Tallgrass Energy Partners, LP (Form: 10-Q, Received: 08/03/2016 16:15:41)

Large accelerated filer

Accelerated filer

Non-accelerated filer

¨ (Do not check if a smaller reporting company)

Smaller reporting company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2016



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-35917

Tallgrass Energy Partners, LP

(Exact name of registrant as specified in its charter)



Delaware				46-1972941
(State or other Jurisdiction of Incorporation or Organization)				(IRS Employer Identification Number)

4200 W. 115th Street, Suite 350
Leawood, Kansas				66211
(Address of Principal Executive Offices)				(Zip Code)

(913) 928-6060

(Registrant's Telephone Number, Including Area Code)

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 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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. (Check one):

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

On August 3, 2016 , the Registrant had 72,108,934 Common Units and 834,391 General Partner Units outstanding.

TALLGRASS ENERGY PARTNERS, LP

TABLE OF CONTENTS



PART 1—FINANCIAL INFORMATION	1
Item 1. Financial Statements	1
CONDENSED CONSOLIDATED BALANCE SHEETS	1
CONDENSED CONSOLIDATED STATEMENTS OF INCOME	2
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	3
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY	4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3. Quantitative and Qualitative Disclosures About Market Risk	40
Item 4. Controls and Procedures	41
PART II - OTHER INFORMATION	42
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	42
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3. Defaults Upon Senior Securities	44
Item 4. Mine Safety Disclosures	44
Item 5. Other Information	44
Item 6. Exhibits	44
SIGNATURES	45

Glossary of Common Industry and Measurement Terms

Bakken oil production area: Montana and North Dakota in the United States and Saskatchewan and Manitoba in Canada.

Barrel (or bbl): forty two U.S. gallons.

Base Gas (or Cushion Gas): the volume of gas that is intended as permanent inventory in a storage reservoir to maintain adequate pressure and deliverability rates.

BBtu: one billion British Thermal Units.

Bcf: one billion cubic feet.

British Thermal Units or Btus: the amount of heat energy needed to raise the temperature of one pound of water by one degree Fahrenheit.

Commodity sensitive contracts or arrangements: contracts or other arrangements, including tariff provisions, that directly expose our cash flows to increases and decreases in the price of commodities such as crude oil, natural gas and NGLs. Examples are Keep Whole Processing Contracts and Percent of Proceeds Processing Contracts, as well as pipeline loss allowances on our pipelines.

Condensate: a NGL with a low vapor pressure, mainly composed of propane, butane, pentane and heavier hydrocarbon fractions.

Contract barrels: barrels of crude oil that our customers have contractually agreed to ship in exchange for firm service assurance of capacity and deliverability to delivery points.

Delivery point: any point at which product in a pipeline is delivered to or for the account of a customer.

Dry gas: a gas primarily composed of methane and ethane where heavy hydrocarbons and water either do not exist or have been removed through processing.

Dth: a dekatherm, which is a unit of energy equal to 10 therms or one million British thermal units.

End-user markets: the ultimate users and consumers of transported energy products.

EPA: the United States Environmental Protection Agency.

FERC: Federal Energy Regulatory Commission.

Firm fee contracts: firm fee contracts generally obligate our customers to pay a fixed recurring charge to reserve an agreed upon amount of capacity and/or deliverability on our assets, regardless if the contracted capacity is actually used by the customer. Such contracts are also commonly known as "take-or-pay" contracts.

Firm services: services pursuant to which customers receive firm assurances regarding the availability of capacity and/or deliverability of natural gas, crude oil or other hydrocarbons or water on our assets up to a contracted amount.

Fractionation: the process by which NGLs are further separated into individual, typically more valuable components including ethane, propane, butane, isobutane and natural gasoline.

GAAP: generally accepted accounting principles in the United States of America.

GHGs: greenhouse gases.

Header system: networks of medium-to-large-diameter high pressure pipelines that connect local gathering systems to large diameter high pressure long-haul transportation pipelines.

Interruptible services: services pursuant to which customers receive limited, or no, assurances regarding the availability of capacity and deliverability in our assets.

Keep Whole Processing Contracts: natural gas processing contracts in which we are required to replace the Btu content of the NGLs extracted from inlet wet gas processed with purchased dry natural gas.

Line fill: the volume of oil, in barrels, in the pipeline from the origin to the destination.

Liquefied natural gas or LNG: natural gas that has been cooled to minus 161 degrees Celsius for transportation, typically by ship. The cooling process reduces the volume of natural gas by 600 times.

Local distribution company or LDC: LDCs are involved in the delivery of natural gas to consumers within a specific geographic area.

Long-term: with respect to any contract, a contract with an initial duration greater than one year.

MMBtu: one million British Thermal Units.

Mcf: one thousand cubic feet.

MMcf: one million cubic feet.

Natural gas liquids or NGLs: those hydrocarbons in natural gas that are separated from the natural gas as liquids through the process of absorption, condensation, adsorption or other methods in natural gas processing or cycling plants. Generally such liquids consist of propane and heavier hydrocarbons and are commonly referred to as lease condensate, natural gasoline and liquefied petroleum gases. Natural gas liquids include natural gas plant liquids (primarily ethane, propane, butane and isobutane) and lease condensate (primarily pentanes produced from natural gas at lease separators and field facilities).

Natural Gas Processing: the separation of natural gas into pipeline-quality natural gas and a mixed NGL stream.

Non-contract barrels (or walk-up barrels): barrels of crude oil that our customers ship based solely on availability of capacity and deliverability with no assurance of future capacity.

No-notice service: those services pursuant to which customers receive the right to transport or store natural gas on assets outside of the daily nomination cycle without incurring penalties.

NYMEX: New York Mercantile Exchange.

Park and loan services: those services pursuant to which customers receive the right to store natural gas in (park), or borrow gas from (loan), our facilities on a seasonal basis.

Percent of Proceeds Processing Contracts: natural gas processing contracts in which we process our customer's natural gas, sell the resulting NGLs and residue gas and divide the proceeds of those sales between us and the customer. Some percent of proceeds contracts may also require our customers to pay a monthly reservation fee for processing capacity.

PHMSA: the United States Department of Transportation's Pipeline and Hazardous Materials Safety Administration.

Play: a proven geological formation that contains commercial amounts of hydrocarbons.

Produced water: all water removed from a well as a byproduct of the production of hydrocarbons and water removed from a well in connection with operations being conducted on the well, including naturally occurring water in the recovery formation, flow back water recovered during completion and fracturing operations and water entering the recovery formation through water flooding techniques.

Receipt point: the point where a product is received by or into a gathering system, processing facility, or transportation pipeline.

Reservoir: a porous and permeable underground formation containing an individual and separate natural accumulation of producible hydrocarbons (such as crude oil and/or natural gas) which is confined by impermeable rock or water barriers and is characterized by a single natural pressure system.

Residue gas: the natural gas remaining after being processed or treated.

Shale gas: natural gas produced from organic (black) shale formations.

Tailgate: the point at which processed natural gas and NGLs leave a processing facility for transportation to end-user markets.

TBtu: one trillion British Thermal Units.

Tcf: one trillion cubic feet.

Throughput: the volume of products, such as crude oil, natural gas or water, transported or passing through a pipeline, plant, terminal or other facility during a particular period.

Uncommitted shippers (or walk-up shippers): customers that have not signed long-term shipper contracts and have rights under the FERC tariff as to rates and capacity allocation that are different than long-term committed shippers.

Volumetric fee contracts: volumetric fee contracts generally obligate a customer to pay fees based upon the extent to which such customer utilizes our assets for midstream energy services. Unlike firm fee contracts, under volumetric fee contracts our customers are not generally required to pay a charge to reserve an agreed upon amount of capacity and/or deliverability.

Wellhead: the equipment at the surface of a well that is used to control the well's pressure; also, the point at which the hydrocarbons and water exit the ground.

Working gas: the volume of gas in the storage reservoir that is in addition to the cushion or base gas. It may or may not be completely withdrawn during any particular withdrawal season. Conditions permitting, the total working capacity could be used more than once during any season.

Working gas storage capacity: the maximum volume of natural gas that can be cost-effectively injected into a storage facility and extracted during the normal operation of the storage facility. Effective working gas storage capacity excludes base gas and non-cycling working gas.

X/d: the applicable measurement metric per day. For example, MMcf/d means one million cubic feet per day.

PART 1—FINANCIAL INFORMATION

Item 1. Financial Statements

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)



	June 30, 2016			December 31, 2015
	(in thousands)
ASSETS
Current Assets:
Cash and cash equivalents	$	1,943		$	1,611
Accounts receivable, net	53,033			57,757
Gas imbalances	878			1,227
Inventories	14,754			13,793
Derivative asset at fair value	148			—
Prepayments and other current assets	3,615			2,835
Total Current Assets	74,371			77,223
Property, plant and equipment, net	2,007,067			2,025,018
Goodwill	343,288			343,288
Intangible asset, net	95,038			96,546
Derivative asset at fair value	55,967			—
Unconsolidated investment	444,074			—
Deferred financing costs, net	6,882			5,105
Deferred charges and other assets	13,232			14,894
Total Assets	$	3,039,919		$	2,562,074
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable (including $10,554 at December 31, 2015 related to variable interest entities)	$	17,451		$	22,218
Accounts payable to related parties	7,191			7,852
Gas imbalances	1,199			1,605
Derivative liabilities at fair value	351			—
Accrued taxes	15,298			13,844
Accrued liabilities	8,136			10,019
Deferred revenue	42,901			26,511
Other current liabilities	6,687			6,880
Total Current Liabilities	99,214			88,929
Long-term debt	1,278,000			753,000
Other long-term liabilities and deferred credits	6,815			5,143
Total Long-term Liabilities	1,284,815			758,143
Commitments and Contingencies
Equity:
Common unitholders (75,669,080 and 60,644,232 units issued and outstanding at June 30, 2016 and December 31, 2015, respectively)	2,242,195			1,618,766
General partner (834,391 units issued and outstanding at June 30, 2016 and December 31, 2015)	(619,837		)	(348,841		)
Total Partners' Equity	1,622,358			1,269,925
Noncontrolling interests	33,532			445,077
Total Equity	1,655,890			1,715,002
Total Liabilities and Equity	$	3,039,919		$	2,562,074

The accompanying notes are an integral part of these condensed consolidated financial statements.

