TREATING AND PROCESSING Natural gas, as it is used by consumers, is much different from natural gas straight from the wellhead. Raw natural gas commonly exists in mixtures with other hydrocarbons such as ethane, butane and propane, and can also contain water vapor, carbon dioxide and hydrogen sulfide, among other compounds. To make pipeline quality natural gas, the raw natural gas may need to be treated, processed or both. Once extracted from the wellhead, natural gas is treated to remove impurities and liquids. Typically at the treatment stage, contaminates such as water, carbon dioxide and hydrogen sulfide are removed. The next stage, if necessary, is transporting the gas to processing facilities for further separation into liquid products such as butane, propane, ethane and natural gasoline. The amount of these natural gas liquids, or NGLs, removed from a particular gas stream is determined by the characteristics of the natural gas produced and the market demand for the product. For instance, NGLs with a market value less than extraction costs will be rejected, and instead will enter the pipeline as part of the natural gas stream.

e operate approximately 11,500 miles of natural gas gathering and transmission pipeline, 10 treating plants and 23 processing plants with a combined treating and processing capacity of 2.8 billion cubic feet per day. One treating and five processing facilities were completed in 2007, adding 200 million cubic feet per day (MMcf/d) of treating capacity, 195 MMcf/d of processing capacity and 550 MMcf/d of hydrocarbon conditioning capacity to our systems. Each plant is strategically placed in our existing infrastructure to maximize deliveries of pipeline quality natural gas to customers in major U.S. markets.

Our midstream natural gas assets are located in the Gulf Coast and Mid-Continent regions of the United States, two of the premier natural gas producing areas. Our three major systems—East Texas, Anadarko and North Texas—are located in basins that are experiencing consistent drilling and production growth. Average daily volumes on these systems increased 12 percent or 224,000 million British thermal units per day. We plan to continue to expand the capacity of these systems to provide gathering, processing and transportation services to meet the growing demand for this valuable product
and the needs of the producers in the areas we serve.