TENNESSEE GAS PIPELINE CO - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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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, 2002

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

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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 [X] No [ ]

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 13,
2002: 208

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

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PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

TENNESSEE GAS PIPELINE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN MILLIONS)
(UNAUDITED)

See accompanying notes.

1

TENNESSEE GAS PIPELINE COMPANY

CONDENSED CONSOLIDATED BALANCE SHEETS
(IN MILLIONS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

See accompanying notes.

2

TENNESSEE GAS PIPELINE COMPANY

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN MILLIONS)
(UNAUDITED)

See accompanying notes.

3

TENNESSEE GAS PIPELINE COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION

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 2001 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, 2002, and for the
quarters and six months ended June 30, 2002 and 2001, are unaudited. We derived
the balance sheet as of December 31, 2001, from the audited balance sheet filed
in our Form 10-K. In our opinion, we have made all adjustments, all of which are
of a normal, recurring nature (except for a cumulative effect of accounting
change, which is discussed below), to fairly present our interim period results.
Due to the seasonal nature of our business, information for interim periods may
not necessarily indicate the results of operations for the entire year.

Our accounting policies are consistent with those discussed in our Form
10-K, except as discussed below:

Goodwill and Other Intangible Assets

On January 1, 2002, we adopted Statement of Financial Accounting Standards
(SFAS) No. 141, Business Combinations, and SFAS No. 142, Goodwill and Other
Intangible Assets. SFAS No. 141 requires that upon adoption of SFAS No. 142, any
negative goodwill should be written off as a cumulative effect of an accounting
change. Prior to adoption of the standards, we had negative goodwill associated
with an investment in an unconsolidated affiliate that we amortized using the
straight-line method. As a result of our adoption of these standards on January
1, 2002, we stopped this amortization, and recognized a pretax and after-tax
gain of $10 million related to the write-off of negative goodwill as a
cumulative effect of an accounting change. Had we continued to amortize negative
goodwill our reported income for the quarter and six months ended June 30, 2002,
would not have been materially different. In addition, had we applied the
amortization provisions of these standards on January 1, 2001, our reported
income for the quarter and six months ended June 30, 2001, would not have
materially differed.

Asset Impairments

On January 1, 2002, we adopted SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets. SFAS No. 144 changed the accounting
requirements related to when an asset qualifies as held for sale or as a
discontinued operation and the way in which we evaluate impairments of assets.
It also changes accounting for discontinued operations such that we can no
longer accrue future operating losses in these operations. There was no initial
financial statement impact of adopting this statement.

2. DEBT AND OTHER CREDIT FACILITIES

At June 30, 2002, we had $363 million in commercial paper with a weighted
average interest rate of 2.6%, and at December 31, 2001, it was $424 million at
3.2%.

In May 2002, El Paso Corporation (El Paso), our parent, renewed its $3
billion, 364-day revolving credit and competitive advance facility. We remain a
designated borrower under this facility and, as such, are liable for any amounts
outstanding under this facility. This facility matures in May 2003. In June
2002, El Paso amended its existing $1 billion, 3-year revolving credit and
competitive advance facility to permit El Paso to issue up to $500 million in
letters of credit and to adjust pricing terms. This facility matures in August
2003, and we are a designated borrower under this facility and, as such, are
liable for any amounts outstanding under this facility. The interest rate under
both of these facilities varies based on El Paso's senior unsecured debt rating,
and as of June 30, 2002, an initial draw would have had a rate of LIBOR plus
0.625%, plus a 0.25%

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utilization fee for drawn amounts above 25% of the committed amounts. As of June
30, 2002, there were no borrowings outstanding, and $450 million in letters of
credit were issued under the $1 billion facility.

In June 2002, we issued $240 million aggregate principal amount 8.375%
notes due 2032. Proceeds were approximately $238 million, net of issuance costs.
As a result, we have no remaining capacity under a shelf registration on file
with the SEC.

3. COMMITMENTS AND CONTINGENCIES

Legal Proceedings

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. 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). In May 2001, the court denied the defendants'
motions to dismiss.