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(UNAUDITED)



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(in thousands, except per unit amounts)
Revenues:
Crude oil transportation services	$	93,322		$	74,022		$	187,894		$	124,403
Natural gas transportation services	28,682			29,041			57,962			61,189
Sales of natural gas, NGLs, and crude oil	16,830			20,011			30,756			41,880
Processing and other revenues	8,097			9,896			15,724			20,173
Total Revenues	146,931			132,970			292,336			247,645
Operating Costs and Expenses:
Cost of sales (exclusive of depreciation and amortization shown below)	15,958			17,180			29,526			36,773
Cost of transportation services (exclusive of depreciation and amortization shown below)	14,240			13,492			30,396			24,207
Operations and maintenance	13,864			12,408			26,341			21,983
Depreciation and amortization	21,576			20,355			43,268			40,960
General and administrative	13,909			13,451			26,925			26,140
Taxes, other than income taxes	5,639			(271		)	13,145			11,026
Loss on disposal of assets	1,849			—			1,849			4,483
Total Operating Costs and Expenses	87,035			76,615			171,450			165,572
Operating Income	59,896			56,355			120,886			82,073
Other Income (Expense):
Interest expense, net	(9,233		)	(3,893		)	(16,732		)	(7,333		)
Unrealized gain on derivative instrument	18,953			—			10,007			—
Equity in earnings of unconsolidated investment	23,321			—			23,321			—
Other income, net	221			769			787			1,481
Total Other Income (Expense)	33,262			(3,124		)	17,383			(5,852		)
Net income	93,158			53,231			138,269			76,221
Net (income) loss attributable to noncontrolling interests	(1,110		)	(8,332		)	(2,151		)	997
Net income attributable to partners	$	92,048		$	44,899		$	136,118		$	77,218
Allocation of income to the limited partners:
Net income attributable to partners	$	92,048		$	44,899		$	136,118		$	77,218
General partner interest in net income	(25,320		)	(11,030		)	(45,673		)	(18,468		)
Common and subordinated unitholders' interest in net income	66,728			33,869			90,445			58,750
Basic net income per common and subordinated unit	$	0.93		$	0.56		$	1.30		$	1.04
Diluted net income per common and subordinated unit	$	0.92		$	0.55		$	1.29		$	1.02
Basic average number of common and subordinated units outstanding	71,975			60,362			69,471			56,566
Diluted average number of common and subordinated units outstanding	72,925			61,225			70,360			57,404

The accompanying notes are an integral part of these condensed consolidated financial statements.

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)



	Six Months Ended June 30,
	2016			2015
	(in thousands)
Cash Flows from Operating Activities:
Net income	$	138,269		$	76,221
Adjustments to reconcile net income to net cash flows provided by operating activities:
Depreciation and amortization	46,077			42,867
Equity in earnings of unconsolidated investment	(23,321		)	—
Distributions from unconsolidated investment	23,321			—
Noncash compensation expense	2,635			3,254
Noncash change in fair value of derivative financial instruments	(9,804		)	41
Loss on disposal of assets	1,849			4,483
Changes in components of working capital:
Accounts receivable and other	6,578			(10,215		)
Inventories	(1,683		)	(6,068		)
Accounts payable and accrued liabilities	(2,303		)	2,183
Deferred revenue	16,174			4,198
Other operating, net	(1,246		)	(4,746		)
Net Cash Provided by Operating Activities	196,546			112,218
Cash Flows from Investing Activities:
Capital expenditures	(28,491		)	(49,544		)
Acquisition of unconsolidated affiliate	(436,022		)	—
Acquisition of Pony Express membership interest	(49,118		)	(700,000		)
Distributions from unconsolidated investment in excess of cumulative earnings	6,335			—
Contributions to unconsolidated investment	(14,387		)	—
Other investing, net	411			(4,648		)
Net Cash Used in Investing Activities	(521,272		)	(754,192		)
Cash Flows from Financing Activities:
Distributions to unitholders	(127,924		)	(67,080		)
Acquisition of Pony Express membership interest	(425,882		)	—
Contributions from noncontrolling interests	7,273			16,294
Borrowings under revolving credit facility, net	525,000			147,000
Proceeds from public offering, net of offering costs	261,770			551,673
Proceeds from private placement, net of offering costs	90,009			—
Other financing, net	(5,188		)	(5,002		)
Net Cash Provided by Financing Activities	325,058			642,885
Net Change in Cash and Cash Equivalents	332			911
Cash and Cash Equivalents, beginning of period	1,611			867
Cash and Cash Equivalents, end of period	$	1,943		$	1,778
Schedule of Noncash Investing and Financing Activities:
Property, plant and equipment acquired via the cash management agreement with Tallgrass Development, LP	$	—		$	103,239
Contributions from noncontrolling interests settled via the cash management agreement with Tallgrass Development, LP	$	—		$	21,525
Distribution to noncontrolling interests settled via the cash management agreement with Tallgrass Development, LP	$	—		$	22,266

The accompanying notes are an integral part of these condensed consolidated financial statements.

TALLGRASS ENERGY PARTNERS, LP

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(UNAUDITED)



	Limited Partners						General Partner			Total Partners’ Equity			Noncontrolling Interests			Total Equity
	Common			Subordinated			General Partner			Total Partners’ Equity			Noncontrolling Interests			Total Equity
	(in thousands)
Balance at January 1, 2016	$	1,618,766		$	—		$	(348,841	)	$	1,269,925		$	445,077		$	1,715,002
Net income	90,445			—			45,673			136,118			2,151			138,269
Issuance of units to public, net of offering costs	261,770			—			—			261,770			—			261,770
Issuance of units in a private placement, net of offering costs	90,009			—			—			90,009			—			90,009
Noncash compensation expense	3,820			—			—			3,820			—			3,820
Distributions to unitholders	(91,222		)	—			(36,702		)	(127,924		)	—			(127,924		)
Acquisition of additional 31.3% membership interest in Pony Express	268,607			—			(279,967		)	(11,360		)	(417,679		)	(429,039		)
Contributions from noncontrolling interest	—			—			—			—			7,273			7,273
Distributions to noncontrolling interest	—			—			—			—			(3,290		)	(3,290		)
Balance at June 30, 2016	$	2,242,195		$	—		$	(619,837	)	$	1,622,358		$	33,532		$	1,655,890

	Limited Partners						General Partner			Total Partners’ Equity			Noncontrolling Interests			Total Equity
	Common			Subordinated			General Partner			Total Partners’ Equity			Noncontrolling Interests			Total Equity
	(in thousands)
Balance at January 1, 2015	$	800,333		$	274,133		$	(35,743	)	$	1,038,723		$	756,428		$	1,795,151
Net income	53,570			5,180			18,468			77,218			(997		)	76,221
Issuance of units to public, net of offering costs	551,673			—			—			551,673			—			551,673
Noncash compensation expense	6,000			—			—			6,000			—			6,000
Distributions to unitholders	(47,247		)	(7,857		)	(11,976		)	(67,080		)	—			(67,080		)
LTIP units tendered by employees to satisfy tax withholding obligations	(6,562		)	—			—			(6,562		)	—			(6,562		)
Contributions from noncontrolling interest	—			—			—			—			68,651			68,651
Distributions to noncontrolling interest	—			—			—			—			(22,607		)	(22,607		)
Acquisition of additional 33.3% membership interest in Pony Express	—			—			(324,328		)	(324,328		)	(375,672		)	(700,000		)
Acquisition of noncontrolling interests	—			—			—			—			(600		)	(600		)
Conversion of subordinated units	271,456			(271,456		)	—			—			—			—
Balance at June 30, 2015	$	1,629,223		$	—		$	(353,579	)	$	1,275,644		$	425,203		$	1,700,847

The accompanying notes are an integral part of these condensed consolidated financial statements.

TALLGRASS ENERGY PARTNERS, LP

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. Description of Business

Tallgrass Energy Partners, LP ("TEP" or the "Partnership") is a publicly traded, growth-oriented limited partnership formed to own, operate, acquire and develop midstream energy assets in North America. "We," "us," "our" and similar terms refer to TEP together with its consolidated subsidiaries. We currently provide crude oil transportation to customers in Wyoming, Colorado, and the surrounding regions through Tallgrass Pony Express Pipeline, LLC ("Pony Express"), which owns a crude oil pipeline commencing in Guernsey, Wyoming and terminating in Cushing, Oklahoma that includes a lateral in Northeast Colorado that commences in Weld County, Colorado, and interconnects with the pipeline just east of Sterling, Colorado (the "Pony Express System"). We provide natural gas transportation and storage services for customers in the Rocky Mountain, Midwest and Appalachian regions of the United States through: (1) our 25% membership interest in Rockies Express Pipeline LLC ("Rockies Express"), a Delaware limited liability company which owns the Rockies Express Pipeline, a FERC-regulated natural gas pipeline system extending from Opal, Wyoming and Meeker, Colorado to Clarington, Ohio, (2) the Tallgrass Interstate Gas Transmission system, a FERC-regulated natural gas transportation and storage system located in Colorado, Kansas, Missouri, Nebraska and Wyoming (the "TIGT System"), and (3) the Trailblazer Pipeline system, a FERC-regulated natural gas pipeline system extending from the Colorado and Wyoming border to Beatrice, Nebraska (the "Trailblazer Pipeline") . We also provide services for customers in Wyoming at the Casper and Douglas natural gas processing facilities and the West Frenchie Draw natural gas treating facility (collectively, the "Midstream Facilities"), and NGL transportation services in Northeast Colorado. We perform water business services in Colorado and Texas through BNN Water Solutions, LLC ("Water Solutions"). Our operations are strategically located in and provide services to certain key United States hydrocarbon basins, including the Denver-Julesburg, Powder River, Wind River, Permian and Hugoton-Anadarko Basins and the Niobrara, Mississippi Lime, Eagle Ford, Bakken, Marcellus and Utica shale formations.

Our reportable business segments are:


•	Crude Oil Transportation & Logistics—the ownership and operation of a FERC-regulated crude oil pipeline system;


•	Natural Gas Transportation & Logistics—the ownership and operation of FERC-regulated interstate natural gas pipelines and integrated natural gas storage facilities; and


•	Processing & Logistics—the ownership and operation of natural gas processing, treating and fractionation facilities, the provision of water business services primarily to the oil and gas exploration and production industry and the transportation of NGLs.

The table below summarizes our equity ownership as of June 30, 2016 :



Unit Holder	Limited Partner Common Units	General Partner Units	Percentage of Outstanding Limited Partner Common Units		Percentage of Outstanding Common and General Partner Units
Public Unitholders	42,795,600	—	56.56	%	55.94	%
Tallgrass Equity, LLC	20,000,000	—	26.43	%	26.14	%
Tallgrass Development, LP ⁽¹⁾	12,873,480	—	17.01	%	16.83	%
Tallgrass MLP GP, LLC ⁽²⁾	—	834,391	—	%	1.09	%
Total	75,669,080	834,391	100.00	%	100.00	%


⁽¹⁾	As discussed in Note 7 – Risk Management , 3,563,146 of the common units held by Tallgrass Development, LP ("TD") as of June 30, 2016 were subsequently repurchased and deemed cancelled.


⁽²⁾	Tallgrass MLP GP, LLC (the "general partner") also holds all of TEP's incentive distribution rights.

