rates then applicable. To exercise its rights

of first refusal, Shipper must agree to all other terms and

conditions of service to which the competing prospective shipper

is prepared to agree, or to such other terms and conditions as may

be acceptable to Transporter.

(b) If Shipper chooses to exercise the foregoing right of first

refusal, Shipper shall give written notice to that effect to

Transporter at least one hundred twenty (120) days prior to the

termination date of its Transportation Service Agreement.

Transporter shall post such notice on its Designated Site for a

minimum period of sixty (60) days and shall receive any competing

offers for such transportation service only during such period.

(c) If Shipper chooses to exercise the foregoing right of first

refusal, but wishes to retain only a portion of its capacity,

Shipper's MDQ, aggregate Maximum Receipt Volume entitlements and

aggregate Maximum Delivery Volume entitlements all must be

retained by the same percentage.

7.4 Extension to Correct Imbalance. The term of the Transportation Service

Agreement shall continue for a period of time reasonably sufficient to

allow the parties to correct any cumulative imbalances in receipts and

deliveries pursuant to Section 4.2.2 herein.