SOUTHERN NATURAL GAS COMPANY, L.L.C. - FORM 10-Q - May 6, 2011

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EX-12 - EXHIBIT 12 - SOUTHERN NATURAL GAS COMPANY, L.L.C.exhibit12.htm
EX-3.A - EXHIBIT 3.A - SOUTHERN NATURAL GAS COMPANY, L.L.C.exhibit3a.htm
EX-32.A - EXHIBIT 32.A - SOUTHERN NATURAL GAS COMPANY, L.L.C.exhibit32a.htm
EX-31.A - EXHIBIT 31.A - SOUTHERN NATURAL GAS COMPANY, L.L.C.exhibit31a.htm
EX-32.B - EXHIBIT 32.B - SOUTHERN NATURAL GAS COMPANY, L.L.C.exhibit32b.htm
EX-31.B - EXHIBIT 31.B - SOUTHERN NATURAL GAS COMPANY, L.L.C.exhibit31b.htm
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________
 
 
Form 10-Q

(Mark One)

R
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
 
For the quarterly period ended March 31, 2011
   
 
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 1-2745
________________
 
Southern Natural Gas Company
(Exact Name of Registrant as Specified in Its Charter)

Delaware
63-0196650
(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 R   No £

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes £  No £

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer £  Accelerated filer £   Non-accelerated filer R        Smaller reporting company £
           (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes £ No R

 
 
 
 


SOUTHERN NATURAL GAS COMPANY




  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 “us”, “we”, “our”, or “ours”, we are describing Southern Natural Gas Company and/or our subsidiaries.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
 


SOUTHERN NATURAL GAS COMPANY

 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In millions)
(Unaudited)

 
 
  
Quarter Ended
March 31,
  
 
  
2011
    
2010
  
                 
Operating revenues
   $ 145     $ 145  
                 
Operating expenses
                
   Operation and maintenance
     34       37  
   Depreciation and amortization
     15       15  
   Taxes, other than income taxes
     8       7  
      57       59  
Operating income
     88       86  
Earnings from unconsolidated affiliate
     4       4  
Other income, net
     2       1  
Interest and debt expense
     (16 )     (16 )
Affiliated interest income, net
     —       1  
Net income
   $ 78     $ 76  

See accompanying notes.
 
 
 
 
 
 
 
 
 
 
 
 
 


 
SOUTHERN NATURAL GAS COMPANY

 CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions)
(Unaudited)

 
 
  
March 31,
2011
    
December 31,
2010
  
ASSETS
  
Current assets
            
   Cash and cash equivalents
   $ 6     $ 4  
   Accounts and note receivable
                
         Customer
     10       3  
         Affiliates
     2       —  
         Other
     21       26  
   Materials and supplies
     16       16  
   Regulatory assets
     18       14  
          Total current assets
     73       63  
Property, plant and equipment, at cost
     3,903       3,885  
   Less accumulated depreciation and amortization
     1,385       1,390  
          Total property, plant and equipment, net
     2,518       2,495  
Other assets
                
   Investment in unconsolidated affiliate
     59       56  
   Other
     73       73  
      132       129  
          Total assets
   $ 2,723     $ 2,687  
                 
LIABILITIES AND PARTNERS’ CAPITAL
  
Current liabilities
                
   Accounts and note payable
                
         Trade
   $ 20     $ 25  
         Affiliates
     12       28  
         Other
     35       31  
   Taxes payable
     7       13  
   Accrued interest
     18       18  
 Contractual deposits
     9       6  
   Asset retirement obligations
     —       1  
          Total current liabilities
     101       122  
Long-term debt
     910       910  
Other liabilities
     32       31  
                 
Commitments and contingencies (Note 4)
                
Partners’ capital
     1,680       1,624  
Total liabilities and partners’ capital
   $ 2,723     $ 2,687  

See accompanying notes.
 