2. Summary of Significant Accounting Policies

Basis of Presentation

These condensed consolidated financial statements and related notes for the three and six months ended June 30, 2016 and 2015 were prepared in accordance with the accounting principles contained in the Financial Accounting Standards Board's Accounting Standards Codification, the single source of generally accepted accounting principles in the United States of America ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. The year-end balance sheet data was derived from audited financial statements but does not include all disclosures required by GAAP for annual periods. The condensed consolidated financial statements for the three and six months ended June 30, 2016 and 2015 include all normal, recurring adjustments and disclosures that we believe are necessary for a fair statement of the results for the interim periods. In this report, the Financial Accounting Standards Board is referred to as the FASB and the FASB Accounting Standards Codification is referred to as the Codification or ASC. Certain prior period amounts have been reclassified to conform to the current presentation.

Our financial results for the three and six months ended June 30, 2016 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2016. The accompanying condensed consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2015 ("2015 Form 10-K") filed with the United States Securities and Exchange Commission (the "SEC") on February 17, 2016.

The condensed consolidated financial statements include the accounts of TEP and its subsidiaries and controlled affiliates. Significant intra-entity items have been eliminated in the presentation. Prior to January 1, 2016, Pony Express participated in a cash management agreement with TD, which currently holds a 2.0% common membership interest in Pony Express, under which cash balances were swept periodically and recorded as loans from Pony Express to TD. Effective January 1, 2016, Pony Express entered into a cash management agreement with TEP.

Net income or loss from consolidated subsidiaries that are not wholly-owned by TEP is attributed to TEP and noncontrolling interests. This is done in accordance with substantive profit sharing arrangements, which generally follow the allocation of cash distributions and may not follow the respective ownership percentages held by TEP. Concurrent with TEP's acquisition of an initial 33.3% membership interest in Pony Express effective September 1, 2014, TEP, TD, and Pony Express entered into the Second Amended and Restated Limited Liability Agreement of Tallgrass Pony Express Pipeline, LLC ("the Second Amended Pony Express LLC Agreement"), which provided TEP a minimum quarterly preference payment of $16.65 million (prorated to approximately $5.4 million for the quarter ended September 30, 2014) through the quarter ended September 30, 2015. Effective March 1, 2015 with TEP's acquisition of an additional 33.3% membership interest in Pony Express, the Second Amended Pony Express LLC Agreement was further amended (as amended, "the Pony Express LLC Agreement") to increase the minimum quarterly preference payment to $36.65 million (prorated to approximately $23.5 million for the quarter ended March 31, 2015) and extend the term of the preference period through the quarter ended December 31, 2015. The Pony Express LLC Agreement provides that the net income or loss of Pony Express be allocated, to the extent possible, consistent with the allocation of Pony Express cash distributions. Under the terms of the Pony Express LLC Agreement, Pony Express distributions and net income for periods beginning after December 31, 2015 are attributed to TEP and its noncontrolling interests in accordance with the respective ownership interests.

A variable interest entity ("VIE") is a legal entity that possesses any of the following characteristics: an insufficient amount of equity at risk to finance its activities, equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their ownership interest), or equity owners who do not have the obligation to absorb expected losses or the right to receive the expected residual returns of the entity. Companies are required to consolidate a VIE if they are its primary beneficiary, which is the enterprise that has a variable interest that could be significant to the VIE and the power to direct the activities that most significantly impact the entity's economic performance. We have presented separately in our condensed consolidated balance sheets, to the extent material, the liabilities of our consolidated VIEs for which creditors do not have recourse to our general credit. Our consolidated VIEs do not have material assets that can only be used to settle specific obligations of the consolidated VIEs. Pony Express was considered to be a VIE under the applicable authoritative guidance prior to our acquisition of an additional 31.3% membership interest effective January 1, 2016. Effective January 1, 2016, Pony Express is no longer considered to be a VIE. We continue to consolidate our membership interest in Pony Express.

Use of Estimates

Certain amounts included in or affecting these condensed consolidated financial statements and related disclosures must be estimated, requiring management to make certain assumptions with respect to values or conditions which cannot be known with certainty at the time the financial statements are prepared. These estimates and assumptions affect the amounts reported for assets, liabilities, revenues, and expenses during the reporting period, and the disclosure of contingent assets and liabilities at the date of the financial statements. Management evaluates these estimates on an ongoing basis, utilizing historical experience, consultation with experts and other methods it considers reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from these estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

New Accounting Pronouncements

Revenue Recognition

In May 2014, the FASB issued Accounting Standards Update ("ASU") No. 2014-09, Revenue from Contracts with Customers (Topic 606). ASU 2014-09 provides a comprehensive and converged set of principles-based revenue recognition guidelines which supersede the existing industry and transaction-specific standards. The core principle of the new guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve this core principle, entities must apply a five step process to (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. ASU 2014-09 also mandates disclosure of sufficient information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The disclosure requirements include qualitative and quantitative information about contracts with customers, significant judgments and changes in judgments, and assets recognized from the costs to obtain or fulfill a contract.

Throughout the first half of 2016, the FASB has issued a series of subsequent updates to the revenue recognition guidance in Topic 606, including ASU No. 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, and ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients.

The amendments in ASU 2014-09, ASU 2016-08, ASU 2016-10, and ASU 2016-12 are effective for public entities for annual reporting periods beginning after December 15, 2017, and for interim periods within that reporting period. Early application is permitted for annual reporting periods beginning after December 15, 2016. We are currently evaluating the impact of these updates.

ASU No. 2015-11, "Inventory (Topic 330): Simplifying the Measurement of Inventory"

In July 2015, the FASB issued ASU No. 2015-11, Inventory (Topic 330), Simplifying the Measurement of Inventory. ASU 2015-11 establishes a "lower of cost and net realizable value" model for the measurement of most inventory balances. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation.

The amendments in ASU 2015-11 are effective for public entities for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact of ASU 2015-11.

ASU No. 2016-02, "Leases (Topic 842)"

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). ASU 2016-02 provides a comprehensive update to the lease accounting topic in the Codification intended to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The amendments in ASU 2016-02 include a revised definition of a lease as well as certain scope exceptions. The changes primarily impact lessee accounting, while lessor accounting is largely unchanged from previous GAAP.

The amendments in ASU 2016-02 are effective for public entities for annual reporting periods beginning after December 15, 2018, and for interim periods within that reporting period. Early application is permitted. We are currently evaluating the impact of ASU 2016-02.

ASU No. 2016-09, "Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting"

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. ASU 2016-09 simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Among other changes, ASU 2016-09 allows an entity to make an entity-wide accounting policy election to either estimate the number of awards expected to vest (consistent with current GAAP) or account for forfeitures when they occur.

The amendments in ASU 2016-09 are effective for public entities for annual periods and interim periods within those annual periods beginning after December 15, 2016. Early adoption is permitted. We are currently evaluating the impact of ASU 2016-09.

ASU No. 2015-16, "Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments"

In September 2015, the FASB issued ASU No. 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. ASU 2015-16 simplifies the accounting for measurement-period adjustments for provisional amounts recognized in a business combination by eliminating the requirement for an acquirer to retrospectively account for measurement-period adjustments. Under the updated guidance, the acquirer must recognize adjustments in the reporting period in which the adjustment amounts are determined and the effect on earnings as a result of the change to the provisional amounts must be calculated as if the accounting had been completed at the acquisition date.

The amendments in ASU 2015-16 are effective for public entities for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoption of ASU 2015-16 did not have a material impact on our financial position and results of operations.

ASU No. 2015-02, "Consolidation (Topic 810): Amendments to the Consolidation Analysis"

In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810) - Amendments to the Consolidation Analysis. ASU 2015-02 will change the analysis that a reporting entity must perform to determine whether it should consolidate certain types of legal entities. ASU 2015-02 will modify the evaluation of whether limited partnerships and other similar legal entities are considered VIEs or voting interest entities, eliminate the presumption that a general partner should consolidate a limited partnership, and change certain aspects of the consolidation analysis for reporting entities that are involved with VIEs, particularly for those with fee arrangements and related party relationships.

The amendments in ASU 2015-02 are effective for public entities for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoption of ASU 2015-02 did not have a material impact on our financial position and results of operations.

ASU No. 2014-12, "Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period"

In June 2014, the FASB issued ASU No. 2014-12, Compensation - Stock Compensation (Topic 718), Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. ASU 2014-12 provides explicit guidance on accounting for share-based payments requiring a specific performance target to be achieved in order for employees to become eligible to vest in the awards when that performance target may be achieved after the requisite service period for the award. The ASU requires that such performance targets be treated as a performance condition, and should not be reflected in the estimate of the grant-date fair value of the award. Instead, compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved.

ASU 2014-12 is effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. The adoption of ASU 2014-12 did not have a material impact on our financial position and results of operations.

3. Acquisitions

Acquisition of a 25% Membership Interest in Rockies Express Pipeline LLC

On March 29, 2016, TD's indirect wholly owned subsidiary Rockies Express Holdings, LLC ("REX Holdings") signed a purchase agreement (the "REX Purchase Agreement") with a unit of Sempra U.S. Gas and Power ("Sempra") to acquire Sempra's 25% membership interest in Rockies Express for cash consideration of $440 million , subject to adjustment under the REX Purchase Agreement.

On April 28, 2016, we announced that TD offered TEP the right to assume the rights and obligations of REX Holdings under the REX Purchase Agreement. On May 6, 2016, TEP REX Holdings, LLC ("TEP REX"), an indirect wholly-owned subsidiary of TEP, and REX Holdings entered into an Assignment and Assumption Agreement pursuant to which REX Holdings assigned to TEP REX all of its rights under the REX Purchase Agreement and, in exchange, TEP REX assumed all of the rights and obligations of REX Holdings under the REX Purchase Agreement. Subsequently on May 6, 2016, TEP REX closed the purchase of a 25% membership interest in Rockies Express from Sempra pursuant to the REX Purchase Agreement for cash consideration of approximately $436.0 million , after making the adjustments to the purchase price required by the REX Purchase Agreement.

Our investment in Rockies Express is recorded under the equity method of accounting and reported as "Unconsolidated investment" on our condensed consolidated balance sheet. As of May 6, 2016, the difference between the fair value of our investment in Rockies Express of $436.0 million and the book value of the underlying net assets of approximately $840.7 million results in a negative basis difference of approximately $404.7 million . The basis difference has been allocated to property, plant and equipment and long-term debt based on their respective fair values at the date of acquisition. The amount of the basis difference allocated to property, plant and equipment is accreted over 35 years , which equates to the 2.86% composite depreciation rate utilized by Rockies Express to depreciate the underlying property, plant and equipment. The amount allocated to long-term debt is amortized over the remaining life of the various debt facilities. The basis difference at June 30, 2016 was allocated as follows:



	Basis Difference			Amortization Period
	(in thousands)
Long-term debt	$	7,002		2 - 25 years
Property, plant and equipment	(411,730		)	35 years
Total basis difference	$	(404,728	)

During the period from May 6, 2016 to June 30, 2016 , we recognized equity in earnings from Rockies Express of $23.3 million , inclusive of the amortization of the negative basis difference discussed above, and received distributions from and made contributions to Rockies Express of $29.7 million and $14.4 million , respectively.