We and a number of our affiliates were named defendants in Quinque
Operating Company, et al v. Gas Pipelines and Their Predecessors, et al, filed
in 1999 in the District Court of Stevens County, Kansas. This class action
complaint alleges that the defendants mismeasured natural gas volumes and
heating content of natural gas on non-federal and non-Native American lands. The
Quinque complaint was transferred to the same court handling the Grynberg
complaint and has now been sent back to Kansas State Court for further
proceedings. A motion to dismiss this case is pending.

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 of June 30, 2002, we had reserves totaling $4 million for all outstanding
legal matters.

While the outcome of our outstanding legal matters cannot be predicted with
certainty, based on the information known to date and our existing accruals, 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. As
new information becomes available or relevant developments occur, we will review
our accruals and make any appropriate adjustments. The impact of these changes
may have a material effect on our results of operations.

Environmental Matters

We are subject to extensive 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. As of June 30, 2002, we had a reserve of approximately $98 million for
expected remediation costs (including related environmental litigation). In
addition, we expect to make capital expenditures for environmental matters of
approximately $63 million in the aggregate for the years 2002 through 2007.
These expenditures primarily relate to compliance with clean air regulations.

Since 1988, we have been engaged in an internal project to identify and
deal with the presence of polychlorinated biphenyls (PCBs) and other substances,
including those on the Environmental Protection Agency's (EPA) List of Hazardous
Substances, at compressor stations and other facilities we operate. While
conducting this project, we have been in frequent contact with federal and state
regulatory agencies, both through informal negotiation and formal entry of
consent orders, to ensure that our efforts meet regulatory requirements. We
executed a consent order in 1994 with the EPA, governing the remediation of the
relevant compressor stations and are working with the EPA, and the relevant
states regarding those

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remediation activities. We are also working with the Pennsylvania and New York
environmental agencies regarding remediation and post-remediation activities at
the Pennsylvania and New York stations.

In November 1988, the Kentucky environmental agency 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 agreed orders with the agency to resolve many of the
issues raised in the complaint and received water discharge permits from the
agency for our Kentucky compressor stations. The relevant Kentucky compressor
stations are being characterized and remediated under the 1994 consent order
with the EPA. Despite these remediation efforts, the agency may raise additional
technical issues or require additional remediation work in the future.

In May 1995, following negotiations with our customers, we filed an
agreement with the Federal Energy Regulatory Commission (FERC) that established
a mechanism for recovering a substantial portion of the environmental costs
identified in our internal 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 costs under the PCB
remediation project, with these surcharges to be collected over a defined
collection period. We have twice received approval from the FERC to extend the
collection period, which is now currently set to expire in June 2004. The
agreement also provided for bi-annual audits of eligible costs. As of June 30,
2002, we had over-collected our PCB costs by approximately $113 million for
which we have established a non-current liability. The over-collection will be
reduced by future eligible costs incurred for the remainder of the remediation
project. We are required to refund to our customers the over-collection amount
to the extent actual eligible expenditures are less than amounts collected.
Presently, we estimate the future refund obligation, at the conclusion of the
remediation process, to be approximately $50 million.

We have been designated and 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 one active
site 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 CERCLA sites, as appropriate, through indemnification by third
parties and settlements which provide for payment of our allocable share of
remediation costs. As of June 30, 2002, we have estimated our share of the
remediation costs at these sites to be between $1 million and $2 million and
have provided reserves that we believe are adequate for such costs. 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 determining our estimated liabilities.

While the outcome of our outstanding environmental matters cannot be
predicted with certainty, based on the information known to date and our
existing accruals, 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. It is possible that new information or future developments could
require us to reassess our potential exposure related to environmental matters.
It is also possible that other developments, such as increasingly strict
environmental laws and regulations and claims for damages to property,
employees, other persons and the environment resulting from our current or past
operations, could result in substantial costs and liabilities in the future. As
new information becomes available, or relevant developments occur, we will
review our accruals and make any appropriate adjustments. The impact of these
changes may have a material effect on our results of operations.

Rates and Regulatory Matters

In February 2000, the FERC issued Order No. 637 which revised regulations
regarding capacity release, capacity segmentation, imbalance management
services, operational flow orders and pipeline penalties. We filed our
compliance proposals on August 15, 2000, as modified on April 6, 2001, and we
received an order on compliance from the FERC on April 3, 2002. Although most of
our compliance proposals were accepted, the

6

FERC rejected our proposals regarding overlapping capacity segments, discounting
and the priority of capacity. We sought rehearing and made another compliance
filing subject to the outcome of our hearing request.