 

 
 
SOUTHERN NATURAL GAS COMPANY

 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)

 
 
  
Quarter Ended
March 31,
  
 
  
2011
    
2010
  
Cash flows from operating activities
            
   Net income
   $ 78     $ 76  
   Adjustments to reconcile net income to net cash from operating activities
                
      Depreciation and amortization
     15       15  
      Earnings from unconsolidated affiliate, adjusted for cash distributions
     (3 )     (1 )
      Other non-cash income items
     (1 )     —  
      Asset and liability changes
     (1 )     2  
              Net cash provided by operating activities
     88       92  
                 
Cash flows from investing activities
                
   Capital expenditures
     (51 )     (18 )
   Net change in note receivable from affiliate
     (4 )     23  
Acquisition
     —       (18 )
Proceeds from the sale of assets
     —       8  
Other
     3       —  
              Net cash used in investing activities
     (52 )     (5 )
                 
Cash flows from financing activities
                
Net change in note payable to affiliate
     (12 )     —  
   Contributions from partners
     25       —  
   Distributions to partners
     (47 )     (83 )
              Net cash used in financing activities
     (34 )     (83 )
                 
Net change in cash and cash equivalents
     2       4  
Cash and cash equivalents
                
   Beginning of period
     4       —  
   End of period
   $ 6     $ 4  

See accompanying notes.
 
 
 
 
 
 
 
 
 
 
 
 

 
 
SOUTHERN NATURAL GAS COMPANY

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1. Basis of Presentation and Significant Accounting Policies

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. As an interim period filing presented using a condensed format, it does not include all of the disclosures required by U.S. generally accepted accounting principles, and you should read this report along with our 2010 Annual Report on Form 10-K. The financial statements as of March 31, 2011, and for the quarters ended March 31, 2011 and 2010, are unaudited. The condensed consolidated balance sheet as of December 31, 2010, was derived from the audited balance sheet filed in our 2010 Annual Report on Form 10-K. In our opinion, we have made adjustments, all of 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 operating results for the entire year. Our disclosures in this Form 10-Q are an update to those provided in our 2010 Annual Report on Form 10-K.

In March 2011, El Paso Pipeline Partners, L.P. (EPB) acquired an additional 25 percent ownership interest in us from El Paso Corporation (El Paso). The acquisition increased EPB’s interest in us to 85 percent with El Paso retaining the remaining 15 percent.

Significant Accounting Policies

There were no changes in the significant accounting policies described in our 2010 Annual Report on Form 10-K and no significant accounting pronouncements issued but not yet adopted as of March 31, 2011.

2. Acquisition / Divestiture

During the first quarter of 2010, we purchased certain pipeline assets from Elba Express Company, L.L.C. (Elba Express), our affiliate, for $18 million and sold certain pipeline assets to Elba Express for net proceeds of $8 million. We recorded both the purchase and sale at their historical cost and accordingly, we recognized no gain or loss on these transactions.

3. Financial Instruments

At March 31, 2011 and December 31, 2010, the carrying amounts of cash and cash equivalents and trade receivables and payables represent fair value because of the short-term nature of these instruments. At March 31, 2011, we had an interest bearing note receivable from EPB of approximately $4 million. At December 31, 2010, this note carried a payable balance to EPB of approximately $12 million. The interest rate on this note is variable and was 0.8% at March 31, 2011 and December 31, 2010. While we are exposed to changes in interest income or expense based on changes to the variable interest rate, the fair value of this note approximates its carrying value due to the note being due on demand and the market-based nature of the interest rate.

In addition, the carrying amounts of our long-term debt and their estimated fair values, which are based on quoted market prices for the same or similar issues, are as follows:
 

   
March 31, 2011
    
December 31, 2010
  
 
 
  
Carrying
Amount
    
Fair
Value
    
Carrying
Amount
    
Fair
Value
  
   
(In millions)
  
Long-term debt
   $ 910     $ 1,031     $ 910     $ 984  

 

 

 
4. Commitments and Contingencies

Legal Proceedings

We and our affiliates are named defendants in numerous legal proceedings and claims that arise in the ordinary course of our business. For each of these matters, we evaluate the merits of the case or claim, 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. While the outcome of these matters cannot be predicted with certainty, and there are still uncertainties related to the costs we may incur, based upon our evaluation and experience to date, we believe we have established appropriate reserves for these matters. It is possible, however, that new information or future developments could require us to reassess our potential exposure related to these matters and adjust our accruals accordingly, and these adjustments could be material. As of March 31, 2011, we had approximately $2 million accrued for all of our outstanding legal proceedings.