Summarized financial information for Rockies Express is as follows:



	June 30, 2016
	(in thousands)
Current assets	$	170,874
Noncurrent assets	$	6,038,268
Current liabilities	$	185,793
Noncurrent liabilities	$	2,636,680
Members' equity	$	3,386,669



	Period from May 6, 2016 to June 30, 2016
	(in thousands)
Revenue	$	98,161
Operating income	$	43,832
Net income to Members	$	84,741

Acquisition of Additional 31.3% Membership Interest in Pony Express

Effective January 1, 2016, TEP acquired an additional 31.3% membership interest in Pony Express in exchange for cash consideration of $475 million and 6,518,000 TEP common units (valued at approximately $268.6 million based on the December 31, 2015 closing price of our common units) issued to TD, for total consideration of approximately $743.6 million . The transaction increased our aggregate membership interest in Pony Express to 98.0% . As part of the transaction, TD granted us an 18 month call option to repurchase the newly issued 6,518,000 common units at a price of $42.50 . On the effective date of the acquisition, the call option was valued at $46.0 million . As discussed in Note 7 – Risk Management , on July 21, 2016, we partially exercised the option and repurchased 3,563,146 of the common units, leaving 2,954,854 remaining common units available for repurchase under the call option.

The acquisition of the additional 31.3% membership interest in Pony Express represents a transaction between entities under common control and an acquisition of noncontrolling interests. As a result, financial information for periods prior to the transaction have not been recast to reflect the additional 31.3% membership interest. The transaction resulted in a deemed distribution to our general partner as discussed further in Note 9 – Partnership Equity and Distributions .

Cash outflows to acquire an additional noncontrolling interest in Pony Express are classified as an investing activity in the accompanying condensed consolidated statements of cash flows to the extent the consideration paid was used to directly fund the construction of the underlying assets by the noncontrolling member. Cash outflows to acquire an additional noncontrolling interest in excess of the cost to construct the underlying assets are classified as financing activities. For the six months ended June 30, 2016 , $49.1 million of the $475 million paid to acquire the additional 31.3% membership interest in Pony Express was classified as an investing activity and $425.9 million was classified as a financing activity.

TEP Acquisition of BNN Western, LLC

On December 16, 2015, Whiting Oil and Gas Corporation ("Whiting"), BNN Redtail, LLC ("Redtail"), and BNN Western, LLC ("Western"), a newly formed Delaware limited liability company, entered into a definitive Transfer, Purchase and Sale Agreement, pursuant to which Redtail acquired 100% of the outstanding membership interests of Western from Whiting in exchange for total cash consideration of $75 million . Western's assets consist of a fresh water delivery and storage system and produced water gathering and produced water disposal system, which together comprise 62 miles of pipeline along with associated fresh water ponds and disposal wells. As part of the transaction with Whiting, Whiting also executed a five -year fresh water service contract and a nine -year gathering and disposal contract.

At December 31, 2015, the assets acquired and liabilities assumed in the acquisition were recorded at provisional amounts based on the preliminary purchase price allocation. The $75 million purchase price of the assets was allocated entirely to property, plant and equipment. TEP is in the process of obtaining additional information to identify and measure all assets acquired and liabilities assumed in the acquisition within the measurement period. Such provisional amounts will be adjusted if necessary to reflect any new information about facts and circumstances that existed at the acquisition date that, if known, would have affected the measurement of these amounts.

TEP's unaudited pro forma revenue and net income attributable to partners for the three and six months ended June 30, 2015 is presented below as if the acquisition of Western had been completed on January 1, 2015:



	Three Months Ended June 30, 2015		Six Months Ended June 30, 2015
	(in thousands)
Revenue	$	133,447	$	248,594
Net income attributable to partners	$	45,065	$	77,548

The pro forma financial information is not necessarily indicative of what the actual results of operations or financial position of TEP would have been if the transactions had in fact occurred on the date or for the period indicated, nor do they purport to project the results of operations or financial position of TEP for any future periods or as of any date. The pro forma financial information does not give effect to any cost savings, operating synergies, or revenue enhancements expected to result from the transactions or the costs to achieve these cost savings, operating synergies, and revenue enhancements. The pro forma revenue and net income includes adjustments to give effect to TEP's consolidated interest in the estimated results of operations of Western for the periods presented.

4. Related Party Transactions

We have no employees. TD, through its wholly-owned subsidiary Tallgrass Operations, LLC ("Tallgrass Operations"), provided and charged us for direct and indirect costs of services provided to us or incurred on our behalf including employee labor costs, information technology services, employee health and retirement benefits, and all other expenses necessary or appropriate to the conduct of our business. We recorded these costs on the accrual basis in the period in which TD incurred them. On May 17, 2013, in connection with the closing of TEP's initial public offering, TEP and its general partner entered into an Omnibus Agreement with TD and certain of its affiliates, including Tallgrass Operations (the "TEP Omnibus Agreement"). The TEP Omnibus Agreement provides that, among other things, TEP will reimburse TD and its affiliates for all expenses they incur and payments they make on TEP's behalf, including the costs of employee and director compensation and benefits as well as the cost of the provision of certain centralized corporate functions performed by TD, including legal, accounting, cash management, insurance administration and claims processing, risk management, health, safety and environmental, information technology and human resources in each case to the extent reasonably allocable to TEP.

There was no interest income from TD recognized for the three and six months ended June 30, 2016 . During the six months ended June 30, 2015 we recognized interest income from TD of $0.4 million on the receivable balance under the Pony Express cash management agreement in effect through December 31, 2015.

Totals of transactions with affiliated companies are as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(in thousands)
Cost of transportation services	$	7,295	$	6,233	$	14,551	$	10,591
Charges to TEP: ⁽¹⁾
Property, plant and equipment, net	$	622	$	1,594	$	1,521	$	2,901
Operation and maintenance	$	6,323	$	5,825	$	12,461	$	11,248
General and administrative	$	10,251	$	9,315	$	19,217	$	18,571


⁽¹⁾	Charges to TEP, inclusive of Pony Express, include directly charged wages and salaries, other compensation and benefits, and shared services.

Details of balances with affiliates included in "Accounts receivable, net" and "Accounts payable to related parties" in the condensed consolidated balance sheets are as follows:



	June 30, 2016		December 31, 2015
	(in thousands)
Receivable from related parties:
Rockies Express Pipeline LLC	$	—	$	15
Total receivable from related parties	$	—	$	15
Accounts payable to related parties:
Tallgrass Operations, LLC	$	7,040	$	7,792
Tallgrass Equity, LLC	93		36
Deeprock Development, LLC	—		17
Rockies Express Pipeline LLC	58		7
Total accounts payable to related parties	$	7,191	$	7,852

Balances of gas imbalances with affiliated shippers are as follows:



	June 30, 2016		December 31, 2015
	(in thousands)
Affiliate gas balance receivables	$	23	$	92
Affiliate gas balance payables	$	167	$	227

5. Inventory

The components of inventory at June 30, 2016 and December 31, 2015 consisted of the following:



	June 30, 2016		December 31, 2015
	(in thousands)
Crude oil	$	5,752	$	2,661
Materials and supplies	6,429		8,581
Natural gas liquids	351		395
Gas in underground storage	2,222		2,156
Total inventory	$	14,754	$	13,793

6. Property, Plant and Equipment

A summary of net property, plant and equipment by classification is as follows:



	June 30, 2016			December 31, 2015
	(in thousands)
Crude oil pipelines	$	1,180,989		$	1,172,684
Natural gas pipelines	552,107			550,710
Processing and treating assets	255,767			254,073
Water business assets	80,736			81,098
General and other	81,876			69,181
Construction work in progress	27,182			30,699
Accumulated depreciation and amortization	(171,590		)	(133,427		)
Total property, plant and equipment, net	$	2,007,067		$	2,025,018

7. Risk Management

We occasionally enter into derivative contracts with third parties for the purpose of hedging exposures that accompany our normal business activities. Our normal business activities directly and indirectly expose us to risks associated with changes in the market price of crude oil and natural gas, among other commodities. For example, the risks associated with changes in the market price of crude oil and natural gas include, among others (i) pre-existing or anticipated physical crude oil and natural gas sales, (ii) natural gas purchases and (iii) natural gas system use and storage. We have elected not to apply hedge accounting and changes in the fair value of all derivative contracts are recorded in earnings in the period in which the change occurs.

Fair Value of Derivative Contracts

The following table summarizes the fair values of our derivative contracts included in the condensed consolidated balance sheets:



	Balance Sheet Location	June 30, 2016		December 31, 2015
		(in thousands)
Crude oil derivative contract ⁽¹⁾	Current assets	$	148	$	—
Call option derivative ⁽²⁾	Noncurrent assets	$	55,967	$	—
Natural gas derivative contracts ⁽³⁾	Current liabilities	$	351	$	—


⁽¹⁾	As of June 30, 2016 , the fair value of crude oil derivative contracts represents the sale of 85,000 barrels in July 2016. As of December 31, 2015 there were no crude oil derivative contracts outstanding.


⁽²⁾	As discussed in Note 3 – Acquisitions , in conjunction with our acquisition of an additional 31.3% membership interest in Pony Express effective January 1, 2016, TD granted us an 18 month call option to repurchase the newly issued 6,518,000 common units at a price of $42.50 .


⁽³⁾	As of June 30, 2016 , the fair value shown for commodity contracts was comprised of derivative volumes for short natural gas fixed-price swaps totaling 0.8 Bcf. As of December 31, 2015 there were no natural gas derivative contracts outstanding.

Effect of Derivative Contracts in the Statements of Income

The following table summarizes the impact of derivative contracts for the three and six months ended June 30, 2016 and 2015 :



	Location of gain (loss) recognized in income on derivatives	Amount of gain (loss) recognized in income on derivatives
		Three Months Ended June 30,						Six Months Ended June 30,
		2016			2015			2016			2015
		(in thousands)
Derivatives not designated as hedging contracts:
Call option derivative	Unrealized gain on derivative instrument	$	18,953		$	—		$	10,007		$	—
Natural gas derivative contracts	Sales of natural gas, NGLs, and crude oil	$	(307	)	$	(131	)	$	(351	)	$	(41	)
Crude oil derivative contract	Sales of natural gas, NGLs, and crude oil	$	148		$	—		$	148		$	—

Exercise of Call Option

On July 21, 2016, we partially exercised the call option granted by TD in January 2016 as discussed in Note 3 – Acquisitions and repurchased 3,563,146 common units for a cash payment of $151.4 million . These common units were deemed canceled upon repurchase by TEP and as of July 21, 2016 are no longer issued and outstanding. As of July 29, 2016, 2,954,854 common units remained available for repurchase under the call option.

Credit Risk

We have counterparty credit risk as a result of our use of derivative contracts. Counterparties to our crude oil and natural gas derivatives consist of major financial institutions. This concentration of counterparties may impact our overall exposure to credit risk, either positively or negatively, in that the counterparties may be similarly affected by changes in economic, regulatory or other conditions. The counterparty to our call option derivative is TD. Settlement of the call option derivative, when exercised, requires TEP to make a cash payment to TD in exchange for return of the common units.

