10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

[X]

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2005

OR

[ ]

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                  to                  

Commission File Number 1-4101

Tennessee Gas Pipeline Company

(Exact Name of Registrant as Specified in its Charter)

Delaware	74-1056569
(State or Other Jurisdiction	(I.R.S. Employer
of Incorporation or Organization)	Identification No.)
El Paso Building
1001 Louisiana Street
Houston, Texas	77002
(Address of Principal Executive Offices)	(Zip Code)

Telephone Number: (713) 420-2600

      Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ No o

      Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes o No þ

      Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

      Common stock, par value $5 per share. Shares outstanding on August 5, 2005: 208

      TENNESSEE GAS PIPELINE COMPANY MEETS THE CONDITIONS OF GENERAL INSTRUCTION H(1)(a) AND (b) TO FORM 10-Q AND IS THEREFORE FILING THIS REPORT WITH A REDUCED DISCLOSURE FORMAT AS PERMITTED BY SUCH INSTRUCTION.

TENNESSEE GAS PIPELINE COMPANY

TABLE OF CONTENTS

	Caption	Page
	PART I — Financial Information
Item 1.	Financial Statements		1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		9
	Cautionary Statements for Purposes of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995		12
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		*
Item 4.	Controls and Procedures		12
	PART II — Other Information
Item 1.	Legal Proceedings		14
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		*
Item 3.	Defaults Upon Senior Securities		*
Item 4.	Submission of Matters to a Vote of Security Holders		*
Item 5.	Other Information		14
Item 6.	Exhibits		14
	Signatures		15

*  We have not included a response to this item in this document since no response is required pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

      Below is a list of terms that are common to our industry and used throughout this document:

/d = per day BBtu = billion British thermal units

     When we refer to cubic feet measurements, all measurements are at a pressure of 14.73 pounds per square inch.

     When we refer to “us”, “we”, “our”, or “ours”, we are describing Tennessee Gas Pipeline Company and/or our subsidiaries.

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PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

TENNESSEE GAS PIPELINE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In millions)

(Unaudited)

		Quarter Ended						Six Months Ended
		June 30,						June 30,
		2005			2004			2005			2004
Operating revenues		$	182		$	179		$	387		$	407
Operating expenses
	Operation and maintenance		83			64			158			133
	Depreciation, depletion and amortization		40			40			80			80
	Taxes, other than income taxes		14			13			27			25
			137			117			265			238
Operating income			45			62			122			169
Earnings from unconsolidated affiliate			4			3			7			6
Other income, net			1			1			2			2
Interest and debt expense			(33	)		(33	)		(65	)		(64	)
Affiliated interest income, net			4			2			7			4
Income before income taxes			21			35			73			117
Income taxes			8			14			28			47
Net income		$	13		$	21		$	45		$	70

See accompanying notes.

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TENNESSEE GAS PIPELINE COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share amounts)

(Unaudited)

				June 30,		December 31,
				2005		2004
ASSETS
Current assets
	Cash and cash equivalents			$	—	$	—
	Accounts and notes receivable
		Customer, net of allowance of $1 in 2005 and $3 in 2004			90		103
		Affiliates			19		16
		Other			4		38
	Materials and supplies				23		23
	Deferred income taxes				27		34
	Other				10		14
			Total current assets		173		228
Property, plant and equipment, at cost					3,275		3,180
	Less accumulated depreciation, depletion and amortization				472		440
					2,803		2,740
	Additional acquisition cost assigned to utility plant, net				2,139		2,159
			Total property, plant and equipment, net		4,942		4,899
Other assets
	Notes receivable from affiliates				1,012		930
	Investment in unconsolidated affiliate				158		151
	Other				42		38
					1,212		1,119
			Total assets	$	6,327	$	6,246
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities
	Accounts payable
		Trade		$	84	$	73
		Affiliates			20		27
		Other			13		15
	Taxes payable				92		79
	Accrued interest				24		25
	Contractual deposits				19		20
	Other				17		25
			Total current liabilities		269		264
Long-term debt					1,599		1,598
Other liabilities
	Deferred income taxes				1,256		1,228
	Other				210		209
					1,466		1,437
Commitments and contingencies
Stockholder’s equity
	Common stock, par value $5 per share; 300 shares authorized; 208 shares issued and outstanding				—		—
	Additional paid-in capital				2,207		2,206
	Retained earnings				786		741
			Total stockholder’s equity		2,993		2,947
			Total liabilities and stockholder’s equity	$	6,327	$	6,246

See accompanying notes.