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 of the disposal or release of specified substances at current and former operating sites. At March 31, 2011, our accrual was less than $1 million for our environmental matters.

Our environmental remediation projects are in various stages of completion. Our recorded liabilities reflect our current estimates of amounts we will spend to remediate these sites. However, depending on the stage of completion or assessment, the ultimate extent of contamination or remediation required may not be known. As additional assessments occur or remediation efforts continue, we may incur additional liabilities.

Superfund Matters. Included in our recorded environmental liabilities are projects where we have received notice that we have been designated or could be designated as a Potentially Responsible Party (PRP) under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), commonly known as Superfund, or state equivalents for one active site. Liability under the federal CERCLA statute may be joint and several, meaning that we could be required to pay in excess of our pro rata share of remediation costs. We consider the financial strength of other PRPs in estimating our liabilities.

We expect to make capital expenditures for environmental matters of approximately $2 million in the aggregate for the remainder of 2011 through 2015, including capital expenditures associated with the impact of the Environmental Protection Agency rule on emissions of hazardous air pollutants from reciprocating internal combustion engines which are subject to regulations with which we have to be in compliance by October 2013.

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, regulations and orders of regulatory agencies, as well as claims for damages to property and the environment or injuries to other persons 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.

Other Commitment

During 2009, we entered into a $57 million letter of credit associated with our estimated construction cost related to the Southeast Supply Header project.  As invoices are paid under the contract, we are able to reduce the value of the letter of credit.  At March 31, 2011, the letter of credit has been reduced to approximately $18 million.
 
 

 

 
 
5. Accounts Receivable Sales Program

We participate in an accounts receivable sales program where we sell receivables in their entirety to a third party financial institution (through a wholly-owned special purpose entity). The sale of these accounts receivable (which are short-term assets that generally settle within 60 days) qualify for sale accounting. The third party financial institution involved in our accounts receivable sales program acquires interests in various financial assets and issues commercial paper to fund those acquisitions. We do not consolidate the third party financial institution because we do not have the power to control, direct, or exert significant influence over its overall activities since our receivables do not comprise a significant portion of its operations.

In connection with our accounts receivable sales, we receive a portion of the sales proceeds up front and receive an additional amount upon the collection of the underlying receivables (which we refer to as a deferred purchase price). Our ability to recover the deferred purchase price is based solely on the collection of the underlying receivables. The table below contains information related to our accounts receivable sales program.

   
Quarter Ended
March 31,
  
   
2011
    
2010
  
   
(In millions)
  
Accounts receivable sold to the third-party financial institution (1) 
   $ 162     $ 146  
Cash received for accounts receivable sold under the program
     96       123  
Deferred purchase price related to accounts receivable sold
     66       23  
Cash received related to the deferred purchase price
     73       57  
Amount paid in conjunction with terminated program (2) 
     —       30  
____________
(1)   During the quarters ended March 31, 2011 and 2010, losses recognized on the sale of accounts receivable were immaterial.
(2)    In January 2010, we terminated our previous accounts receivable sales program and paid $30 million to acquire the related senior interests in certain receivables under that program. See our 2010 Annual Report on Form 10-K for further information.
 
   
March 31,
    
December 31,
  
   
2011
    
2010
  
   
(In millions)
  
Accounts receivable sold and held by third-party financial institution
   $ 50     $ 56  
Uncollected deferred purchase price related to accounts receivable sold (1)
     19       26  
____________
(1)   Initially recorded at an amount which approximates its fair value using observable inputs other than quoted prices in active markets.

The deferred purchase price related to the accounts receivable sold is reflected as other accounts receivable on our balance sheet. Because the cash received up front and the deferred purchase price relate to the sale or ultimate collection of the underlying receivables, and are not subject to significant other risks given their short term nature, we reflect all cash flows under the accounts receivable sales program as operating cash flows on our statement of cash flows. Under the accounts receivable sales program, we service the underlying receivables for a fee. The fair value of this servicing agreement, as well as the fees earned, were not material to our financial statements for the quarters ended March 31, 2011 and 2010.
   