Our over-the-counter swaps are entered into with counterparties outside central trading organizations such as futures, options or stock exchanges. These contracts are with financial institutions with investment grade credit ratings. While we enter into derivative transactions principally with investment grade counterparties and actively monitor their credit ratings, it is nevertheless possible that from time to time losses will result from counterparty credit risk in the future. As of June 30, 2016 , the fair value of our natural gas commodity derivative contracts was a liability, resulting in no credit exposure from TEP's counterparties as of that date. The maximum potential exposure to credit losses on our crude oil derivative contract at June 30, 2016 was:



	Asset Position
	(in thousands)
Gross	$	148
Netting agreement impact	—
Cash collateral held	—
Net Exposure	$	148

As of June 30, 2016 and December 31, 2015 , we did not have any outstanding letters of credit or cash in margin accounts in support of our hedging of commodity price risks associated with the sale of natural gas nor did we have any margin deposits with counterparties associated with natural gas contract positions.

Fair Value

Derivative assets and liabilities are measured and reported at fair value. Derivative contracts can be exchange-traded or over-the-counter ("OTC"). Exchange-traded derivative contracts typically fall within Level 1 of the fair value hierarchy if they are traded in an active market. We value exchange-traded derivative contracts using quoted market prices for identical securities.

OTC derivatives are valued using models utilizing a variety of inputs including contractual terms and commodity and interest rate curves. The selection of a particular model and particular inputs to value an OTC derivative contract depends upon the contractual terms of the instrument as well as the availability of pricing information in the market. We use similar models to value similar instruments. For OTC derivative contracts that trade in liquid markets, such as generic forwards and swaps, model inputs can generally be verified and model selection does not involve significant management judgment. Such contracts are typically classified within Level 2 of the fair value hierarchy.

Certain OTC derivative contracts trade in less liquid markets with limited pricing information; as such, the determination of fair value for these derivative contracts is inherently more difficult. Such contracts are classified within Level 3 of the fair value hierarchy. The valuations of these less liquid OTC derivatives are typically impacted by Level 1 and/or Level 2 inputs that can be observed in the market, as well as unobservable Level 3 inputs. Use of a different valuation model or different valuation input values could produce a significantly different estimate of fair value. However, derivative contracts valued using inputs unobservable in active markets are generally not material to our financial statements. When appropriate, valuations are adjusted for various factors including credit considerations. Such adjustments are generally based on available market evidence. In the absence of such evidence, management's best estimate is used.

The call option granted by TD is valued using a Black-Scholes option pricing model. Key inputs to the valuation model include the term of the option, risk free rate, the exercise price and current market price, expected volatility and expected distribution yield of the underlying units. The call option valuation is classified within Level 2 of the fair value hierarchy as the value is based on significant observable inputs.

The following table summarizes the fair value measurements of our derivative contracts as of June 30, 2016 based on the fair value hierarchy established by the Codification:



			Asset Fair Value Measurements Using
	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(in thousands)
As of June 30, 2016
Call option derivative	$	55,967	$	—	$	55,967	$	—
Crude oil derivative contract	$	148	$	—	$	148	$	—

			Liability Fair Value Measurements Using
	Total		Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	(in thousands)
As of June 30, 2016
Natural gas derivative contracts	$	351	$	—	$	351	$	—

8. Long-term Debt

Revolving Credit Facility

Effective January 4, 2016, in connection with the acquisition of an additional 31.3% membership interest in Pony Express, TEP exercised the committed accordion feature to increase the total capacity of the revolving credit facility from $1.1 billion to $1.5 billion . In connection with the acquisition of a 25% membership interest in Rockies Express, TEP amended the revolving credit facility to increase the total capacity to $1.75 billion , which increase became effective May 6, 2016.

The following table sets forth the available borrowing capacity under the revolving credit facility as of June 30, 2016 and December 31, 2015 :



	June 30, 2016			December 31, 2015
	(in thousands)
Total capacity under the revolving credit facility	$	1,750,000		$	1,100,000
Less: Outstanding borrowings under the revolving credit facility ⁽¹⁾	(1,278,000		)	(753,000		)
Available capacity under the revolving credit facility	$	472,000		$	347,000


⁽¹⁾	As of July 29, 2016, our outstanding borrowings under the revolving credit facility were approximately $1.423 billion .

The revolving credit facility contains various covenants and restrictive provisions that, among other things, limit or restrict our ability (as well as the ability of our restricted subsidiaries) to incur or guarantee additional debt, incur certain liens on assets, dispose of assets, make certain distributions (including distributions from available cash, if a default or event of default under the credit agreement then exists or would result from making such a distribution), change the nature of our business, engage in certain mergers or make certain investments and acquisitions, enter into non-arms-length transactions with affiliates and designate certain subsidiaries as "Unrestricted Subsidiaries." In addition, we are required to maintain a consolidated leverage ratio of not more than 4.75 to 1.00 (which will be increased to 5.25 to 1.00 for certain measurement periods following the consummation of certain acquisitions) and a consolidated interest coverage ratio of not less than 2.50 to 1.00. As of June 30, 2016 , we are in compliance with the covenants required under the revolving credit facility.

The unused portion of the revolving credit facility is subject to a commitment fee, which ranges from 0.300% to 0.500% , based on our total leverage ratio. As of June 30, 2016 , the weighted average interest rate on outstanding borrowings was 2.72% . During the six months ended June 30, 2016 , our weighted average effective interest rate, including the interest on outstanding borrowings, commitment fees, and amortization of deferred financing costs, was 2.66% .

Fair Value

The following table sets forth the carrying amount and fair value of our long-term debt, which is not measured at fair value in the condensed consolidated balance sheets as of June 30, 2016 and December 31, 2015 , but for which fair value is disclosed:



	Fair Value
	Quoted prices in active markets for identical assets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)		Total		Carrying Amount
	(in thousands)
June 30, 2016	$	—	$	1,278,000	$	—	$	1,278,000	$	1,278,000
December 31, 2015	$	—	$	753,000	$	—	$	753,000	$	753,000

The long-term debt borrowed under the revolving credit facility is carried at amortized cost. As of June 30, 2016 and December 31, 2015 , the fair value approximates the carrying amount for the borrowings under the revolving credit facility using a discounted cash flow analysis. We are not aware of any factors that would significantly affect the estimated fair value subsequent to June 30, 2016 .

9. Partnership Equity and Distributions

Equity Distribution Agreements

On October 31, 2014, we entered into an equity distribution agreement pursuant to which we may sell from time to time through a group of managers, as our sales agents, common units representing limited partner interests having an aggregate offering price of up to $200 million . On May 13, 2015 the amount was subsequently amended to $100.2 million in order to account for follow-on equity offerings under our S-3 shelf registration statement. On May 17, 2016, we entered into a new equity distribution agreement allowing for the sale of common units with an aggregate offering price of up to $657.5 million . Sales of common units, if any, will be made by means of ordinary brokers' transactions, to or through a market maker or directly on or through an electronic communication network, a "dark pool" or any similar market venue, or as otherwise agreed by the Partnership and one or more of the managers. We intend to use the net cash proceeds from any sale of the units for general partnership purposes, which may include, among other things, the exercise of the Partnership's right to repurchase all or a portion of the 6,518,000 common units issued by the Partnership to TD in connection with the Partnership's acquisition of an additional 31.3% of Pony Express in January 2016, repayment or refinancing of debt, funding for acquisitions, capital expenditures and additions to working capital.

Private Placement

On April 28, 2016, we issued an aggregate of 2,416,987 common units for net cash proceeds of $90.0 million in a private placement transaction to certain funds managed by Tortoise Capital Advisors, L.L.C. The units were subsequently registered pursuant to our Form S-3/A (File No. 333-210976) filed with the SEC on May 6, 2016, which became effective May 17, 2016.

Tallgrass Development Purchase Program

On February 17, 2016, TEP and Tallgrass Energy GP, LP ("TEGP") announced that the Board of Directors of Tallgrass Energy Holdings, LLC, the sole member of TEGP's general partner and the general partner of TD, has authorized an equity purchase program under which TD may initially purchase up to an aggregate of $100 million of the outstanding Class A shares of TEGP or the outstanding common units of TEP. TD may purchase Class A shares or Common Units from time to time on the open market or in negotiated purchases. The timing and amounts of any such purchases will be subject to market conditions and other factors, and will be in accordance with applicable securities laws and other legal requirements. The purchase plan does not obligate TD to acquire any specific number of Class A shares or Common Units and may be discontinued at any time. No purchases were made under this program during the six months ended June 30, 2016 .

Distributions to Holders of Common Units, General Partner Units and Incentive Distribution Rights

Our partnership agreement requires us to distribute our available cash, as defined in the partnership agreement, to unitholders of record on the applicable record date within 45 days after the end of each quarter. The following table shows the distributions for the periods indicated:



		Distributions
		Limited Partner Common Units		General Partner						Distributions per Limited Partner Unit
Three Months Ended	Date Paid	Limited Partner Common Units		Incentive Distribution Rights		General Partner Units		Total		Distributions per Limited Partner Unit
		(in thousands, except per unit amounts)
June 30, 2016	August 12, 2016 ⁽¹⁾	$	54,442	$	24,262	$	911	$	79,615	$	0.7550
March 31, 2016	May 13, 2016	48,238		19,816		830		68,884		0.7050
December 31, 2015	February 12, 2016	42,984		15,332		724		59,040		0.6400
September 30, 2015	November 13, 2015	36,347		11,567		660		48,574		0.6000
June 30, 2015	August 14, 2015	35,135		10,418		627		46,180		0.5800
March 31, 2015	May 14, 2015	31,322		6,934		530		38,786		0.5200


⁽¹⁾	The distribution announced on July 6, 2016 for the second quarter of 2016 will be paid on August 12, 2016 to unitholders of record at the close of business on July 29, 2016.

Other Contributions and Distributions

During the six months ended June 30, 2016 , TEP was deemed to have made a noncash capital distribution of $280.0 million to the general partner, which represents the excess purchase price over the carrying value of the additional 31.3% membership interest in Pony Express acquired effective January 1, 2016. See Note 3 – Acquisitions for additional information regarding the transaction.

During the six months ended June 30, 2015 , TEP was deemed to have made a noncash capital distribution of $324.3 million to the general partner, which represents the excess purchase price over the carrying value of the additional 33.3% membership interest in Pony Express acquired effective March 1, 2015. TEP also recognized contributions from noncontrolling interests of $68.7 million , which consisted primarily of contributions from TD to Pony Express to fund construction of the lateral in Northeast Colorado, and distributions to noncontrolling interests of $22.6 million .

10. Net Income per Limited Partner Unit

The Partnership's net income is allocated to the general partner and the limited partners, including the holders of the subordinated units, in accordance with their respective ownership percentages, after giving effect to incentive distributions paid to the general partner. Basic and diluted net income per limited partner unit is calculated by dividing limited partners' interest in net income, less general partner incentive distributions, by the weighted average number of outstanding limited partner units during the period.