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TENNESSEE GAS PIPELINE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)

				Six Months Ended
				June 30,
				2005			2004
Cash flows from operating activities
	Net income			$	45		$	70
	Adjustments to reconcile net income to net cash from operating activities
		Depreciation, depletion and amortization			80			80
		Deferred income taxes			18			12
		Earnings from unconsolidated affiliate			(7	)		(6	)
		Asset and liability changes			15			13
			Net cash provided by operating activities		151			169
Cash flows from investing activities
	Additions to property, plant and equipment				(70	)		(39	)
	Net change in affiliate advances				(82	)		(131	)
	Other				1			1
			Net cash used in investing activities		(151	)		(169	)
Net change in cash and cash equivalents					—			—
Cash and cash equivalents
	Beginning of period				—			—
	End of period			$	—		$	—

See accompanying notes.

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TENNESSEE GAS PIPELINE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

  Basis of Presentation

      We are an indirect wholly owned subsidiary of El Paso Corporation (El Paso). We prepared this Quarterly Report on Form 10-Q under the rules and regulations of the United States Securities and Exchange Commission (SEC). Because this is an interim period filing presented using a condensed format, it does not include all of the disclosures required by generally accepted accounting principles. You should read it along with our 2004 Annual Report on Form 10-K, which includes a summary of our significant accounting policies and other disclosures. The financial statements as of June 30, 2005, and for the quarters and six months ended June 30, 2005 and 2004, are unaudited. We derived the balance sheet as of December 31, 2004, from the audited balance sheet filed in our 2004 Annual Report on Form 10-K. In our opinion, we have made all adjustments which are of a normal, recurring nature to fairly present our interim period results. Due to the seasonal nature of our business, information for interim periods may not be indicative of our results of operations for the entire year.

  Significant Accounting Policies

      Our significant accounting policies are consistent with those discussed in our 2004 Annual Report on Form 10-K.

  New Accounting Pronouncements Issued But Not Yet Adopted

      As of June 30, 2005, there were several accounting standards and interpretations that had not yet been adopted by us. Below is a discussion of significant standards that may impact us.

      Accounting for Asset Retirement Obligations. In March 2005, the Financial Accounting Standards Board (FASB) issued FASB Interpretation (FIN) No. 47, Accounting for Conditional Asset Retirement Obligations. FIN No. 47 requires companies to record a liability for those asset retirement obligations in which the timing and/or amount of settlement of the obligation are uncertain. These conditional obligations were not addressed by Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, which we adopted on January 1, 2003. FIN No. 47 will require us to accrue a liability when a range of scenarios indicate that the potential timing and/or settlement amounts of our conditional asset retirement obligations can be determined. We will adopt the provisions of this standard in the fourth quarter of 2005 and have not yet determined the impact, if any, that this pronouncement will have on our financial statements.

      Accounting for Pipeline Integrity Costs. In June 2005, the Federal Energy Regulatory Commission (FERC) issued an accounting release that will impact certain costs we incur related to our pipeline integrity programs. This release will require us to expense certain pipeline integrity costs incurred after January 1, 2006 instead of capitalizing them as part of our property, plant and equipment. Although we continue to evaluate the impact that this accounting release will have on our consolidated financial statements, we currently estimate that we would be required to expense an additional amount of pipeline integrity costs under the release in the range of approximately $7 million to $14 million annually.

2. Credit Facilities

      We are an eligible borrower under El Paso’s $3 billion credit agreement. At June 30, 2005, El Paso had $1.2 billion outstanding under the term loan and $1.4 billion of letters of credit issued under the credit agreement, none of which was borrowed by or issued on behalf of us. For a further discussion of El Paso’s $3 billion credit agreement and our restrictive covenants, see our 2004 Annual Report on Form 10-K.

