High Island Offshore System, L.L.C.

Third Revised Volume No. 1

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Effective Date: 11/01/2007, Docket: RP08- 55-000, Status: Effective

Seventh Revised Sheet No. 171 Seventh Revised Sheet No. 171 : Effective

Superseding: Sixth Revised Sheet No. 171

GENERAL TERMS AND CONDITIONS

(Continued)

25. NEGOTIATED RATES

25.1 Availability: Notwithstanding anything to the contrary contained in this

Tariff, including the provisions of the rate schedules contained herein,

Transporter and Shipper may mutually agree to a Negotiated Rate under any

Part 284 Rate Schedule, provided that Shipper has not acquired its capacity

under the capacity release provisions of Section 17 of these General Terms

and Conditions. If a portion of the capacity under any existing Agreement

is agreed to be priced at Negotiated Rates, the existing Agreement must

first be bifurcated, and the existing tariff rate will continue to apply to

the capacity not subject to the Negotiated Rates. Transporter's maximum

effective rate (maximum base rate plus all applicable surcharges) for

service under any such rate schedule is available as a recourse rate for

any Shipper that does not desire to negotiate a rate hereunder.

HIOS and Shipper may agree that a specified negotiated rate will apply:

(a) to Rate Schedules IT, FT-1 and FT-2; (b) only if specified quantity

levels are actually achieved under Shipper's service agreement (with higher

rates, charges, and fees applicable to all quantities above those levels,

or to all quantities under Shipper's service agreement if the specified

levels are not achieved); (c) only to natural gas reserves committed by the

Shipper pursuant to the applicable Reserve Commitment Agreement with HIOS

in the appropriate form contained in these General Terms and Conditions;

(d) only during specified time periods; or (e) only to specified Points of

Receipt, Points of Delivery, transportation paths, or defined geographical

areas.

25.2 Definition: Negotiated rates shall be mutually agreed and set forth in

writing. A negotiated rate is a rate: which is determined from a formula

rather than a stated rate between the maximum and minimum on the filed rate

sheets; or which is a stated rate that is or may be greater than the

maximum rate; or which may have components which are less than the minimum

charge for such components on the filed rate sheets; or which uses a rate

design other than the one used to establish the applicable recourse rate

(e.g., straight fixed variable). A negotiated rate may include a minimum

or maximum volume quantity for which charges will be paid.

25.3 Capacity Allocation: In evaluating requests for firm service, where one or

more request uses a negotiated rate or negotiated rate formula, Transporter

will consider, in assigning value to such requests, only reservation or

demand charge revenue or other revenue which is guaranteed to be received

by Transporter. Pursuant to a capacity evaluation under Section 16 of

these General Terms and Conditions, the net present value of any such bid

for firm service shall be capped by the net present value of the maximum

applicable reservation rate for such service over the contract term bid. In

evaluating, scheduling and allocating requests for interruptible service

pursuant to Sections 7.8 and 7.9 of the General Terms and Conditions, the

consideration of the price paid to HIOS for such service shall be capped by

the maximum applicable rate for such service. In performing a net present

value evaluation of a negotiated rate bid proposing a volumetric or usage

rate along with a minimum throughput commitment, Transporter shall

consider only the amounts required to be paid regardless of actual usage.