High Island Offshore System, L.L.C.

Third Revised Volume No. 1

Effective Date: 04/07/1999, Docket: GT99- 17-000, Status: Effective

Original Sheet No. 118 Original Sheet No. 118 : Effective

GENERAL TERMS AND CONDITIONS

(Continued)

16.7 Provisional Payment to Ensure Bona Fide Bid. Each Qualified

Bidder must also submit with its Qualified Bid, as a

demonstration of its bona fide intentions, a check, payable

to HIOS, for the lesser of: (1) $10,000; or (2) three

months' reservation charges for the amount of capacity

sought, at the maximum rate. In the event that, upon

completion of the right of first refusal procedures

described in this Section 16, capacity is awarded to the

Qualified Bidder and the Qualified Bidder executes a

Transportation Agreement with HIOS, the payment shall be

credited to the Qualified Bidder's bill(s) for service under

the Transportation Agreement. In the event that the

Qualified Bidder is awarded capacity but declines to execute

a Transportation Agreement with HIOS, or the Qualified

Budder withdraws its bid before the right of first refusal

procedures are complete, the Qualified Bidder will be deemed

to have forfeited the payment. Otherwise, in the event that

the Qualified Bidder is not awarded capacity, the payment,

together with interest calculated in accordance with Section

154.67(c) of the Commission's regulations, shall be refunded

to the Qualified Bidder upon completion of the right of

first refusal procedures.

16.8 Determination of Highest Bid. If, at the end of the posting

period specified in subsection 16.4 above, HIOS has received

more than one Qualified Bid for the available capacity, HIOS

shall evaluate the Qualified Bids to determine which

constitutes the highest bid. Whether an application

constitutes the "highest bid" shall be determined on the

basis of the following procedures:

16.8(a) HIOS shall calculate the Net Present Value of each

Qualified Bid by applying the proposed reservation

charge to the amount of capacity proposed to be

taken for the term proposed by the Qualified

Bidder, and discounting the