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3. Commitments and Contingencies

  Legal Proceedings

      Grynberg. In 1997, we and a number of our affiliates were named defendants in actions brought by Jack Grynberg on behalf of the U.S. Government under the False Claims Act. Generally, these complaints allege an industry-wide conspiracy to underreport the heating value as well as the volumes of the natural gas produced from federal and Native American lands, which deprived the U.S. Government of royalties due to the alleged mismeasurement. The plaintiff in this case seeks royalties, along with interest, expenses, and punitive damages. The plaintiff also seeks injunctive relief with regard to future gas measurement practices. No monetary relief has been specified in this case. These matters have been consolidated for pretrial purposes (In re: Natural Gas Royalties Qui Tam Litigation, U.S. District Court for the District of Wyoming, filed June 1997). Motions to dismiss were argued before a representative appointed by the court. In May 2005, the representative issued its recommendation, which if adopted by the district court judge, will result in the dismissal on jurisdictional grounds of the suit against us. If the district court judge adopts the representative’s recommendation, an appeal by the plaintiff of the district court’s order is likely. Our costs and legal exposure related to these lawsuits and claims are not currently determinable.

      Will Price (formerly Quinque). We and a number of our affiliates are named defendants in Will Price, et al. v. Gas Pipelines and Their Predecessors, et al., filed in 1999 in the District Court of Stevens County, Kansas. Plaintiffs allege that the defendants mismeasured natural gas volumes and heating content of natural gas on non-federal and non-Native American lands and seek to recover royalties that they contend they should have received had the volume and heating value of natural gas produced from their properties been differently measured, analyzed, calculated and reported, together with prejudgment and postjudgment interest, punitive damages, treble damages, attorneys’ fees, costs and expenses, and future injunctive relief to require the defendants to adopt allegedly appropriate gas measurement practices. No monetary relief has been specified in this case. Plaintiffs’ motion for class certification of a nationwide class of natural gas working interest owners and natural gas royalty owners was denied in April 2003. Plaintiffs were granted leave to file a Fourth Amended Petition, which narrows the proposed class to royalty owners in wells in Kansas, Wyoming and Colorado and removes claims as to heating content. A second class action petition has since been filed as to the heating content claim. Motions for class certification have been briefed and argued in both proceedings, and the parties are awaiting the court’s ruling. Our costs and legal exposure related to these lawsuits and claims are not currently determinable.

      In addition to the above matters, we and our subsidiaries and affiliates are named defendants in numerous lawsuits and governmental proceedings that arise in the ordinary course of our business.

      For each of our outstanding legal matters, we evaluate the merits of the case, our exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If we determine that an unfavorable outcome is probable and can be estimated, we establish the necessary accruals. As further information becomes available, or other relevant developments occur, we adjust our accrual amounts accordingly. While there are still uncertainties related to the ultimate costs we may incur, based upon our evaluation and experience to date, we had no accruals for our outstanding legal matters at June 30, 2005.

  Environmental Matters

      We are subject to federal, state and local laws and regulations governing environmental quality and pollution control. These laws and regulations require us to remove or remedy the effect on the environment of the disposal or release of specified substances at current and former operating sites. At June 30, 2005, we had accrued approximately $40 million, including approximately $39 million for expected remediation costs and associated onsite, offsite and groundwater technical studies, and approximately $1 million for related environmental legal costs. Our accrual was based on the most likely outcome that can be reasonably

5

estimated. Below is a reconciliation of our accrued liability from January 1, 2005 to June 30, 2005 (in millions):

Balance at January 1, 2005	$	42
Payments for remediation activities		(2	)
Balance at June 30, 2005	$	40

      For the remainder of 2005, we estimate that our total remediation expenditures will be approximately $3 million, which will be expended under government directed clean-up plans. In addition, we expect to make capital expenditures for environmental matters of approximately $31 million in the aggregate for the years 2005 through 2009. These expenditures primarily relate to compliance with clean air regulations.

      Polychlorinated Biphenyls (PCB) Cost Recoveries. Pursuant to a consent order executed by us in May 1994 with the Environmental Protection Agency (EPA), we have been conducting various remediation activities at certain of our compressor stations associated with the presence of PCB and certain other hazardous materials. In May 1995, following negotiations with our customers, we filed an agreement with FERC that established a mechanism for recovering a substantial portion of the environmental costs identified in our PCB remediation project. The agreement, which was approved by the FERC in November 1995, provided for a PCB surcharge on firm and interruptible customers’ rates to pay for eligible remediation costs, with these surcharges to be collected over a defined collection period. We have received approval from the FERC to extend the collection period, which is now currently set to expire in June 2006. The agreement also provided for bi-annual audits of eligible costs. As of June 30, 2005, we had pre-collected PCB costs of approximately $129 million. This pre-collected amount will be reduced by future eligible costs incurred for the remainder of the remediation project. To the extent actual eligible expenditures are less than the amounts pre-collected, we will refund to our customers the difference, plus carrying charges incurred up to the date of the refunds. At June 30, 2005, we have recorded a regulatory liability (included in other non-current liabilities on our balance sheet) of approximately $102 million for our estimated future refund obligations.

