COLORADO INTERSTATE GAS 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 MARCH 31, 2003

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 1-4874
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COLORADO INTERSTATE GAS COMPANY
(Exact Name of Registrant as Specified in its Charter)

DELAWARE 84-0173305
(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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

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 $1 per share. Shares outstanding on May 15, 2003:
1,000

COLORADO INTERSTATE GAS 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

COLORADO INTERSTATE GAS COMPANY

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

See accompanying notes.

1

COLORADO INTERSTATE GAS COMPANY

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

See accompanying notes.

2

COLORADO INTERSTATE GAS COMPANY

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

See accompanying notes.

3

COLORADO INTERSTATE GAS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

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 in the United States. You should read it along with our
2002 Annual Report on Form 10-K, which includes a summary of our significant
accounting policies and other disclosures. The financial statements as of March
31, 2003, and for the quarters ended March 31, 2003 and 2002, are unaudited. We
derived the balance sheet as of December 31, 2002, from the audited balance
sheet filed in our 2002 Form 10-K. In our opinion, we have made all adjustments,
all of which are of a normal, recurring nature (except for the items discussed
in Note 2 below), to fairly present our interim period results. Due to the
seasonal nature of our businesses, information for interim periods may not
indicate the results of operations for the entire year. In addition, prior
period information presented in these financial statements includes
reclassifications which were made to conform to the current period presentation.
These reclassifications have no effect on our previously reported net income or
stockholder's equity.

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

Accounting for Costs Associated with Exit or Disposal Activities. As of
January 1, 2003, we adopted Statement of Financial Accounting Standards (SFAS)
No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS
No. 146 requires that we recognize costs associated with exit or disposal
activities when they are incurred rather than when we commit to an exit or
disposal plan. There was no initial financial statement impact of adopting this
standard.

Accounting for Guarantees. On January 1, 2003, we adopted Financial
Accounting Standards Board Interpretation (FIN) No. 45, Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. FIN No. 45 requires that we record a liability for all
guarantees, including financial performance and fair value guarantees, issued
after December 31, 2002, at fair value when they are issued. There was no
initial financial statement impact of adopting this standard.

Accounting for Regulated Operations. We continue to evaluate the
application of SFAS No. 71, Accounting for the Effects of Certain Types of
Regulation, for changes in the competitive environment and our operating cost
structures. See a further discussion of our accounting for regulated operations
in our 2002 Form 10-K.

2. DISCONTINUED OPERATIONS AND DIVESTITURES

In March 2003, we received approval to sell our Field Services assets in
the Mid-Continent region. These assets primarily include our Greenwood, Hugoton,
Keyes and Mocane natural gas gathering systems, our Sturgis processing plant and
our processing arrangements at three additional processing plants. The Mid-
Continent assets have historically been included in our Field Services segment.
In January 2003, we completed the sale of our Wyoming gathering systems to
Western Gas Resources, Inc. Net proceeds from this sale were $14 million, and we
recognized a gain of approximately $1 million. Upon the announcement of our plan
to sell our mid-continent assets along with the completion in the first quarter
of 2003 of our sale of Wyoming gathering systems, we had sold or announced the
sale of substantially all of the assets in our Field Services segment. As a
result, we have classified our Field Services segment as discontinued operations
in our financial statements for all periods presented. We classified Field
Services' assets and liabilities at March 31, 2003 as other current assets and
liabilities since we anticipate selling them within the next twelve months.

In February 2003, we completed the sale of a natural gas gathering system
located in the Panhandle field of Texas. Net proceeds on this transaction of
approximately $19 million were advanced to us by the purchaser
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in July 2002. These assets were historically reported in our Pipeline segment
and were reclassified as discontinued operations for the quarter ended March 31,
2002 and at December 31, 2002.

In July 2002, we completed the sale of our interest in natural gas and oil
properties and related contracts located in Texas, Kansas and Oklahoma. The
operating results of these assets are classified as discontinued operations for
the quarter ended March 31, 2002.