In 1997, the FERC approved the settlement of all issues related to the
recovery of our Gas Supply Realignment (GSR) and other transition costs. Under
the agreement, we are entitled to collect up to $770 million from our customers,
$693 million through a demand surcharge and $77 million through an interruptible
transportation surcharge. Our final GSR report was approved by the FERC on May
16, 2001. In June 2001, $31 million of the amount collected through the demand
surcharge was refunded to our firm transportation contract customers. As of June
30, 2002, $62 million of the interruptible transportation surcharge had been
collected. There is no time limit for collection of the remaining interruptible
transportation surcharge. This agreement also provides for a rate case
moratorium that expired November 2000 and an escalating rate cap, indexed to
inflation, through October 2005, for some of our customers.

In September 2001, the FERC issued a Notice of Proposed Rulemaking (NOPR).
The NOPR proposes to apply the standards of conduct governing the relationship
between interstate pipelines and marketing affiliates to all energy affiliates.
The proposed regulations, if adopted by the FERC, would dictate how we conduct
business and interact with our energy affiliates. In December 2001, we filed
comments with the FERC addressing our concerns with the proposed rules. A public
hearing was held on May 21, 2002, at which interested parties were given an
opportunity to comment further on the NOPR. Following the conference, additional
comments were filed by El Paso's pipelines and others. We cannot predict the
outcome of the NOPR, but adoption of the regulations in substantially the form
proposed would, at a minimum, place additional administrative and operational
burdens on us.

On July 17, 2002, the FERC issued a Notice of Inquiry (NOI) that seeks
comments regarding its policy, established in 1996, of permitting pipelines to
enter into negotiated rates transactions. Our pipeline has entered into such
transactions over the years. Specifically, the FERC is now undertaking a review
of whether negotiated rates should be capped, whether or not a pipeline's
"recourse rate" (cost of service based rate) continues to serve as a viable
alternative and safeguard against the exercise of alleged pipeline market power,
as well as other issues related to its negotiated rate program. Comments are due
on September 25, 2002, with reply comments due on October 25, 2002. We cannot
predict the outcome of this NOI.

On August 1, 2002, the FERC issued a NOPR requiring that all arrangements
concerning the cash management or money pool arrangements between a FERC
regulated subsidiary and a non-FERC regulated parent must be in writing, and set
forth: the duties and responsibilities of cash management participants and
administrators; the methods of calculating interest and for allocating interest
income and expenses; and the restrictions on deposits or borrowings by money
pool members. The NOPR also requires specified documentation for all deposits
into, borrowings from, interest income from, and interest expenses related to,
these arrangements. Finally, the NOPR proposed that as a condition of
participating in a cash management or money pool arrangement, the FERC regulated
entity must maintain a minimum proprietary capital balance of 30 percent, and
the FERC regulated entity and its parent must maintain investment grade credit
ratings. Comments on the NOPR are due on August 22, 2002. We cannot predict the
outcome of this NOPR.

Also on August 1, 2002, the FERC's Chief Accountant issued, to be effective
immediately, an Accounting Release providing guidance on how jurisdictional
entities should account for money pool arrangements and the types of
documentation that should be maintained for these arrangements. The Accounting
Release sets forth the documentation requirements set forth in the NOPR for
money pool arrangements, but does not address the requirements in the NOPR that
as a condition for participating in money pool arrangements the FERC regulated
entity must maintain a minimum proprietary capital balance of 30 percent and
that the entity and its parent must have investment grade credit ratings.
Requests for rehearing are due on September 3, 2002.

While the outcome of our rates and regulatory matters cannot be predicted
with certainty, based on the information known to date and our existing
accruals, 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. As new information

7

becomes available or relevant developments occur, we will review our accruals
and make any appropriate adjustments. The impact of these changes may have a
material effect on our results of operations.

Other Matters

In December 2001, Enron Corp. and a number of its subsidiaries including,
Enron North America Corp. and Enron Power Marketing, Inc. filed for Chapter 11
bankruptcy protection in the United States Bankruptcy Court for the Southern
District of New York. Affiliates of Enron held both short-term and long-term
capacity on our pipeline system but Enron has now rejected most of these
contracts. Future revenue on these contracts will depend upon the outcome of
Enron's bankruptcy and our ability to re-market or otherwise maximize the value
of the rejected or released capacity. We do not presently know the precise
values that will be received by our pipelines as a result of their efforts.