6. Investment in Unconsolidated Affiliate and Transactions with Affiliates

     Investment in Unconsolidated Affiliate

We have a 50 percent ownership interest in Bear Creek Storage Company, L.L.C. (Bear Creek), a joint venture with Tennessee Gas Pipeline Company, our affiliate. For the quarters ended March 31, 2011 and 2010, we received $1 million and $3 million in cash distributions from Bear Creek.

 

 

 
 
Summarized financial information for our proportionate share of Bear Creek for the quarters ended March 31 is presented as follows:
 
 
  
2011
    
2010
  
   
(In millions)
  
Operating results data:
            
   Operating revenues
   $ 5     $ 5  
   Operating expenses
     1       1  
   Income from continuing operations and net income
     4       4  

Transactions with Affiliates

EPB Acquisition. In March 2011, EPB acquired an additional 25 percent ownership interest in us from El Paso. The acquisition increased EPB’s interest in us to 85 percent with El Paso retaining the remaining 15 percent.

Distributions and Contributions. We are required to make distributions of available cash as defined in our partnership agreement on a quarterly basis to our partners. During the quarter ended March 31, 2011 and 2010, we paid cash distributions of approximately $47 million and approximately $83 million to our partners.  In addition, in April 2011, we paid cash distributions to our partners of approximately $81 million. During the first quarter of 2011, we received cash contributions of approximately $25 million from our partners to fund our expansion projects and, in April 2011, we received an additional $36 million.

Cash Management Program. We participate in EPB’s cash management program which matches short-term cash surpluses and needs of participating affiliates, thus minimizing total borrowings from outside sources. EPB uses the cash management program to settle intercompany transactions between participating affiliates.  At March 31, 2011, we had a note receivable from EPB of approximately $4 million which was classified as non-current on our balance sheet. At December 31, 2010 this note carried a payable balance to EPB of approximately $12 million which was classified as current on our balance sheet. The interest rate on this note is variable and was 0.8% at March 31, 2011 and December 31, 2010.

Affiliate Revenues and Expenses. We enter into transactions with our affiliates within the ordinary course of business.  For a further discussion of our affiliated transactions, see our 2010 Annual Report on Form 10-K. The following table shows revenues and charges from our affiliates for the quarters ended March 31:

 
  
2011
    
2010
  
   
(In millions)
  
Revenues
   $ 2     $ 2  
Operation and maintenance expenses
     27       30  
Reimbursements of operating expenses
     1       1  
 
 
 
 
 

 
 
 

The information contained in Item 2 updates, and should be read in conjunction with, information disclosed in our 2010 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

Beginning January 1, 2011, our management uses segment earnings before interest expense and income taxes Segment (EBIT) as a measure to assess the operating results and effectiveness of our business, which consists of consolidated operations as well as an investment in an unconsolidated affiliate. We believe Segment EBIT is useful to investors to provide them with the same measure used by our management to evaluate our performance and so that investors may evaluate our operating results without regard to our financing methods. We define Segment EBIT as net income adjusted for items such as interest and debt expense, and affiliated interest income. Segment EBIT may not be comparable to measures used by other companies. Additionally, Segment EBIT should be considered in conjunction with net income and other performance measures such as operating income or operating cash flows. Below is a reconciliation of our Segment EBIT to net income, our throughput volumes and an analysis and discussion of our results for the quarter ended March 31, 2011 compared with the same period in 2010.

Operating Results:
 
  
2011
    
 2010
  
   
(In millions,
except for volumes)
  
 
Operating revenues
   $ 145     $ 145  
Operating expenses
     (57 )     (59 )
   Operating income
     88       86  
Earnings from unconsolidated affiliate
     4       4  
Other income, net
     2       1  
   Segment EBIT
     94       91  
Interest and debt expense
     (16 )     (16 )
Affiliated interest income, net
     —       1  
   Net income
   $ 78     $ 76  
Throughput volumes (BBtu/d)(1) 
     2,632       2,899  
____________
(1)  Throughput volumes include billable transportation throughput volumes for storage injection.