The summarized financial results of discontinued operations are as follows:

3. DEBT AND CREDIT FACILITIES

In April 2003, El Paso entered into a new $3 billion revolving credit
facility, with a $1.5 billion letter of credit sub-limit, which matures in June
2005. This facility replaces the previous $3 billion, 364-day revolving credit
facility. El Paso's existing $1 billion revolving credit facility, which matures
in August 2003, and approximately $1 billion of other financing arrangements
(including leases, letters of credit and other facilities) were also amended to
conform El Paso's obligations to the new $3 billion revolving credit facility.
Under the terms of the $3 billion revolving credit facility, upon the retirement
of the Clydesdale financing transaction (as discussed below), we will become a
pipeline company borrower under this facility.

El Paso's $3 billion revolving credit facility and the other financing
arrangements are secured by El Paso's equity in several of its subsidiaries.
These bank facilities are also collateralized by El Paso's equity in the
companies that collateralize the Clydesdale transaction including its equity in
us.

The revolving credit facilities have a borrowing cost of LIBOR plus 350
basis points and letter of credit fees of 350 basis points. A key financial
covenant of the facilities is the requirement for El Paso to maintain debt to
total capitalization, as those terms are defined in the revolving credit
facilities, not to exceed 75 percent. In addition, the pipeline company
borrowers cannot incur incremental debt if the incurrence of debt would cause
our debt to EBITDA ratio, as those terms are defined in the revolving credit
facilities, to exceed 5 to 1. The proceeds from the issuance of debt by the
pipeline company borrowers can be used only for maintenance and expansion
capital expenditures or investments in other FERC-regulated assets, and to
refinance existing debt. As of March 31, 2003, $1.5 billion was outstanding
under the $3 billion facility, none of which was our obligation.

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In April of 2003, El Paso restructured the remaining $750 million
outstanding under its Clydesdale financing agreement as a term loan. The term
loan will amortize in equal quarterly payments of $100 million over the next two
years. The same assets that supported the Clydesdale financing arrangement,
including a production payment from El Paso, various natural gas and oil
properties and El Paso's equity in us, and now, in addition, a guarantee by El
Paso, collateralize the term loan. Upon Clydesdale meeting its quarterly
amortization requirements, the term loan removes restrictions on our ability to
invest or dividend cash. In May 2003, El Paso paid the first quarterly
installment on the loan.

4. 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. The plaintiff in this case seeks royalties that he
contends the government should have received had the volume and heating value of
natural gas produced from royalty properties been differently measured,
analyzed, calculated and reported, together with interest, treble damages, civil
penalties, 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. 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' motion to dismiss. Discovery is proceeding. 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 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. Quinque has been dropped as a plaintiff and Will Price has been added.
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 plaintiff in this case seeks certification of a nationwide
class of natural gas working interest owners and natural gas royalty owners to
recover royalties that the plaintiff contends these owners 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,
attorney's 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. Plaintiff's motion for class
certification was denied on April 10, 2003. Our costs and legal exposure related
to this lawsuit and claims are not currently determinable.

Cimarron County. In January of 2003, our subsidiary, CIG Field Services
Company, was named a defendant in a suit titled Patty Hiner, As Duly Elected
County Assessor, The Board of County Commissioners for Cimarron County, Oklahoma
vs. CIG Field Services Company in Cimarron County District Court, alleging that
in 1999 our agents falsely represented the value of our property to the Cimarron
County Property Tax Assessor. The plaintiffs seek compensatory and punitive
damages. The case has been removed to the United States District Court for the
Western District of Oklahoma. Plaintiff's motion to remand was denied. CIG Field
Services has filed a Motion to Dismiss.

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 March 31, 2003, we had approximately $2 million accrued for all
outstanding legal matters.

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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. As of March 31,
2003, we had accrued approximately $13 million for expected remediation costs
and associated onsite, offsite and groundwater technical studies, which we
anticipate incurring through 2027. The high and low end of our reserve estimates
were not materially different.

In addition, we expect to make capital expenditures for environmental
matters of approximately $1 million in the aggregate for the years 2003 through
2008. These expenditures primarily relate to compliance with clean air
regulations.

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 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 relating to the ultimate costs we may incur,
based upon our evaluation and experience to date, we believe the reserves are
adequate.

