U-T Offshore System, L.L.C.

Third Revised Volume No. 1

Effective Date: 06/01/1997, Docket: RP97-146-001, Status: Effective

Second Revised Sheet No. 50 Second Revised Sheet No. 50 : Superseded

Superseding: First Revised Sheet No. 50

GENERAL TERMS AND CONDITIONS

(Continued)

(d) The netting of imbalances does not relieve Shipper of the obligation to

pay all transportation charges for the quantity of gas actually delivered

to Shipper during the month.

(e) Nothing contained in this subsection 8.2 shall require U-TOS to incur a

financial loss as a result of netting excess receipts and excess

deliveries or to continue such netting, if doing so would be inconsistent

with the prudent operation of U-TOS' pipeline system.

8.3 Cashout Procedures. Any imbalance remaining will be cashed out on a tiered

basis pursuant to the following schedule:

OVERAGE UNDERAGE

IMBALANCE LEVEL (U-TOS Pays Shipper) (Shipper Pays U-TOS)

--------------- -------------------- --------------------

0% to 5% 100% x AMIP 100% x AMIP

Greater than

5% to 10% 90% x AMIP 110% x AMIP

Greater than

10% to 15% 80% x AMIP 120% x AMIP

Greater than

15% to 20% 70% x AMIP 130% x AMIP

Greater than 20% 60% x AMIP 140% x AMIP

(a) A Shipper's remaining imbalance will be cashed out based on the percentage

of that imbalance compared to the total deliveries for that Shipper during

the month. For example, if the Total Deliveries were 1,000 Dth and the

remaining underage imbalance was 100 Dth, the total Imbalance Level would

be 10%. The first 5% (50 Dth) would be cashed out at 100% of the AMIP and

the remaining 50 Dth would be cashed out at 110% of the AMIP.

(b) The Average Monthly Index Price (AMIP) is the arithmetic average of the

Weekly Index Prices (WIPs). The WIP for any week is the arithmetic

average of the following two index prices reported in "Gas Price Report"

issued by "Natural Gas Week":

(1) Louisiana, Gulf Coast, Onshore, Spot Delivered to Pipeline; and

(2) Louisiana, Gulf Coast, Offshore, Spot Delivered to Pipeline.

In calculating the AMIP, the WIPs will be based on the prices reported in

the issue of "Natural Gas Week" dated on or after U-TOS' nomination

deadline for first of the month service for that month, and the subsequent

issues dated prior to U-TOS nomination deadline for the following month's

first of the month service.

with the appropriate cashout amounts.