Segment EBIT Analysis:
   
Variance
  
   
Operating
    
Operating
              
   
Revenue
    
Expense
    
Other
    
Total
  
   
Favorable/(Unfavorable)
  
   
(In millions)
  
Expansion
   $ 5     $ —     $ 1     $ 6  
Reservation and other service revenues
     (5 )     —       —       (5 )
Operating and general and administrative expenses
     —       2       —       2  
Total impact on Segment EBIT
   $ —     $ 2     $ 1     $  3  

Expansion.  During the quarter ended March 31, 2011, we benefited from increased reservation revenues due to Phase I of the South System III expansion project being placed in service. Construction on Phase II of the project began in February 2011 and we expect to place this phase in-service in June 2011.

Reservation and Other Services Revenues. For the quarter ended March 31, 2011, we experienced lower revenues as a result of a $3 million decrease in our usage and interruptible services when compared to 2010, which had extremely cold weather, and a $2 million decrease in reservation revenue as a result of turned back capacity on our system.

Operating and General and Administrative Expenses. Our operating and general and administrative costs were lower during the quarter ended March 31, 2011 compared with the same period in 2010, primarily due to lower allocated costs from El Paso based on the estimated level of resources devoted to us and the relative size of our Segment EBIT, gross property and payroll when compared to El Paso’s other affiliates.
 
8
 
 
 
Affiliated Interest Income, Net
 
The following table shows the average advances due to EPB and from El Paso, and the average short-term interest rates for the quarters ended March 31:

   
2011
      2010  
   
(In millions, except for rates)
    
Average advance due from El Paso
   $ —     $ 137  
Average advance due to EPB
     10       —  
Average short-term interest rate
     0.8 %     1.5 %

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 
Liquidity and Capital Resources

 Liquidity Overview. Our primary sources of liquidity are cash flows from operating activities, amounts available to us under EPB’s cash management program and capital contributions from our partners while our primary uses of cash are for working capital, capital expenditures and required distributions to our partners.  At March 31, 2011, we had a note receivable from EPB of approximately $4 million. We do not intend to settle any amounts owed under this note within the next twelve months and therefore, classified it as non-current on our balance sheet. See Item 1, Financial Statements, Note 6, for a further discussion of EPB’s cash management program.  

We believe we have adequate liquidity available to us to meet our capital requirements and our existing operating needs through cash flow from operating activities, amounts available to us under EPB’s cash management program and capital contributions from our partners. As of March 31, 2011, EPB had approximately $342 million of capacity available to it under its $750 million revolving credit facility and $36 million of cash. While we do not anticipate a need to directly access the financial markets in the remainder of 2011 for any of our operating activities or expansion capital needs based on liquidity available to us, market conditions may impact our or EPB’s ability to act opportunistically.

2011 Cash Flow Activities. Our cash flows for the quarter ended March 31, 2011 are summarized as follows (in millions):  
       
Cash Flow from Operations
      
Net income
   $ 78  
Non-cash income adjustments
     11  
Change in assets and liabilities
     (1 )
Total cash flow from operations
     88  
         
Other Cash Inflows
        
Investing activities
        
Other
     3  
         
Financing activities
        
Contributions from partners
     25  
         
Total other cash inflows other cash inflows
     28  
         
Cash Outflows
        
Investing activities
        
Capital expenditures
     51  
Net change in note receivable from affiliate
     4  
      55  
Financing activities
        
Net change in note payable to affiliate
     12  
Distributions to partners
     47  
      59  
         
Total cash outflows
     114  
Net change in cash and cash equivalents
   $ 2  
 
 

 

 
During the quarter ended March 31, 2011, we generated $88 million of operating cash flow. We used these amounts primarily to fund maintenance capital expenditures, as well as pay distributions to our partners. During the quarter ended March 31, 2011, we paid cash distributions of approximately $47 million to our partners. In addition, in April 2011, we paid a cash distribution to our partners of approximately $81 million.  In January 2011 and April 2011, we received cash contributions of approximately $25 million and $36 million from our partners to fund our expansion projects.