      Kentucky PCB Project. In November 1988, the Kentucky Natural Resources and Environmental Protection Cabinet filed a complaint in a Kentucky state court alleging that we discharged pollutants into the waters of the state and disposed of PCBs without a permit. The agency sought an injunction against future discharges, an order to remediate or remove PCBs and a civil penalty. We entered into interim agreed orders with the agency to resolve many of the issues raised in the complaint. The relevant Kentucky compressor stations are being remediated under a 1994 consent order with the EPA. Despite our remediation efforts, the agency may raise additional technical issues or seek additional remediation work and/or penalties in the future.

      CERCLA Matters. We have received notice that we could be designated, or have been asked for information to determine whether we could be designated, as a Potentially Responsible Party (PRP) with respect to three active sites under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) or state equivalents. We have sought to resolve our liability as a PRP at these sites through indemnification by third parties and settlements which provide for payment of our allocable share of remediation costs. As of June 30, 2005, we have estimated our share of the remediation costs at these sites to be approximately $1 million. Since the clean-up costs are estimates and are subject to revision as more information becomes available about the extent of remediation required, and because in some cases we have asserted a defense to any liability, our estimates could change. Moreover, liability under the federal CERCLA statute is joint and several, meaning that we could be required to pay in excess of our pro rata share of remediation costs. Our understanding of the financial strength of other PRPs has been considered, where appropriate, in estimating our liabilities. Accruals for these matters are included in the environmental reserve discussed above.

      It is possible that new information or future developments could require us to reassess our potential exposure related to environmental matters. We may incur significant costs and liabilities in order to comply with existing environmental laws and regulations. It is also possible that other developments, such as increasingly strict environmental laws and regulations and claims for damages to property, employees, other

6

persons and the environment resulting from our current or past operations, could result in substantial costs and liabilities in the future. As this information becomes available, or other relevant developments occur, we will adjust our accrual amounts accordingly. While there are still uncertainties related to the ultimate costs we may incur, based upon our evaluation and experience to date, we believe our reserves are adequate.

  Rates and Regulatory Matters

      Selective Discounting Notice of Inquiry. In November 2004, the FERC issued a Notice of Inquiry seeking comments on its policy regarding selective discounting by natural gas pipelines. In May 2005, the FERC issued an order reaffirming its prior practice of permitting pipelines to adjust their ratemaking throughput downward in rate cases to reflect discounts given by pipelines for competitive reasons when the discount is given to meet competition from another natural gas pipeline.

      While the outcome of our outstanding rates and regulatory matters cannot be predicted with certainty, based on current information, we do not expect the ultimate resolution of these matters to have a material adverse effect on our financial position, operating results or cash flows. However, it is possible that new information or future developments could require us to reassess our potential exposure related to these matters, which could have a material effect on our results of operations, our financial position, and our cash flows in the periods these events occur.

Guarantees

      We are involved in various joint ventures and other ownership arrangements that sometimes require additional financial support that results in the issuance of financial and performance guarantees. See our 2004 Annual Report on Form 10-K for a description of these guarantees. As of June 30, 2005, we had approximately $8 million of both financial and performance guarantees not otherwise reflected in our financial statements.

4. Investment in Unconsolidated Affiliate and Transactions with Affiliates

Investment in Unconsolidated Affiliate

      We have a 50 percent ownership interest in Bear Creek Storage Company. We account for this investment using the equity method of accounting. Summarized income statement information of our proportionate share of the income of this investment for the periods ended June 30 is as follows:

		Quarter Ended				Six Months Ended
		June 30,				June 30,
		2005		2004		2005		2004
		(In millions)
Operating results data:
	Operating revenues	$	5	$	5	$	9	$	9
	Operating expenses		2		2		4		4
	Income from continuing operations and net income		4		2		7		4

  Transactions with Affiliates

      Cash Management Program. We participate in El Paso’s cash management program which matches short-term cash surpluses and needs of participating affiliates, thus minimizing total borrowings from outside sources. At June 30, 2005 and December 31, 2004, we had advanced to El Paso $1,010 million and $928 million. The interest rate was 4.3% at June 30, 2005 and 2.0% at December 31, 2004. This receivable is due upon demand; however, at June 30, 2005 and December 31, 2004, we have classified this receivable as non-current because we do not anticipate settlement within the next twelve months.

