High Island Offshore System, L.L.C.

Third Revised Volume No. 1

Effective Date: 09/01/2006, Docket: RP06-244-001, Status: Effective

Substitute First Revised Sheet No. 108 Substitute First Revised Sheet No. 108 : Effective

Superseding: Original Sheet No. 108

GENERAL TERMS AND CONDITIONS

(Continued)

8.5 Purchase and Sale of Gas. HIOS is not providing a supply service under

any Rate Schedule of this Tariff. Without limitation of the foregoing,

HIOS may buy and sell gas to the extent necessary to maintain system

pressure, to maintain line pack and provide additional line pack for new

facilities, to implement the cashout procedures under this Section 8 and

to perform other functions in connection with providing transportation

service. Such sales shall be authorized pursuant to HIOS' blanket sales

certificate. Nothing herein shall impose on HIOS any obligation to

provide a supply function to any of its transportation Shippers.

8.6 Treatment of Cash-Out Revenues and Costs. Subsequent to the end of each

calendar year HIOS shall compare (a) the revenues received by HIOS for

sales of gas to eliminate imbalances with (b) the costs incurred by HIOS

for purchases of gas to eliminate imbalances. If the revenues received

exceed the costs incurred, then HIOS shall use such net positive revenues

to reduce any positive surcharge associated with any negative Company Use

True Up determined for the same calendar year as calculated pursuant to

Section 28.3(c) of these General Terms and Conditions. If revenues

received are less than the costs incurred, then HIOS shall carry forward

such net negative revenues and may offset such net negative revenues

against any future net positive revenues that may subsequently occur.