Our cash capital expenditures for the quarter ended March 31, 2011 and our estimated capital expenditures for the remainder of this year to expand and maintain our system are listed below:

 
 
  
Quarter Ended
March 31, 2011
    
2011
Remaining
    
Total
  
   
(In millions)
  
Expansion
   $ 40     $ 94     $ 134  
Maintenance
     11       53       64  
    $ 51     $ 147     $ 198  

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
Commitments and Contingencies

For a further discussion of our commitments and contingencies, see Item 1, Financial Statements, Note 4 which is incorporated herein by reference and our 2010 Annual Report on Form 10-K.


There are no material changes in our quantitative and qualitative disclosures about market risks from those reported in our 2010 Annual Report on Form 10-K.


Evaluation of Disclosure Controls and Procedures

As of March 31, 2011, we carried out an evaluation under the supervision and with the participation of our management, including our President and Chief Financial Officer (CFO), as to the effectiveness, design and operation of our disclosure controls and procedures. This evaluation considered the various processes carried out under the direction of our disclosure committee in an effort to ensure that information required to be disclosed in the U.S. Securities and Exchange Commission reports we file or submit under the Securities Exchange Act of 1934, as amended (Exchange Act) is accurate, complete and timely. Our management, including our President and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent and/or detect 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 our company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our President and CFO concluded that our disclosure controls and procedures (as defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) were effective as of March 31, 2011.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the first quarter of 2011 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.
 
 
 
 
 
 
 
 
 
 
 
 
 

 


 


See Part I, Item 1, Financial Statements, Note 4 which is incorporated herein by reference.


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

This report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on assumptions or beliefs that we believe to be reasonable; however, assumed facts almost always vary from actual results, and differences between assumed facts and actual results can be material, depending upon the circumstances. Where, based on assumptions, 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 stated expectation or belief will occur, be achieved or accomplished. The words “believe,” “expect,” “estimate,” “anticipate,” and similar expressions will generally identify forward-looking statements. All of our forward-looking statements, whether written or oral, are expressly qualified by these cautionary statements and any other cautionary statements that may accompany such forward-looking statements. In addition, we disclaim any obligation to update any forward-looking statements to reflect events or circumstances after the date of this report.
     
Important factors that could cause actual results to differ materially from estimates or projections contained in forward-looking statements are described in our 2010 Annual Report on Form 10-K under Part I, Item 1A, Risk Factors. There have been no material changes in these risk factors since that report.


None.


None.



None.
 
 
 
 
 
 
 
 
 

 
 

The Exhibit Index is incorporated herein by reference.

The agreements included as exhibits to this report are intended to provide information regarding their terms and not to provide any other factual or disclosure information about us or the other parties to the agreements. The agreements may contain representations and warranties by the parties to the agreements, including us, solely for the benefit of the other parties to the applicable agreement and:

•  
should not in all instances be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate;
   
•  
 may have been qualified by disclosures that were made to the other party in connection with the negotiation of the applicable agreement, which disclosures are not necessarily reflected in the agreement;
   
•  
may apply standards of materiality in a way that is different from what may be viewed as material to certain investors; and
   
 •  
were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement and are subject to more recent developments.
 
Accordingly, these representations and warranties may not describe the actual state of affairs as of the date they were made or at any other time.
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 
 

 
 
 
 

 Pursuant to the requirements of the Securities Exchange Act of 1934, Southern Natural Gas Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
 
SOUTHERN NATURAL GAS COMPANY
  
     
     
     
Date: May 6, 2011
  /s/ Norman G. Holmes  
 
Norman G. Holmes
President
(Principal Executive Officer)
  
     
     
     
     
Date: May 6, 2011   
  /s/ John R. Sult  
 
John R. Sult
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
  
     
     
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

 

 
SOUTHERN NATURAL GAS COMPANY

EXHIBIT INDEX
 

        Each exhibit identified below is filed as a part of this report.

Exhibit
Number
 
Description
 
  3.A   Fifth Amendment to General Partnership Agreement of Southern Natural Gas Company, dated March 14, 2011. 
 * 12   Ratio of Earnings to Fixed Charges.
 
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.

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  16

SOUTHERN NATURAL GAS COMPANY, L.L.C. Reports