We compute earnings per unit using the two-class method for Master Limited Partnerships as prescribed in the FASB guidance. The two-class method requires that securities that meet the definition of a participating security be considered for inclusion in the computation of basic earnings per unit. Under the two-class method, earnings per unit is calculated as if all of the earnings for the period were distributed under the terms of the partnership agreement, regardless of whether the general partner has discretion over the amount of distributions to be made in any particular period, whether those earnings would actually be distributed during a particular period from an economic or practical perspective, or whether the general partner has other legal or contractual limitations on its ability to pay distributions that would prevent it from distributing all of the earnings for a particular period.

We calculate net income available to limited partners based on the distributions pertaining to the current period's net income. After adjusting for the appropriate period's distributions, the remaining undistributed earnings or excess distributions over earnings, if any, are allocated to the general partner and limited partners in accordance with the contractual terms of the partnership agreement and as further prescribed in the FASB guidance under the two-class method.

The two-class method does not impact our overall net income or other financial results; however, in periods in which aggregate net income exceeds our aggregate distributions for such period, it will have the impact of reducing net income per limited partner unit. This result occurs as a larger portion of our aggregate earnings, as if distributed, is allocated to the incentive distribution rights (which are currently held by our general partner), even though we make distributions on the basis of available cash and not earnings. In periods in which our aggregate net income does not exceed our aggregate distributions for such period, the two-class method does not have any impact on our calculation of earnings per limited partner unit.

Basic earnings per unit is computed by dividing net earnings attributable to unitholders by the weighted average number of units outstanding during each period. Diluted earnings per unit reflects the potential dilution of common equivalent units that could occur if equity participation units are converted into common units.

The following table illustrates the Partnership's calculation of net income per common and subordinated unit for the three and six months ended June 30, 2016 and 2015 :



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(in thousands, except per unit amounts)
Net income	$	93,158		$	53,231		$	138,269		$	76,221
Net (income) loss attributable to noncontrolling interests	(1,110		)	(8,332		)	(2,151		)	997
Net income attributable to partners	92,048			44,899			136,118			77,218
General partner interest in net income	(25,320		)	(11,030		)	(45,673		)	(18,468		)
Net income available to common and subordinated unitholders	$	66,728		$	33,869		$	90,445		$	58,750
Basic net income per common and subordinated unit	$	0.93		$	0.56		$	1.30		$	1.04
Diluted net income per common and subordinated unit	$	0.92		$	0.55		$	1.29		$	1.02
Basic average number of common and subordinated units outstanding	71,975			60,362			69,471			56,566
Equity Participation Unit equivalent units	950			863			889			838
Diluted average number of common and subordinated units outstanding	72,925			61,225			70,360			57,404

11. Regulatory Matters

There are currently no proceedings challenging the currently effective rates of Pony Express, Rockies Express or Trailblazer Pipeline Company LLC ("Trailblazer"). On October 30, 2015, Tallgrass Interstate Gas Transmission, LLC ("TIGT") filed a general rate case with the FERC pursuant to Section 4 of the Natural Gas Act ("NGA"), discussed in more detail below. Regulators, as well as shippers, do have rights, under circumstances prescribed by applicable law, to challenge the rates that we charge at our regulated entities. Further, applicable law governing service by Pony Express allows parties having standing to file complaints in regard to existing tariff rates and provisions. If the complaint is not resolved, the FERC may conduct a hearing and order a crude oil pipeline like the Pony Express System to make reparations going back for up to two years prior to the date on which a complaint was filed if a rate is found to be unjust and unreasonable. We can provide no assurance that current rates will remain unchallenged. Any successful challenge could have a material, adverse effect on our future earnings and cash flows.

TIGT

General Rate Case Filing – FERC Docket RP16-137

On October 30, 2015, TIGT filed a general rate case with the FERC pursuant to Section 4 of the NGA. The rate case proposed a general system-wide increase in the maximum tariff rates for all firm and interruptible services offered by TIGT. In addition, TIGT proposed certain changes to the transportation rate design of its system to replace the current rate zone structure with a single "postage stamp" rate. TIGT also proposed new incremental charges, including (i) a charge for deliveries made to points without certain electronic flow measurement equipment, and (ii) a Cost Recovery Mechanism ("CRM") charge to completely or partially reimburse TIGT for certain costs it incurred to maintain system safety, environmental compliance and reliability. TIGT also proposed to replace its fixed fuel and lost and unaccounted for ("FL&U") charge with a FL&U tracker that would compensate TIGT for its actual FL&U expenses and adjust each year to reflect the previous period's under/over collection and the forecasted FL&U expense for the upcoming period. TIGT also proposed to implement a power cost tracker to recover the actual power costs incurred by TIGT to power its compressors. Finally, TIGT proposed certain revisions to its FERC Gas Tariff addressing a number of other rate and non-rate matters. Under the NGA and the FERC's regulations, TIGT's shippers and other interested parties, including the FERC's Trial Staff, have a right to challenge any aspect of TIGT's rate case filing. Accordingly, numerous TIGT customers have protested aspects of TIGT's NGA Section 4 rate filing.

On November 30, 2015, the FERC issued an order accepting and suspending the proposed rates and certain proposed tariff records to be effective upon motion May 1, 2016, subject to refund, certain modifications to TIGT's proposed CRM charge, and the outcome of an evidentiary hearing before a FERC Administrative Law Judge (the "Suspension Order"). In the Suspension Order, the FERC also accepted two tariff records related to force majeure events and reservation charge crediting to be effective December 1, 2015, subject to certain modifications. On December 21, 2015, TIGT made a compliance filing with the FERC to modify TIGT's proposed CRM charge and update the tariff records related to force majeure events and reservation charge crediting as directed by the FERC in the Suspension Order. No comments or protests were filed in response to the compliance filing and FERC accepted the compliance filing on February 1, 2016. On March 22, 2016, a Settlement Judge was appointed in the case to assist the participants in exploring the possibility of settlement. On March 31, 2016, the FERC issued an order denying certain rehearing requests concerning the CRM, granting in part a motion to remove certain pro forma tariff records from the hearing, and also requested comments in order to assess the need for a technical conference. The FERC also retained for resolution through hearing the pro forma tariff records related to TIGT's proposed charge at delivery points lacking electronic flow measurement and removed from hearing the other issues related to the pro forma tariff records. Whether any issues will be resolved through technical conference is pending. The FERC also directed TIGT to provide additional information related to certain pro forma tariff records, which TIGT filed on April 14, 2016. On June 23, 2016, the Commission approved the implementation of TIGT’s filed postage stamp rates, subject to refund, effective on May 1, 2016.

TIGT has reached an agreement in principle with customers representing a majority of firm fee revenue on the TIGT System for the year ended December 31, 2015 to settle all rate related issues set for hearing in its existing FERC rate case, including the issues of a cost recovery mechanism and a non-Electronic Flow Measurement charge. On May 5, 2016, the Acting Chief Administrative Law Judge issued an Order suspending the procedural schedule in the case as a result of the agreement in principle. On June 8, 2016, TIGT filed with the Commission its offer of settlement which resolves all issues in the case, with the exception of certain non-rate related tariff issues which remain subject to the Commission’s review and approval. On June 9, 2016, the Presiding Administrative Law Judge issued an Order shortening the period for any comments on the settlement, such that comments were due by June 13, 2016. No adverse comments were filed. The offer of settlement was certified to the Commission by the Administrative Law Judge on July 14, 2016. The Judge found that the settlement is uncontested, presents no issues of first impression, has no Commission policy implications, and appears to be just, reasonable, and in the public interest. The settlement is now subject to the final approval of the FERC.

Trailblazer

2016 Annual Fuel Tracker Filing – FERC Docket RP16-814-000

On April 1, 2016, Trailblazer made its annual fuel tracker filing with a proposed effective date of May 1, 2016 in Docket No. RP16-814-000. The FERC accepted this filing on April 18, 2016.

Rockies Express

Annual FERC Fuel Tracking Filings – Docket No. RP16-702

On March 1, 2016, Rockies Express made its annual fuel tracker filing with a proposed effective date of April 1, 2016 in Docket No. RP16-702. The FERC issued an order accepting the filing on March 25, 2016.

Seneca Lateral Facilities Conversion

On March 2, 2015 in Docket No. CP15-102-000, Rockies Express filed with FERC an application for (1) authorization to convert certain existing and operating pipeline and compression facilities located in Noble and Monroe Counties, Ohio (Seneca Lateral Facilities described in Docket Nos. CP13-539-000 and CP14-194-000) from Natural Gas Policy Act of 1978 Section 311 authority to Natural Gas Act Section 7 jurisdiction, and (2) issuance of a certificate of public convenience and necessity authorizing Rockies Express to operate and maintain the Seneca Lateral Facilities. On April 7, 2016, the FERC issued a Certificate to Rockies Express granting its requested authorizations. As directed by the FERC, Rockies Express filed revised rates for Natural Gas Act service on the Seneca Lateral and the pipeline announced that Natural Gas Act service would commence on June 1, 2016.

Rockies Express Zone 3 Capacity Enhancement Project

On March 31, 2015 in Docket No. CP15-137-000, Rockies Express filed with FERC an application for authorization to construct and operate (1) three new mainline compressor stations located in Pickaway and Fayette Counties, Ohio and Decatur County, Indiana; (2) additional compressors at an existing compressor station in Muskingum County, Ohio; and (3) certain ancillary facilities. The proposed facilities will increase the Rockies Express Zone 3 east-to-west mainline capacity by 800,000 Dth/d from receipts at Clarington, Ohio to corresponding deliveries of 520,000 Dth/d and 280,000 Dth/d to Lebanon, Ohio and Moultrie County, Illinois, respectively. Pursuant to the FERC's obligations under the National Environmental Policy Act, FERC staff issued an Environmental Assessment for the project on August 31, 2015. On February 25, 2016, the FERC issued a Certificate of Public Convenience and Necessity authorizing Rockies Express to proceed with the project. On March 14, 2016, Rockies Express commenced construction of the project facilities, which are expected to be placed into service in the fourth quarter of 2016.

12. Legal and Environmental Matters

Legal

In addition to the matters discussed below, we are a defendant in various lawsuits arising from the day-to-day operations of our business. Although no assurance can be given, we believe, based on our experiences to date, that the ultimate resolution of such routine items will not have a material adverse impact on our business, financial position, results of operations or cash flows. We have evaluated claims in accordance with the accounting guidance for contingencies that we deem both probable and reasonably estimable and, accordingly, had no reserve for legal claims as of June 30, 2016 or December 31, 2015 .