      Taxes. We are a party to a tax accrual policy with El Paso whereby El Paso files U.S. and certain state tax returns on our behalf. In certain states, we file and pay directly to the state taxing authorities. We have state income taxes receivable of $28 million at December 31, 2004, which are included in accounts and notes

7

receivable — other on our balance sheets. We have income taxes payable of $57 million at June 30, 2005 and $46 million at December 31, 2004, which are included in taxes payable on our balance sheets. The majority of these balances will become payable to or receivable from El Paso.

      Other Affiliate Balances. The following table shows other balances with our affiliates:

	June 30,		December 31,
	2005		2004
	(In millions)
Other current assets	$	2	$	2
Non-current note receivable		2		2
Contractual deposits		7		7
Other non-current liabilities		1		1

      Affiliate Revenues and Expenses. We are allocated a portion of El Paso’s general and administrative costs. The allocation is based on the estimated level of effort devoted to our operations and the relative size of our EBIT, gross property and payroll. We also allocated costs to our pipeline affiliates associated with their share of pipeline services. The following table shows revenues and charges from our affiliates for the periods ended June 30:

					Six Months
	Quarter Ended				Ended
	June 30,				June 30,
	2005		2004		2005		2004
	(In millions)
Revenues from affiliates	$	7	$	6	$	12	$	11
Operations and maintenance expenses from affiliates		14		10		27		22
Reimbursements of operating expenses charged to affiliates		20		20		39		36

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Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

      The information contained in Item 2 updates, and should be read in conjunction with, the information disclosed in our 2004 Annual Report on Form 10-K, and the financial statements and notes presented in Item 1 of this Quarterly Report on Form 10-Q.

Results of Operations

      Our management, as well as El Paso’s management, uses earnings before interest expense and income taxes (EBIT) to assess the operating results and effectiveness of our business. We define EBIT as net income adjusted for (i) items that do not impact our income from continuing operations, (ii) income taxes and (iii) interest, which includes interest and debt expense and affiliated interest income. Our business consists of consolidated operations as well as an investment in an unconsolidated affiliate. We exclude interest from this measure so that our management can evaluate our operating results without regard to our financing methods. We believe the discussion of our results of operations based on EBIT is useful to our investors because it allows them to more effectively evaluate the operating performance of both our consolidated business and our unconsolidated investment using the same performance measure analyzed internally by our management. EBIT may not be comparable to measurements used by other companies. Additionally, EBIT should be considered in conjunction with net income and other performance measures such as operating income or operating cash flows.

      The following is a reconciliation of EBIT to net income for the periods ended June 30:

		Quarter Ended						Six Months Ended
		June 30,						June 30,
		2005			2004			2005			2004
		(In millions, except volume amounts)
Operating revenues		$	182		$	179		$	387		$	407
Operating expenses			(137	)		(117	)		(265	)		(238	)
	Operating income		45			62			122			169
Earnings from unconsolidated affiliate			4			3			7			6
Other income, net			1			1			2			2
	Other		5			4			9			8
	EBIT		50			66			131			177
Interest and debt expense			(33	)		(33	)		(65	)		(64	)
Affiliated interest income, net			4			2			7			4
Income taxes			(8	)		(14	)		(28	)		(47	)
	Net income	$	13		$	21		$	45		$	70
Throughput volumes (BBtu/d)			4,315			4,321			4,668			4,853

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      The following items contributed to our overall EBIT decrease of $16 million and $46 million for the quarter and six months ended June 30, 2005 as compared to the same periods in 2004:

		Quarter Ended											Six Months Ended
		June 30,											June 30,
										EBIT											EBIT
		Revenue			Expense			Other		Impact			Revenue			Expense			Other		Impact
		Favorable/(Unfavorable)
		(In millions)
Resolution in 2004 of measurement dispute at a processing plant serving our system		$	—		$	—		$	—	$	—		$	(10	)	$	—		$	—	$	(10	)
Gas not used in operations and other natural gas sales			2			—			—		2			(1	)		(2	)		—		(3	)
Higher electric compression costs			—			(3	)		—		(3	)		—			(4	)		—		(4	)
Completion of regulatory asset collection and regulatory liability amortization in 2004			(2	)		—			—		(2	)		(3	)		—			—		(3	)
Higher benefits and allocation of overhead and shared service costs			—			(7	)		—		(7	)		—			(12	)		—		(12	)
Higher other operating costs			—			(2	)		—		(2	)		—			(5	)		—		(5	)
Other(1)			3			(8	)		1		(4	)		(6	)		(4	)		1		(9	)
	Total impact on EBIT	$	3		$	(20	)	$	1	$	(16	)	$	(20	)	$	(27	)	$	1	$	(46	)

⁽¹⁾  Consists of individual insignificant items.

