Clajon Gas Co., L.P., Aquila Gas Pipeline Corp., Tax Matters Partner - Page 3

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                                  FINDINGS OF FACT                                    
               Some facts are stipulated and are so found.  The stipulation           
          of facts, with accompanying exhibits, is incorporated herein by             
          this reference.                                                             
          Principal Place of Business                                                 
               At the time the petition was filed, Clajon’s principal place           
          of business was in San Antonio, Texas.                                      
          Natural Gas Production Process                                              
               Natural gas is extracted from the earth through gas wells.             
          It leaves the earth at the wellhead and passes into flow lines.             
          The flow lines carry the gas to a separator located at the well             
          site or to a central production facility (which serves two or               
          more wells), where, among other things, oil, water, and sand are            
          removed from the gas.  The gas next flows to a meter installation           
          for measurement and then enters a gathering system.                         
               A gathering system is a system of interconnected                       
          subterranean pipelines and related facilities, including                    
          compression stations and metering installations, that aggregates            
          gas from multiple wells for delivery to a transmission line or a            
          gas processing plant.  A gathering system’s smaller diameter                
          pipelines, sometimes called feeder lines or lateral lines,                  
          connect individual wells or one or more central production                  
          facilities to larger diameter lateral lines or trunk lines that             

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Last modified: May 25, 2011