Rates and Regulatory Matters

Rate Case. In March 2001, we filed a rate case with the FERC proposing
increased rates of $9 million annually and new and enhanced services for our
customers. In April 2001, we received an order from the FERC, which suspended
the rates, subject to refund, and subject to the outcome of a hearing. On
September 26, 2001, the FERC approved certain of our new or enhanced services
but rejected two firm services proposed in our rate filing and required us to
reallocate the costs allocated to those two services to existing services. We
complied with this order and arranged with the affected customers to provide
service under existing rate schedules. We and our customers entered into a
settlement agreement in May 2002 settling all issues in the case. The
settlement, which contained a small rate increase, was approved by the FERC, and
became final in September 2002. The settlement obligates us to file a new rate
case to be effective no later than October 1, 2006. We paid approximately $8
million, including interest, in customer refunds in November 2002. These refunds
were included in accrued liabilities, and did not have an adverse effect on our
financial position or results of operations. On March 13, 2003, the FERC issued
an order approving our refund report.

Marketing Affiliate NOPR. 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, providing an
opportunity to comment further on the NOPR. Following the conference, additional
comments were filed by El Paso's pipelines and others. At this time, we cannot
predict the outcome of the NOPR, but adoption of the regulations in their
proposed form would, at a minimum, place additional administrative and
operational burdens on us.

Negotiated Rate NOI. In July 2002, the FERC issued a Notice of Inquiry
(NOI) that seeks comments regarding its 1996 policy of permitting pipelines to
enter into negotiated rate transactions. We have entered into these transactions
over the years, and the FERC is now reviewing whether negotiated rates should be
capped, whether or not the "recourse rate" (a cost-of-service based rate)
continues to safeguard against a pipeline exercising market power and other
issues related to negotiated rate programs. On September 25, 2002, El Paso's
pipelines and others filed comments. Reply comments were filed on October 25,
2002. At this time, we cannot predict the outcome of this NOI.

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Cash Management NOPR. On August 1, 2002, the FERC issued a NOPR requiring
that all cash management or money pool arrangements between a FERC regulated
subsidiary (like us) 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 maintain a minimum proprietary capital balance of 30 percent, and the
FERC regulated entity and its parent maintain investment grade credit ratings.
On August 28, 2002, comments were filed. The FERC held a public conference on
September 25, 2002 to discuss the issues raised in the comments. Representatives
of companies from the gas and electric industries participated on a panel and
uniformly agreed that the proposed regulations should be revised substantially
and that the proposed capital balance and investment grade credit rating
requirements would be excessive. At this time, we cannot predict the outcome of
this NOPR.

Also on August 1, 2002, the FERC's Chief Accountant issued an Accounting
Release, which was effective immediately. The Accounting Release provides
guidance on how companies should account for money pool arrangements and the
types of documentation that should be maintained for these arrangements.
However, it did not address the proposed requirements that the FERC regulated
entity maintain a minimum proprietary capital balance of 30 percent and that the
entity and its parent have investment grade credit ratings. Requests for
rehearing were filed on August 30, 2002. The FERC has not yet acted on the
rehearing requests.

Emergency Reconstruction of Interstate Natural Gas Facilities NOPR. On
January 17, 2003, FERC issued a NOPR proposing, in emergency situations, to (1)
expand the scope of construction activities authorized under a pipeline's
blanket certificate to allow replacement of mainline facilities; (2) authorize a
pipeline to commence reconstruction of the affected system without a waiting
period; and (3) authorize automatic approval of construction that would be above
the normal cost ceiling. Comments on the NOPR were filed on February 27, 2003.
At this time, we cannot predict the outcome of this rulemaking.

Pipeline Safety Notice of Proposed Rulemaking. On January 28, 2003, the
U.S. Department of Transportation issued a NOPR proposing to establish a rule
requiring pipeline operators to develop integrity management programs to
comprehensively evaluate their pipelines, and take measures to protect pipeline
segments located in what the notice refers to as "high consequence areas." The
proposed rule resulted from the enactment of the Pipeline Safety Improvement Act
of 2002, a new bill signed into law in December 2002. Comments on the NOPR were
filed on April 30, 2003. At this time, we cannot predict the outcome of this
rulemaking.

While the outcome of our outstanding legal matters, environmental matters,
and rates and regulatory matters cannot be predicted with certainty, based on
current information 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. However, it is possible that new
information or future developments could require us to reassess our potential
exposure related to these matters. It is also possible that these matters could
impact our debt rating and the credit rating of our parent. Further, for
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 for our outstanding legal matters, environmental
matters and rates and regulatory matters 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, our financial position, and on our cash flows in the
period the event occurs.