As a result of current circumstances surrounding the energy sector, the
creditworthiness of several industry participants has been called into question.
We have taken actions to mitigate our exposure to these participants; however,
should several of these participants file for Chapter 11 bankruptcy protection
and our contracts are not assumed by other counterparties, it could have a
material adverse effect on our financial position, operating results or cash
flows.

4. RELATED PARTY TRANSACTIONS

We participate in El Paso's cash management program which matches
short-term cash surpluses and needs of participating affiliates, thus minimizing
total borrowing from outside sources. We had advanced $322 million at June 30,
2002, at a market rate of interest which was 1.9%. At December 31, 2001, we had
advanced $153 million, at a market rate of interest which was 2.1%. In addition,
we had a demand note receivable with El Paso of $37 million at June 30, 2002, at
an interest rate of 2.4%. At December 31, 2001, the demand note receivable was
$28 million at an interest rate of 2.7%.

At June 30, 2002 and December 31, 2001, we had other accounts receivable
from related parties of $5 million and $15 million. In addition, we had accounts
payable to related parties of $9 million and $30 million at June 30, 2002 and
December 31, 2001. These balances arose in the normal course of business.

5. NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

Accounting for Asset Retirement Obligations

In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143, Accounting for Asset Retirement Obligations. This statement requires
companies to record a liability for the estimated retirement and removal costs
of assets used in their business. The liability is recorded at its present
value, and the same amount is added to the recorded value of the asset and is
amortized over the asset's remaining useful life. The provisions of SFAS No. 143
are effective for fiscal years beginning after June 15, 2002. We are currently
evaluating the effects of this statement.

Accounting for Costs Associated with Exit or Disposal Activities

In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This statement will require us to recognize
costs associated with exit or disposal activities when they are incurred rather
than when we commit to an exit or disposal plan. Examples of costs covered by
this guidance include lease termination costs, employee severance costs that are
associated with a restructuring, discontinued operations, plant closings or
other exit or disposal activities. The provisions of this statement are
effective for fiscal years beginning after December 31, 2002 and will impact any
exit or disposal activities initiated after January 1, 2003.

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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 you should read it in
conjunction with, information disclosed in our Annual Report on Form 10-K filed
March 25, 2002, in addition to the financial statements and notes presented in
Item 1, Financial Statements, of this Quarterly Report on Form 10-Q.

RECENT DEVELOPMENTS

As a result of current circumstances surrounding the energy sector, the
creditworthiness of several industry participants has been called into question.
We have taken actions to mitigate our exposure to these participants; however,
should several of these participants file for Chapter 11 bankruptcy protection
and our contracts are not assumed by other counterparties, it could have a
material adverse effect on our financial position, operating results or cash
flows.

RESULTS OF OPERATIONS

Pipeline results are relatively stable, but can be subject to variability
from a number of factors, such as weather conditions, including those conditions
that may impact the amount of power produced by natural gas fired turbines, as
well as gas supply availability which can displace the pipeline's delivery
capabilities to the markets they serve. Results can also be impacted by the
ability to market excess natural gas which is influenced by a pipeline's rate of
recovery for use and efficiencies of the compression equipment. Future revenues
may also be impacted by expansion projects in our service areas, competition by
other pipelines for those expansion needs and regulatory impacts on rates.
Results of our operations were as follows for the periods ended June 30:

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(1) BBtu/d means billion British thermal units per day.

Second Quarter 2002 Compared to Second Quarter 2001

Operating revenues for the quarter ended June 30, 2002, were $5 million
lower than the same period in 2001. The decrease was primarily due to the
favorable resolution of regulatory issues related to natural gas purchase
contracts in 2001 and the impact of lower natural gas prices on excess natural
gas recoveries in 2002. The decrease was partially offset by revenues from
transmission system expansion projects placed in service in 2002 and a favorable
resolution of measurement issues at a processing plant serving the TGP system.