Rockies Express

Mineral Management Service Lawsuit

On June 30, 2009, Rockies Express filed claims against Mineral Management Service, a former unit of the U.S. Department of Interior (collectively "Interior") for breach of its contractual obligation to sign transportation service agreements and to pay approximately $192 million for pipeline capacity that it had agreed to take on Rockies Express. The Civilian Board of Contract Appeals ("CBCA") conducted a trial and ruled that Interior was liable for breach of contract, but limited the damages Interior was required to pay. On September 13, 2013, the United States Court of Appeals for the Federal Circuit issued a decision affirming that Interior was liable for its breach of contract, but reversing the CBCA's decision to limit damages. The case was remanded to the CBCA for the purpose of calculating damages at a hearing. On May 20, 2016, Rockies Express and Interior agreed to resolve the claims in this matter in exchange for a $65 million cash payment to Rockies Express. Interior paid the amount due Rockies Express on June 23, 2016.

Ultra Resources

In early 2016, Ultra Resources, Inc. ("Ultra"), defaulted on its firm transportation service agreement for approximately 0.2 Bcf/d through November 11, 2019. In late March 2016, Rockies Express terminated Ultra's service agreement. On April 14, 2016, Rockies Express filed a lawsuit against Ultra for breach of contract and damages in Harris County, Texas, in which Rockies Express seeks approximately $303 million in damages and other relief. Specifically, Rockies Express has asserted that Ultra owes approximately $303 million for past transportation service charges and for reservation charge fees that Rockies Express would have received over the term of the service agreement had Ultra not defaulted, in addition to other amounts owed under law or equity.

On April 29, 2016, Ultra and certain of its debtor affiliates filed for protection under Chapter 11 of the United States Bankruptcy Code in United States Bankruptcy Court for the Southern District of Texas. On May 10, 2016, Ultra filed a notice of bankruptcy in the Harris County state court proceeding, which asserted that pursuant to section 362(a) of the Bankruptcy Code, the filing of Ultra’s Chapter 11 petition operated as a stay of the Harris County state court proceeding. Accordingly, Rockies Express intends to pursue its approximately $303 million claim in Ultra’s Chapter 11 proceeding.

Michels Corporation

On June 17, 2014, Michels Corporation ("Michels") filed a complaint and request for relief against Rockies Express as a result of work performed by Michels to construct the Seneca Lateral Pipeline in Ohio. Michels seeks unspecified damages from Rockies Express and asserts claims of breach of contract, negligent misrepresentation, unjust enrichment and quantum meruit. Michels has also filed notices of Mechanic's Liens in Monroe and Noble Counties, asserting $24.2 million as the amount due. The case is currently scheduled to go to trial in April 2017. Rockies Express also previously filed Petition for Declaratory Judgment, Injunctive Relief and Damages against Michels in Johnson County, Kansas. That claim was dismissed without prejudice in September 2015. Rockies Express believes Michels' claims are without merit and plans to continue to vigorously contest all of the claims in this matter.

Environmental, Health and Safety

We are subject to a variety of federal, state and local laws that regulate permitted activities relating to air and water quality, waste disposal, and other environmental matters. We believe that compliance with these laws will not have a material adverse impact on our business, cash flows, financial position or results of operations. However, there can be no assurances that future events, such as changes in existing laws, the promulgation of new laws, or the development of new facts or conditions will not cause us to incur significant costs. We had environmental reserves of $4.4 million and $4.8 million at June 30, 2016 and December 31, 2015 , respectively.

TMID

Casper Plant, EPA Notice of Violation

In August 2011, the EPA and the Wyoming Department of Environmental Quality ("WDEQ") conducted an inspection of the Leak Detection and Repair ("LDAR") Program at the Casper Gas Plant in Wyoming. In September 2011, Tallgrass Midstream, LLC ("TMID") received a letter from the EPA alleging violations of the Standards of Performance of Equipment Leaks for Onshore Natural Gas Processing Plant requirements under the Clean Air Act. TMID received a letter from the EPA concerning settlement of this matter in April 2013 and received additional settlement communications from the EPA and Department of Justice beginning in July 2014. Settlement negotiations are continuing, including the expected inclusion of TIGT as a party to any possible settlement as a result of TIGT owning a compressor that is located adjacent to the Casper Gas Plant site.

Casper Mystery Bridge Superfund Site

The Casper Gas Plant is part of the Mystery Bridge Road/U.S. Highway 20 Superfund Site also known as Casper Mystery Bridge Superfund Site. Remediation work at the Casper Gas Plant has been completed and we have requested that the portion of the site attributable to us be delisted from the National Priorities List.

Casper Gas Plant

On November 25, 2014, WDEQ issued a Notice of Violation for violations of Part 60 Subpart OOOO related to the Depropanizer project (wv-14388, issued 7/9/13) in Docket No. 5506-14. TMID had discussed the issues in a meeting with WDEQ in Cheyenne on November 17, 2014, and submitted a disclosure on November 20, 2014 detailing the regulatory issues and potential violations. The project triggered a modification of Subpart OOOO for the entire plant. The project equipment as well as plant equipment subjected to Subpart OOOO was not monitored timely, and initial notification was not made timely. Settlement negotiations with WDEQ are currently ongoing.

Trailblazer

Pipeline Integrity Management Program

In 2014 and 2015, Trailblazer conducted smart tool surveys and preliminary analysis on segments of its natural gas pipeline to evaluate the growth rate of corrosion downstream of compressor stations. Trailblazer currently believes that approximately 25 - 35 miles of pipe will likely need to be repaired or replaced in order for the pipeline to operate at its maximum allowable operating pressure of 1,000 pounds per square inch. Such repair or replacement will likely occur over a period of years, depending upon final assessment of corrosion growth rates and the remediation and repair plan implemented by Trailblazer. Trailblazer is currently operating at less than its current maximum allowable operating pressure, public notice of which was first provided in June 2014. The current pressure reduction is not expected to prevent Trailblazer from fulfilling its firm service obligations at existing subscription levels and to date it has not had a material adverse financial impact on TEP.

During 2015, Trailblazer completed 32 excavation digs at an aggregate cost of approximately $1.3 million based on preliminary analysis of the smart tool surveys performed in 2014. Segments of the Trailblazer Pipeline that require full replacement are currently expected to cost in the range of approximately $2.2 million to $2.7 million per mile. Repair costs on sections of the pipeline that do not require full replacement are expected to be less on a per mile basis. Trailblazer is continuing to develop a remediation and repair plan, which involves, among other things, finalizing cost recovery options, establishing project scope and timing and setting an overall project budget. In 2016, Trailblazer intends to replace approximately 8 miles of pipe, install additional ground beds, and continue remediating areas with external control anomalies at an estimated cost of $21.5 million . Trailblazer is currently exploring all possible cost recovery options. It may not ultimately be able to recover any or all of such out of pocket costs unless and until Trailblazer recovers them through a general rate increase or other FERC-approved recovery mechanism, or through negotiated rate agreements with its customers.

In connection with TEP's acquisition of the Trailblazer Pipeline, TD agreed to contractually indemnify TEP for any out of pocket costs incurred between April 1, 2014 and April 1, 2017 related to repairing or remediating the Trailblazer Pipeline, to the extent that such actions are necessitated by external corrosion caused by the pipeline's disbonded Hi-Melt CTE coating. The contractual indemnity provided to TEP by TD is currently capped at $20 million and is subject to an annual $1.5 million deductible.

13. Reporting Segments

Our operations are located in the United States. We are organized into three reporting segments: (1) Crude Oil Transportation & Logistics, (2) Natural Gas Transportation & Logistics, and (3) Processing & Logistics.

Crude Oil Transportation & Logistics

The Crude Oil Transportation & Logistics segment is engaged in the ownership and operation of the Pony Express System, which is a FERC-regulated crude oil pipeline serving the Bakken Shale and other nearby oil producing basins. The mainline portion of the Pony Express System was placed in service in October 2014. The Pony Express System also includes a lateral pipeline in Northeast Colorado, which interconnects with the Pony Express System just east of Sterling, Colorado and was placed in service in the second quarter of 2015.

Natural Gas Transportation & Logistics

The Natural Gas Transportation & Logistics segment is engaged in the ownership and operation of FERC-regulated interstate natural gas pipelines and integrated natural gas storage facilities that provide services to on-system customers (such as third-party LDCs), industrial users and other shippers. The Natural Gas Transportation & Logistics segment includes our 25% membership interest in Rockies Express effective May 6, 2016, as discussed in Note 3 – Acquisitions .

Processing & Logistics

The Processing & Logistics segment is engaged in the ownership and operation of natural gas processing, treating and fractionation facilities that produce NGLs and residue gas that is sold in local wholesale markets or delivered into pipelines for transportation to additional end markets, as well as water business services provided primarily to the oil and gas exploration and production industry and the transportation of NGLs.

Corporate and Other

Corporate and Other includes corporate overhead costs that are not directly associated with the operations of our reportable segments, such as interest and fees associated with our revolving credit facility, public company costs, and equity-based compensation expense.

These segments are monitored separately by management for performance and are consistent with internal financial reporting. These segments have been identified based on the differing products and services, regulatory environment and the expertise required for their respective operations.

We consider Adjusted EBITDA our primary segment performance measure as we believe it is the most meaningful measure to assess our financial condition and results of operations as a public entity. We define Adjusted EBITDA, a non-GAAP measure, as net income excluding the impact of interest, income taxes, depreciation and amortization, non-cash income or loss related to derivative instruments, non-cash long-term compensation expense, impairment losses, gains or losses on asset or business disposals or acquisitions, gains or losses on the repurchase, redemption or early retirement of debt, and earnings from unconsolidated investments, but including the impact of distributions from unconsolidated investments.

