Unconsolidated Investments

6 Months Ended

Jun. 30, 2011

Notes to Financial Statements [Abstract]

Unconsolidated Investments

5. Unconsolidated Investments

Unconsolidated investments at June 30, 2011 and December 31, 2010 include the Company's 50 percent investment in Citrus and investments in other entities. The Company accounts for these investments using the equity method. The Company's share of net earnings or loss from these equity investments is recorded in Earnings from unconsolidated investments in the unaudited interim Condensed Consolidated Statement of Operations.

The following table summarizes the Company's unconsolidated equity investments at the dates indicated.

	June 30,		December 31,
	2011		2010
		(In thousands)
Citrus (1)	$	1,561,664	$	1,510,847
Other		26,199		27,701
	$	1,587,863	$	1,538,548

___________________

(1) See Note 3 – ETE Merger for information regarding the Company's intent for its ownership interest in Citrus to be merged with an ETP subsidiary.

The following table sets forth summarized financial information for the Company's equity investments for the periods presented.

	Three Months Ended June 30,
	2011				2010
			Other Equity				Other Equity
	Citrus		Investments		Citrus		Investments
	(In thousands)
Statement of Operations Data:
Revenues	$	194,361	$	2,506	$	140,572	$	5,823
Operating income		118,716		705		77,323		3,297
Net earnings		47,173		689		46,460		3,101
	Six Months Ended June 30,
	2011				2010
			Other Equity				Other Equity
	Citrus		Investments		Citrus		Investments
	(In thousands)
Statement of Operations Data:
Revenues	$	308,246	$	5,082	$	254,711	$	11,684
Operating income		168,598		1,637		129,694		6,482
Net earnings		96,526		1,844		76,087		6,270

Citrus Dividends. Citrus did not pay dividends to the Company during the three-month periods ended and six-month periods endedJune 30, 2011 and 2010.

Contingent Matters Potentially Impacting Southern Union Through the Company's Investment in Citrus

Florida Gas Phase VIII Expansion.  Florida Gas' Phase VIII Expansion project was placed in-service on April1, 2011, at an estimated cost of approximately $2.48 billion, including capitalized equity and debt costs. To date, Florida Gas has entered into firm transportation service agreements with shippers for 25-year terms accounting for approximately 74 percent of the available expansion capacity.

In 2011, the Company, through an indirect wholly-owned subsidiary, and Citrus' other shareholder each made sponsor contributions of $72 million in the form of loans to Citrus.   The Company has recorded the Citrus loan in Other non-current assets on the Condensed Consolidated Balance Sheet. The contributions are related to the costs of Florida Gas' Phase VIII Expansion project.  In conjunction with anticipated sponsor contributions, Citrus has entered into a promissory note in favor of each shareholder for up to $150 million. The promissory notes have a final maturity date of March 31, 2014,with no principal payments required prior to the maturity date, and bear an interest rate equal to aone-month Eurodollar rate plus a credit spread of 1.5percent. Amounts may be redrawn periodically under the notes to temporarily fund capital expenditures, debt retirements, or other working capital needs.  Citrus' principal operating asset is Florida Gas, whose debt is rated Baa2 by Moody's Investor Services, Inc. and BBB by Standard & Poors.

Florida Gas Pipeline Relocation Costs.The FDOT/FTE has various turnpike/State Road 91 widening projects that have impacted or may, over time, impact one or more of Florida Gas' mainline pipelines located in FDOT/FTE rights-of-way. Several FDOT/FTE projects are the subject of litigation in Broward County, Florida. On January 27, 2011, a jury awarded Florida Gas $82.7 million and rejected all damage claims by the FDOT/FTE.On May 2, 2011, the judge issued an order entitling Florida Gas to an easement of 15 feet on either side of its pipelines and 75 feet of temporary work space. The judge further ruled that Florida Gasis entitled to approximately $8 million in interest. In addition to ruling on other aspects of the easement,he ruled that pavement could not be placed directly over Florida Gas' pipelinewithout the consent of Florida Gas although Florida Gas would be required to relocate the pipeline if it did not provide such consent. He also denied all other pending post-trial motions. The FDOT/FTE filed a notice of appeal on July 12, 2011. Amounts ultimately received would primarily reduce Florida Gas' property, plant and equipment costs.

On April 14, 2011 Florida Gas filed suit against the FDOT/FTE, Dragados USA and I-595 Express, LLC in Broward County, Florida seeking an injunction and damages as the result of the construction of a mechanically stabilized earth wall and other encroachments in Florida Gas easements containing the newly constructed 36-inch pipeline.  The same judge that presided over the previously discussed FDOT/FTE proceeding was assigned to the case.  Trial is expected to be set in early 2012.