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5. SEGMENT INFORMATION

Prior to the sale or announced sale of our remaining Field Services assets,
we segregated our business activities into two distinct operating segments:
Pipeline and Field Services. These segments were strategic business units that
provided a variety of energy products and services. They were managed separately
as each business unit requires different technology and marketing strategies. In
the first quarter of 2003, we reclassified our Field Services segment to
discontinued operations in our financial statements, and all periods were
restated to reflect this change. See Note 2 for a further discussion of these
operations. As a result of this change, our continuing operations consist solely
of our regulated natural gas pipeline business.

6. RELATED PARTY TRANSACTIONS

We participate in El Paso's and its affiliates cash management program
which matches short-term cash surpluses and needs of its participating
affiliates, thus minimizing total borrowing from outside sources. As of March
31, 2003 and December 31, 2002, we had advanced $480 million and $469 million.
The market rate of interest at March 31, 2003 and December 31, 2002 was 1.3
percent and 1.5 percent. As of March 31, 2003 and December 31, 2002, we have
classified $442 million and $444 million of these advances as non-current notes
receivable from affiliates. These receivables are due upon demand; however, we
do not anticipate settlement within the next twelve months.

At March 31, 2003 and December 31, 2002, we had accounts receivable from
related parties of $17 million for both periods. In addition, we had accounts
payable to related parties of $10 million and $11 million at March 31, 2003 and
December 31, 2002. These balances arose in the normal course of our business.

The following table shows revenues and charges from our affiliates
including discontinued operations for the quarters ended March 31:

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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 2002 Form 10-K, in addition
to the financial statements and notes presented in Item 1, Financial Statements,
of this Form 10-Q.

GENERAL

In the first quarter of 2003, we announced our intent to sell the remaining
assets in our Field Services segment and reclassified the entire Field Services
segment as discontinued operations. All periods presented in our financial
statements and in our discussion and analysis of financial condition and results
of operations have been restated to reflect this reclassification.

RESULTS OF OPERATIONS

We use earnings before interest expense and income taxes (EBIT) to assess
the operating results and effectiveness of our business segments. EBIT is
operating income adjusted for other miscellaneous non-operating income. Items
that are not included in this measure are financing costs, including interest
and debt expense, income taxes and discontinued operations. We believe this
measurement is useful to our investors because it allows them to evaluate the
effectiveness of our businesses and operations and our investments from an
operational perspective, exclusive of the costs to finance those activities and
exclusive of income taxes. This measurement may not be comparable to
measurements used by other companies and should not be used as a substitute for
net income or other performance measures such as operating income or operating
cash flow. Presented below is a reconciliation of operating results to EBIT and
EBIT to income from continuing operations and a discussion of our operating
results for the quarter ended March 31:

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(1) BBtu/d means billion British thermal units per day. Throughput volumes
exclude volumes related to discontinued operations. Prior period volumes
have been restated to reflect our current year presentation which includes
billable transportation throughput volume for storage withdrawal.

First Quarter 2003 Compared to First Quarter 2002

Operating revenues for the quarter ended March 31, 2003, were $13 million
higher than the same period in 2002. The increase was due to a $4 million
reversal of reserves in 2003 related to the finalization of our rate case
settlement and $3 million from completed system expansions. Also contributing to
the increase were higher storage gas sales of $3 million which commenced in the
fourth quarter of 2002 and $2 million of increased gas processing revenues
resulting from higher prices.

Operating expenses for the quarter ended March 31, 2003, were $3 million
lower than the same period in 2002. The decrease was due to lower gas costs for
our system supply operating needs during 2003.

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AFFILIATED INTEREST INCOME (EXPENSE), NET

Affiliated interest income (expense), net for the quarter ended March 31,
2003, was $3 million higher than the same period in 2002, due to higher average
advances to El Paso under our cash management program in 2003 partially offset
by lower short-term interest rates.

INCOME TAXES

The income tax expense for the quarters ended March 31, 2003 and 2002, was
$19 million and $12 million, resulting in effective tax rates of 38 percent and
39 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 4, 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, 2002, 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, 2002.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Controls and Procedures. Under the supervision and with the
participation of management, including our principal executive officer and
principal financial officer, we have evaluated the effectiveness of the design
and operation of our disclosure controls and procedures (Disclosure Controls)
and internal controls (Internal Controls) within 90 days of the filing date of
this Quarterly Report pursuant to Rules 13a-15 and 15d-15 under the Securities
Exchange Act of 1934 (Exchange Act).

