High Island Offshore System, L.L.C.

Third Revised Volume No. 1

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

Substitute Second Revised Sheet No. 173A Substitute Second Revised Sheet No. 173A : Effective

Superseding: First Revised Sheet No. 173A

GENERAL TERMS AND CONDITIONS

(Continued)

27. Refunding of Penalty Revenue

This section applies to the refund of all penalty refunds that are collected

outside of the cash-out mechanism. Any refunds due under the cash-out

mechanism will be distributed in accordance with Section 8.5

This section sets forth the procedures under which HIOS will refund, for each

annual billing period, penalty revenues collected. For the purposes of this

Section 27, an annual billing period shall be the twelve month period

commencing each January 1 and ending each December 31.

Within 60 days of the end of each annual billing period, HIOS shall calculate

the amount of penalty revenues received by HIOS pursuant to provisions of its

various rate schedules. HIOS shall refund to non-offending firm and

interruptible transportation customers, as a credit to their bills, all penalty

revenues received by HIOS, on a pro-rata basis in accordance with the

transportation volumes received during the annual period.

28. Company Use

28.1 Company Use Percentage. The Company Use Percentage shall be expressed

as a percentage rounded to two (2) decimal places and shall be used to

calculate the quantity of gas, expressed in MMBtu, to be delivered by or

for the account of Shipper and accepted by HIOS at receipt point(s) to

reimburse HIOS for actual Compressor Fuel and Unaccounted For Gas. Such

percentage shall be the sum of the Compressor Fuel percentage, the

Unaccounted For Gas percentage and the Company Use True up percentage

and shall be adjusted annually in accordance with this Section 28. The

currently effective Company Use, Compressor Fuel, Unaccounted For Gas

and Company Use True up percentages shall be separately stated on Sheet

No. 11 of this Tariff. For purposes of this Section 28, "receipts"

shall mean net receipts, defined as gross receipts on HIOS less

deliveries to Stingray.

28.2 Annual Filing of Company Use Percentage. HIOS shall make an annual

Company Use Percentage filing with an effective date of April 1. Such

filing shall include workpapers setting forth the calculation of the

prospective Compressor Fuel, Unaccounted For Gas and Company Use True up

percentages as determined in accordance with Section 28.3.

28.3 Computation of Company Use Percentage. The Compressor Fuel, Unaccounted

For Gas, Company Use True up and Company Use Percentages determined as part

of the annual filing and posted on Sheet No. 11 of this Tariff, shall be

calculated in accordance with this section.

28.3(a) Compressor Fuel. The Compressor Fuel percentage shall be

calculated annually as the quotient of a) the Compressor Fuel

used for the previous calendar year ending each December 31 and

b) the projected quantity of gas received by HIOS for the account

of Shippers during the recovery period. HIOS shall include

supporting workpapers.