     The following provides further discussions of some of the significant items listed above as well as events that may affect our operations in the future.

      Gas Not Used in Operations and Other Natural Gas Sales. The financial impact of operational gas, net of gas used in operations, is based on the amount of natural gas we are allowed to recover and dispose of, relative to the amounts of natural gas we use for operating purposes and the price of natural gas. Gas not needed for operations results in revenues to us, which are driven by volumes and prices during a given period and are influenced by factors such as system throughput, facility enhancements and the ability to operate the systems in the most efficient and safe manner. We anticipate that this area of our business will continue to vary in the future and will be impacted by things such as rate actions, efficiency of our pipeline operations, natural gas prices and other factors.

      Allocated Costs. We are allocated a portion of El Paso’s general and administrative costs. The allocation is based on the estimated level of effort devoted to our operations and the relative size of our EBIT, gross property and payroll. During the quarter and six months ended June 30, 2005, we were allocated higher costs than the same periods in 2004, primarily due to an increase in El Paso’s benefits accrued under its retirement plan and higher legal, insurance and professional fees. In addition, we were allocated a larger percentage of El Paso’s total corporate costs due to the significance of our asset base and earnings to the overall El Paso asset base and earnings.

      Accounting for Pipeline Integrity Costs. In June 2005, the FERC issued an accounting release that will impact certain costs we incur related to our pipeline integrity programs. This release will require us to expense certain pipeline integrity costs incurred after January 1, 2006 instead of capitalizing them as part of our property, plant and equipment. Although we continue to evaluate the impact that this accounting release will have on our consolidated financial statements, we currently estimate that we would be required to expense an additional amount of pipeline integrity costs under the release in the range of approximately $7 million to $14 million annually.

Affiliated Interest Income, Net

Second Quarter 2005 Compared to Second Quarter 2004

      Affiliated interest income, net for the quarter ended June 30, 2005, was $2 million higher than the same period in 2004. The average advance balance due from El Paso of $499 million for the second quarter of 2004

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decreased to $451 million in 2005. However, the average short-term interest rates for the second quarter increased from 2.3% in 2004 to 4.0% in 2005.

Six Months Ended 2005 Compared to Six Months Ended 2004

      Affiliated interest income, net for the six months ended June 30, 2005, was $3 million higher than the same period in 2004. The average advance balance due from El Paso of $415 million for the six months of 2004 increased to $450 million in 2005. In addition, the average short-term interest rates increased from 2.5% in 2004 to 3.5% in 2005.

Income Taxes

	Quarter Ended						Six Months Ended
	June 30,						June 30,
	2005			2004			2005			2004
	(In millions, except for rates)
Income taxes	$	8		$	14		$	28		$	47
Effective tax rate		38	%		40	%		38	%		40	%

      Our effective tax rates were different than the statutory rate of 35 percent in all periods, primarily due to the effect of state income taxes in 2005 and the expiration of certain state net operating loss carryovers in 2004.

Liquidity

      Our liquidity needs have historically been provided by cash flows from operating activities and the use of El Paso’s cash management program. Under El Paso’s cash management program, depending on whether we have short-term cash surpluses or requirements, we either provide cash to El Paso or El Paso provides cash to us. We have historically provided cash advances to El Paso, and we reflect these advances as investing activities in our statement of cash flows. At June 30, 2005, we had a cash advance receivable from El Paso of $1,010 million as a result of this program. This receivable is due upon demand; however, we do not anticipate settlement within the next twelve months. At June 30, 2005, this receivable was classified as a non-current note receivable from affiliates on our balance sheet. In addition to El Paso’s cash management program, we are also eligible to borrow amounts available under El Paso’s $3 billion credit agreement, under which we and our interest in Bear Creek Storage Company are pledged as collateral. We believe that cash flows from operating activities and amounts available under El Paso’s cash management program, if necessary, will be adequate to meet our short-term capital and debt service requirements for our existing operations.