Definition of Disclosure Controls and Internal Controls. Disclosure
Controls are our controls and other procedures that are designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act is recorded, processed, summarized and reported, within
the time periods specified under the Exchange Act. Disclosure Controls include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by us in the reports that we file under the Exchange
Act is accumulated and communicated to our management, including our principal
executive officer and principal financial officer, as appropriate to allow
timely decisions regarding required disclosure. Internal Controls are procedures
which are designed with the objective of providing reasonable assurance that (1)
our transactions are properly authorized; (2) our assets are safeguarded against
unauthorized or improper use; and (3) our transactions are properly recorded and
reported, all to permit the preparation of our financial statements in
conformity with generally accepted accounting principles.

Limitations on the Effectiveness of Controls. Colorado Interstate Gas
Company's management, including the principal executive officer and principal
financial officer, does not expect that our Disclosure Controls and Internal
Controls will prevent all errors and all fraud. A control system, no matter how
well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs. Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and that
breakdowns can occur because of simple errors or mistakes. Additionally,
controls can be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. The
design of any system of controls also is based in part upon certain assumptions
about the likelihood of future events, and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions. Over time, controls may become
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inadequate because of changes in conditions, or the degree of compliance with
the policies or procedures may deteriorate. Because of the inherent limitations
in a cost-effective control system, misstatements due to error or fraud may
occur and not be detected.

No Significant Changes in Internal Controls. We have sought to determine
whether there were any "significant deficiencies" or "material weaknesses" in
Colorado Interstate Gas Company's Internal Controls, or whether the Company had
identified any acts of fraud involving personnel who have a significant role in
Colorado Interstate Gas Company's Internal Controls. This information was
important both for the controls evaluation generally and because the principal
executive officer and principal financial officer are required to disclose that
information to our Board and our independent accountants and to report on
related matters in this section of the Quarterly Report. The principal executive
officer and principal financial officer note that, from the date of the controls
evaluation to the date of this Quarterly Report, there have been no significant
changes in Internal Controls or in other factors that could significantly affect
Internal Controls, including any corrective actions with regard to significant
deficiencies and material weaknesses.

Effectiveness of Disclosure Controls. Based on the controls evaluation,
our principal executive officer and principal financial officer have concluded
that, subject to the limitations discussed above, the Disclosure Controls are
effective to ensure that material information relating to Colorado Interstate
Gas Company and its consolidated subsidiaries is made known to management,
including the principal executive officer and principal financial officer,
particularly during the period when our periodic reports are being prepared.

Officer Certificates. The certifications from the principal executive
officer and principal financial officer required under Sections 302 and 906 of
the Sarbanes-Oxley Act of 2002 have been included herein, or as Exhibits to this
Quarterly Report, as appropriate.

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PART II -- OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

See Part I, Item 1, Financial Statements, Note 4, 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 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

None.

14

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.

COLORADO INTERSTATE GAS COMPANY

Date: May 15, 2003 /s/ JOHN W. SOMERHALDER II
------------------------------------
John W. Somerhalder II
Chairman of the Board,
Chief Executive Officer and Director
(Principal Executive Officer)

Date: May 15, 2003 /s/ GREG G. GRUBER
------------------------------------
Greg G. Gruber
Senior Vice President,
Chief Financial Officer and
Treasurer
(Principal Financial and Accounting
Officer)

15

CERTIFICATION

I, John W. Somerhalder II, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Colorado
Interstate Gas Company;

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluations as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

/s/ JOHN W. SOMERHALDER II
--------------------------------------
John W. Somerhalder II
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Colorado Interstate Gas Company

16

CERTIFICATION

I, Greg G. Gruber, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Colorado
Interstate Gas Company;

2. Based on my knowledge, this quarterly 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 quarterly
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly 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 quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures 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 quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluations as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: May 15, 2003

/s/ GREG G. GRUBER
--------------------------------------
Greg G. Gruber
Senior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Colorado Interstate Gas Company

17

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.