Operating expenses for the quarter ended June 30, 2002, were $23 million
higher than the same period in 2001. The increase was primarily due to higher
shared services costs, higher amortization of additional acquisition cost
assigned to utility plant, higher field operational costs, higher costs
associated with gas storage and higher electric compression costs in 2002.

Six Months Ended 2002 Compared to Six Months Ended 2001

Operating revenues for the six months ended June 30, 2002, were $31 million
lower than the same period in 2001. The decrease was primarily due to the
favorable resolution of regulatory issues related to natural gas purchase
contracts in 2001, the impact of lower natural gas prices on excess natural gas
recoveries, lower transportation revenues from capacity sold under short-term
contracts and lower revenues due to milder weather in 2002. Partially offsetting
the decrease were revenues from transmission system expansion projects

9

placed in service in 2002 and a favorable resolution of measurement issues at a
processing plant serving the TGP system.

Operating expenses for the six months ended June 30, 2002, were $30 million
higher than the same period in 2001. The increase was primarily due to higher
shared services costs, higher amortization of additional acquisition cost
assigned to utility plant, higher field operational costs, higher costs
associated with gas storage and higher electric compression costs in 2002. Also
contributing to the increase were lower project development costs in the first
quarter of 2001.

New Expansion Project. The FERC approved our Can-East project and related
compressor facilities on June 26, 2002. Service is anticipated to commence in
November 2002. The Can-East project will extend our mainline pipeline system to
the Leidy Hub using 280 million cubic feet of capacity per day that we currently
intend to lease from Dominion Resources and National Fuel Gas Supply Corp.

INTEREST AND DEBT EXPENSE

Non-affiliated Interest and Debt Expense, Net

Non-affiliated interest and debt expense, net for the quarter and six
months ended June 30, 2002, was $2 million higher than the same period in 2001
primarily due to an increase in long-term debt and a decrease in capitalized
interest on construction projects due to lower rates. The increase was partially
offset by lower interest rates on commercial paper borrowings in 2002.

Affiliated Interest Income, Net

Affiliated interest income, net for the quarter and six months ended June
30, 2002, was $1 million and $4 million higher than the same period in 2001 due
primarily to an increase in average advances to El Paso in 2002 under our cash
management program, partially offset by lower 2002 short-term interest rates.

INCOME TAXES

Income tax expense for the quarter and six months ended June 30, 2002, was
$5 million and $22 million, resulting in effective tax rates of 26 percent and
28 percent. Our effective tax rates were different than the statutory rate of 35
percent primarily due to state income taxes.

Income tax expense for the quarter and six months ended June 30, 2001, was
$13 million and $41 million, resulting in effective tax rates of 27 percent and
30 percent. Our effective tax rates were different than the statutory rate of 35
percent primarily due to state income taxes.

COMMITMENTS AND CONTINGENCIES

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

NEW ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED

See Item 1, Financial Statements, Note 5, which is incorporated herein by
reference.

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CAUTIONARY STATEMENT 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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

This information updates, and you should read it in conjunction with,
information disclosed in Part II, Item 7A in our Annual Report on Form 10-K for
the year ended December 31, 2001, in addition to the information presented in
Items 1 and 2 of this Quarterly Report on Form 10-Q.

There are no material changes in our quantitative and qualitative
disclosures about market risks from those reported in our Annual Report on Form
10-K for the year ended December 31, 2001.

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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. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a. 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 "*"; all
exhibits not so designated are incorporated herein by reference to a prior
filing as indicated.

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.

b. Reports on Form 8-K

We filed a Current Report on Form 8-K dated June 5, 2002 filing the
Computation of our Ratio of Earnings to Fixed Charges.

We filed a Current Report on Form 8-K dated June 10, 2002 filing exhibits
in connection with our issuance of $240,000,000 of 8.375% Notes.

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SIGNATURES

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

TENNESSEE GAS PIPELINE COMPANY

Date: August 13, 2002 /s/ JOHN W. SOMERHALDER II
------------------------------------
John W. Somerhalder II
Chairman of the Board and Director
(Principal Executive Officer)

Date: August 13, 2002 /s/ GREG G. GRUBER
------------------------------------
Greg G. Gruber
Senior Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial and Accounting
Officer)

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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 "*"; all
exhibits not so designated are incorporated herein by reference to a prior
filing as indicated.