Capital Expenditures

      Our capital expenditures for the six months ended June 30, 2005 were approximately $70 million. We expect to spend $182 million for the remainder of 2005 for capital expenditures, consisting of $44 million to expand the capacity on our system, $113 million for maintenance capital and $25 million to repair damage caused by Hurricane Ivan in 2004. We expect an insurance reimbursement for a majority of the cost associated with Hurricane Ivan. We expect to fund our maintenance and expansion capital expenditures through internally generated funds and/or by recovering some of the amounts advanced to El Paso under its cash management program, if necessary.

Commitments and Contingencies

      See Item 1, Financial Statements, Note 3, which is incorporated herein by reference.

11

CAUTIONARY STATEMENTS FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

      This Report contains or incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Where any forward-looking statement includes a statement of the assumptions or bases underlying the forward-looking statement, we caution that, while we believe these assumptions or bases to be reasonable and to be made in good faith, assumed facts or bases almost always vary from the actual results, and the differences between assumed facts or bases and actual results can be material, depending upon the circumstances. Where, in any forward-looking statement, we or our management express an expectation or belief as to future results, that expectation or belief is expressed in good faith and is believed to have a reasonable basis. We cannot assure you, however, that the statement of expectation or belief will result or be achieved or accomplished. The words “believe,” “expect,” “estimate,” “anticipate” and similar expressions will generally identify forward-looking statements.

      With this in mind, you should consider the risks discussed elsewhere in this Report and other documents we file with the Securities and Exchange Commission from time to time.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

      Omitted from this Report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

Item 4.  Controls and Procedures

Material Weaknesses Previously Disclosed

      As discussed in our 2004 Annual Report on Form 10-K, we did not maintain effective controls as of December 31, 2004, over (1) access to financial application programs and data in certain information technology environments, and (2) identification, capture and communication of financial data used in accounting for non-routine transactions or activities. The remedial actions implemented in 2005 related to these material weaknesses are described below.

Evaluation of Disclosure Controls and Procedures

      As of June 30, 2005, we carried out an evaluation under the supervision and with the participation of our management, including our President and our Chief Financial Officer (CFO), as to the effectiveness, design and operation of our disclosure controls and procedures (pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)). As discussed below, we have made various changes in our internal controls which we believe remediate the material weaknesses previously identified by the company. We are relying on those changes in internal controls as an integral part of our disclosure controls and procedures. Based upon the results of the evaluation of our disclosure controls and procedures and based upon our reliance on these revised internal controls, management, including our President and CFO, concluded that our disclosure controls and procedures were effective as of June 30, 2005.

12

Changes in Internal Control Over Financial Reporting

      During the first quarter of 2005, we implemented the following changes in our internal control over financial reporting:

•  Implemented automated and manual controls for our primary financial system to monitor unauthorized password changes;

•  Developed a segregation of duties matrix for our primary financial system that documents existing role assignments; and

•  Implemented an accounting policy that requires a higher level of review of non-routine transactions.

      During the second quarter of 2005, we implemented the following changes in our internal control over financial reporting:

•  Performed an in-depth analysis of the company’s primary financial accounting system to examine existing functional access to identify any potentially incompatible duties.

•  Enhanced the segregation of duties matrix for our primary financial accounting system based on the in-depth analysis of user access.

•  Modified the primary financial accounting system to eliminate or modify potentially conflicting functionality.

•  Implemented a process to evaluate all new user access requests against segregation of duties matrices to ensure no new conflicts are created for our applications described above.

•  Separated security administration rights from system update capabilities for our applications described above.

•  Implemented monitoring procedures to monitor activities of security administration roles for our applications described above.

•  Improved communications to establish the expectation that non-routine transactions must be communicated to ensure timely identification and thorough review of transactions.

•  Established periodic business unit meetings to discuss and review non-routine transactions.

      We believe that the changes in our internal controls described above have remediated the material weaknesses. Our testing and evaluation of the operating effectiveness and sustainability of the changes in internal controls has not been completed at this time. As a result, we may identify additional changes that are required to remediate or improve our internal controls over financial reporting.

13

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

      See Part I, Item 1, Financial Statements, Note 3, which is incorporated herein by reference.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

      Omitted from this Report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

Item 3. Defaults Upon Senior Securities

      Omitted from this Report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

Item 4. Submission of Matters to a Vote of Security Holders

      Omitted from this Report pursuant to the reduced disclosure format permitted by General Instruction H to Form 10-Q.

Item 5. Other Information

      None.

Item 6. Exhibits

      Each exhibit identified below is filed as a part of this Report. Exhibits not incorporated by reference to a prior filing are designated by an “*”. Exhibits designated by “**” are furnished with this filing pursuant to Item 601(b)(32) of Regulation S-K. All exhibits not so designated are incorporated herein by reference to a prior filing as indicated.

Exhibit
Number			Description
	*31	.A	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	*31	.B	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	**32	.A	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	**32	.B	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

      Undertaking

      We hereby undertake, pursuant to Regulation S-K, Item 601(b), paragraph (4)(iii), to furnish to the U.S. Securities and Exchange Commission, upon request, all constituent instruments defining the rights of holders of our long-term debt not filed herewith for the reason that the total amount of securities authorized under any of such instruments does not exceed 10 percent of our total consolidated assets.

14

SIGNATURES

      Pursuant to the requirements of the Securities Exchange Act of 1934, Tennessee Gas Pipeline Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TENNESSEE GAS PIPELINE COMPANY

Date: August 5, 2005

/s/ Stephen C. Beasley

Stephen C. Beasley

Chairman of the Board and President

(Principal Executive Officer)

Date: August 5, 2005

/s/ Greg G. Gruber

Greg G. Gruber

Senior Vice President,

Chief Financial Officer and Treasurer

(Principal Financial and Accounting Officer)

15

TENNESSEE GAS PIPELINE COMPANY

EXHIBIT INDEX

      Each exhibit identified below is filed as a part of this Report. Exhibits not incorporated by reference to a prior filing are designated by an “*”. Exhibits designated by “**” are furnished with this filing pursuant to Item 601(b)(32) of Regulation S-K. All exhibits not so designated are incorporated herein by reference to a prior filing as indicated.

Exhibit
Number			Description
	*31	.A	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	*31	.B	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	**32	.A	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	**32	.B	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

EX-31.A

Exhibit 31.A

CERTIFICATION

I, Stephen C. Beasley, certify that:

      1. I have reviewed this Quarterly Report on Form 10-Q of Tennessee Gas Pipeline Company;

      2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

      3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

      4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

      (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

      (b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

      (c) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

      5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

      (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

TENNESSEE GAS PIPELINE COMPANY

/s/ Stephen C. Beasley

Stephen C. Beasley

Chairman of the Board and President

(Principal Executive Officer)

Date: August 5, 2005

EX-31.B

Exhibit 31.B

CERTIFICATION

I, Greg G. Gruber, certify that:

      1. I have reviewed this Quarterly Report on Form 10-Q of Tennessee Gas Pipeline Company;

      2. Based on my knowledge, this Report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this Report;

      3. Based on my knowledge, the financial statements, and other financial information included in this Report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this Report;

      4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

      (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this Report is being prepared;

      (b) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this Report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this Report based on such evaluation; and

      (c) Disclosed in this Report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

      5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

      (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

      (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

TENNESSEE GAS PIPELINE COMPANY

/s/ Greg G. Gruber

Greg G. Gruber

Senior Vice President, Chief Financial Officer

and Treasurer

(Principal Financial and Accounting Officer)

Date: August 5, 2005

EX-32.A

Exhibit 32.A

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Quarterly Report on Form 10-Q for the period ending June 30, 2005, of Tennessee Gas Pipeline Company (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stephen C. Beasley, President, certify (i) that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Stephen C. Beasley

Stephen C. Beasley

Chairman of the Board and President

(Principal Executive Officer)

August 5, 2005

A signed original of this written statement required by Section 906 has been provided to Tennessee Gas Pipeline Company and will be retained by Tennessee Gas Pipeline Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.B

Exhibit 32.B

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906

OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the Quarterly Report on Form 10-Q for the period ending June 30, 2005, of Tennessee Gas Pipeline Company (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Greg G. Gruber, Senior Vice President, Chief Financial Officer and Treasurer, certify (i) that the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and (ii) that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Greg G. Gruber

Greg G. Gruber

Senior Vice President, Chief Financial Officer

and Treasurer

(Principal Financial and Accounting Officer)

August 5, 2005

A signed original of this written statement required by Section 906 has been provided to Tennessee Gas Pipeline Company and will be retained by Tennessee Gas Pipeline Company and furnished to the Securities and Exchange Commission or its staff upon request.