The following tables set forth our segment information for the periods indicated:



	Three Months Ended June 30, 2016							Three Months Ended June 30, 2015
Revenue:	Total Revenue		Inter- Segment			External Revenue		Total Revenue		Inter- Segment			External Revenue
	(in thousands)
Crude Oil Transportation & Logistics	$	93,470	$	—		$	93,470	$	75,219	$	—		$	75,219
Natural Gas Transportation & Logistics	30,150		(1,410		)	28,740		30,969		(1,344		)	29,625
Processing & Logistics	24,721		—			24,721		28,126		—			28,126
Corporate and Other	—		—			—		—		—			—
Total Revenue	$	148,341	$	(1,410	)	$	146,931	$	134,314	$	(1,344	)	$	132,970



	Six Months Ended June 30, 2016							Six Months Ended June 30, 2015
Revenue:	Total Revenue		Inter- Segment			External Revenue		Total Revenue		Inter- Segment			External Revenue
	(in thousands)
Crude Oil Transportation & Logistics	$	188,042	$	—		$	188,042	$	125,600	$	—		$	125,600
Natural Gas Transportation & Logistics	61,137		(2,765		)	58,372		64,579		(2,690		)	61,889
Processing & Logistics	45,922		—			45,922		60,156		—			60,156
Corporate and Other	—		—			—		—		—			—
Total Revenue	$	295,101	$	(2,765	)	$	292,336	$	250,335	$	(2,690	)	$	247,645



	Three Months Ended June 30, 2016									Three Months Ended June 30, 2015
Adjusted EBITDA:	Total Adjusted EBITDA			Inter- Segment			External Adjusted EBITDA			Total Adjusted EBITDA			Inter- Segment			External Adjusted EBITDA
	(in thousands)
Crude Oil Transportation & Logistics	$	65,760		$	1,346		$	67,106		$	46,320		$	1,344		$	47,664
Natural Gas Transportation & Logistics	45,763			(1,410		)	44,353			16,591			(1,344		)	15,247
Processing & Logistics	3,549			64			3,613			7,077			—			7,077
Corporate and Other	(1,089		)	—			(1,089		)	(1,036		)	—			(1,036		)
Reconciliation to Net Income:
Add:
Equity in earnings of unconsolidated investment							23,321									—
Less:
Interest expense, net of noncontrolling interest							(9,233		)							(3,893		)
Depreciation and amortization expense, net of noncontrolling interest							(21,840		)							(18,302		)
Distributions from unconsolidated investment							(29,656		)							—
Non-cash gain (loss) related to derivative instruments, net of noncontrolling interest							18,791									(131		)
Non-cash compensation expense							(1,469		)							(1,727		)
Non-cash loss from disposal of assets							(1,849		)							—
Net income attributable to partners							$	92,048								$	44,899



	Six Months Ended June 30, 2016									Six Months Ended June 30, 2015
Adjusted EBITDA:	Total Adjusted EBITDA			Inter- Segment			External Adjusted EBITDA			Total Adjusted EBITDA			Inter- Segment			External Adjusted EBITDA
	(in thousands)
Crude Oil Transportation & Logistics	$	130,301		$	2,691		$	132,992		$	71,826		$	2,690		$	74,516
Natural Gas Transportation & Logistics	62,915			(2,765		)	60,150			35,837			(2,690		)	33,147
Processing & Logistics	6,900			74			6,974			15,795			—			15,795
Corporate and Other	(2,441		)	—			(2,441		)	(1,671		)	—			(1,671		)
Reconciliation to Net Income:
Add:
Equity in earnings of unconsolidated investment							23,321									—
Non-cash loss allocated to noncontrolling interest							—									9,377
Less:
Interest expense, net of noncontrolling interest							(16,732		)							(7,333		)
Depreciation and amortization expense, net of noncontrolling interest							(43,807		)							(38,835		)
Distributions from unconsolidated investment							(29,656		)							—
Non-cash gain (loss) related to derivative instruments, net of noncontrolling interest							9,801									(41		)
Non-cash compensation expense							(2,635		)							(3,254		)
Non-cash loss from disposal of assets							(1,849		)							(4,483		)
Net income attributable to partners							$	136,118								$	77,218



	Six Months Ended June 30,
Capital Expenditures:	2016		2015
	(in thousands)
Crude Oil Transportation & Logistics	$	19,160	$	32,501
Natural Gas Transportation & Logistics	4,115		7,061
Processing & Logistics	5,216		9,982
Corporate and Other	—		—
Total capital expenditures	$	28,491	$	49,544



Assets:	June 30, 2016		December 31, 2015
	(in thousands)
Crude Oil Transportation & Logistics	$	1,425,917	$	1,439,418
Natural Gas Transportation & Logistics	1,142,222		706,576
Processing & Logistics	408,055		409,795
Corporate and Other	63,725		6,285
Total assets	$	3,039,919	$	2,562,074

14. Subsequent Events

On July 1, 2016, we acquired the remaining 8% noncontrolling equity interest in Water Solutions and additional interests in certain of Water Solutions' subsidiaries from Regency Investments I, LLC and BSEG Water Group LLC for total cash consideration of $6.0 million , which will be accounted for as an acquisition of noncontrolling interest. Subsequent to the closing of the transaction, our aggregate membership interest in Water Solutions is 100% .

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

As used in this Quarterly Report, unless the context otherwise requires, "we," "us," "our," the "Partnership," "TEP" and similar terms refer to Tallgrass Energy Partners, LP, together with its consolidated subsidiaries. The term our "general partner" refers to Tallgrass MLP GP, LLC. References to "TD" refer to Tallgrass Development, LP. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and related notes thereto included elsewhere in this Quarterly Report. Additionally, the following discussion and analysis should be read in conjunction with our audited financial statements and notes thereto, the related "Management's Discussion and Analysis of Financial Condition and Results of Operations," the discussion of "Risk Factors" and the discussion of TEP's "Business" in our Annual Report on Form 10-K for the year ended December 31, 2015 (our "2015 Form 10-K") filed with the United States Securities and Exchange Commission (the "SEC") on February 17, 2016.

A reference to a "Note" herein refers to the accompanying Notes to Condensed Consolidated Financial Statements contained in Item 1. — Financial Statements. In addition, please read "Cautionary Statement Regarding Forward-Looking Statements" and "Risk Factors" for information regarding certain risks inherent in our business.

Cautionary Statement Regarding Forward-Looking Statements

This Quarterly Report and the documents incorporated by reference herein contain forward-looking statements concerning our operations, economic performance and financial condition. Forward-looking statements give our current expectations, contain projections of results of operations or of financial condition, or forecasts of future events. Words such as "could," "will," "may," "assume," "forecast," "position," "predict," "strategy," "expect," "intend," "plan," "estimate," "anticipate," "believe," "project," "budget," "potential," or "continue," and similar expressions are used to identify forward-looking statements. Without limiting the generality of the foregoing, forward-looking statements contained in this Quarterly Report include our expectations of plans, strategies, objectives, growth and anticipated financial and operational performance, including guidance regarding our and TD's infrastructure programs, revenue projections, capital expenditures and tax position. Forward-looking statements can be affected by assumptions used or by known or unknown risks or uncertainties. Consequently, no forward-looking statements can be guaranteed.

A forward-looking statement may include a statement of the assumptions or bases underlying the forward-looking statement. We believe that we have chosen these assumptions or bases in good faith and that they are reasonable. However, when considering these forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Quarterly Report. Actual results may vary materially. You are cautioned not to place undue reliance on any forward-looking statements. You should also understand that it is not possible to predict or identify all such factors and should not consider the following list to be a complete statement of all potential risks and uncertainties. Factors that could cause our actual results to differ materially from the results contemplated by such forward-looking statements include:

•

our ability to complete and integrate acquisitions from TD or from third parties, including our acquisition of a 25% membership interest in Rockies Express that was completed in May 2016, our purchase of an additional 31.3% membership interest in Pony Express that was completed in January 2016, and our acquisition of water business assets in Weld County, Colorado that was completed in December 2015;


•	large or multiple customer defaults, including defaults resulting from actual or potential insolvencies;


•	changes in general economic conditions;


•	competitive conditions in our industry;


•	actions taken by third-party operators, processors and transporters;


•	the demand for our services, including crude oil transportation services, natural gas transportation, storage and processing services and water business services;


•	our ability to successfully implement our business plan;


•	our ability to complete internal growth projects on time and on budget;


•	the price and availability of debt and equity financing;


•	the level of production of crude oil, natural gas and other hydrocarbons and the resultant market prices of crude oil, natural gas, NGLs, and other hydrocarbons;


•	the availability and price of natural gas and crude oil, and fuels derived from both, to the consumer compared to the price of alternative and competing fuels;


•	competition from the same and alternative energy sources;


•	energy efficiency and technology trends;


•	operating hazards and other risks incidental to transporting crude oil, transporting, storing and processing natural gas, and transporting, gathering and disposing of water produced in connection with hydrocarbon exploration and production activities;


•	natural disasters, weather-related delays, casualty losses and other matters beyond our control;


•	interest rates;


•	labor relations;


•	changes in tax status;


•	the effects of existing and future laws and governmental regulations;


•	the effects of future litigation; and


•	certain factors discussed elsewhere in this Quarterly Report.

Forward-looking statements speak only as of the date on which they are made. While we may update these statements from time to time, we are not required to do so other than pursuant to the securities laws.

Overview

We are a publicly traded, growth-oriented limited partnership formed in 2013 to own, operate, acquire and develop midstream energy assets in North America. We currently provide crude oil transportation to customers in Wyoming, Colorado, and the surrounding regions through Tallgrass Pony Express Pipeline, LLC ("Pony Express"), which owns a crude oil pipeline commencing in Guernsey, Wyoming and terminating in Cushing, Oklahoma that includes a lateral in Northeast Colorado that commences in Weld County, Colorado, and interconnects with the pipeline just east of Sterling, Colorado (the "Pony Express System"). We provide natural gas transportation and storage services for customers in the Rocky Mountain, Midwest and Appalachian regions of the United States through: (1) our 25% membership interest in Rockies Express Pipeline LLC ("Rockies Express"), a Delaware limited liability company which owns the Rockies Express Pipeline, a FERC-regulated natural gas pipeline system extending from Opal, Wyoming and Meeker, Colorado to Clarington, Ohio, (2) the Tallgrass Interstate Gas Transmission system, a FERC-regulated natural gas transportation and storage system located in Colorado, Kansas, Missouri, Nebraska and Wyoming (the "TIGT System"), and (3) the Trailblazer Pipeline system, a FERC-regulated natural gas pipeline system extending from the Colorado and Wyoming border to Beatrice, Nebraska (the "Trailblazer Pipeline"). We also provide services for customers in Wyoming at the Casper and Douglas natural gas processing facilities and the West Frenchie Draw natural gas treating facility (collectively, the "Midstream Facilities"), and NGL transportation services in Northeast Colorado. We perform water business services in Colorado and Texas through BNN Water Solutions, LLC ("Water Solutions"). Our operations are strategically located in and provide services to certain key United States hydrocarbon basins, including the Denver-Julesburg, Powder River, Wind River, Permian and Hugoton-Anadarko Basins and the Niobrara, Mississippi Lime, Eagle Ford, Bakken, Marcellus and Utica shale formations.

We intend to continue to leverage our relationship with TD and utilize the significant experience of our management team to execute our growth strategy of acquiring midstream assets from TD and third parties, increasing utilization of our existing assets and expanding our systems through construction of additional assets. Our reportable business segments are:


•	Crude Oil Transportation & Logistics—the ownership and operation of a FERC-regulated crude oil pipeline system;


•	Natural Gas Transportation & Logistics—the ownership and operation of FERC-regulated interstate natural gas pipelines and integrated natural gas storage facilities; and


•	Processing & Logistics—the ownership and operation of natural gas processing, treating and fractionation facilities, the provision of water business services primarily to the oil and gas exploration and production industry and the transportation of NGLs.

Recent Developments

Distribution Announced

On July 6, 2016, we announced a cash distribution for the quarter ended June 30, 2016 of $0.755 per common unit. The distribution will be paid on August 12, 2016, to unitholders of record on July 29, 2016.

Exercise of Call Option

On July 21, 2016, we partially exercised the call option granted by TD in January 2016 and repurchased 3,563,146 common units for a cash payment of $151.4 million . These common units were deemed canceled upon repurchase by TEP and as of July 21, 2016 are no longer issued and outstanding. As of July 29, 2016, 2,954,854 common units remained available for repurchase under the call option.

Acquisition of Additional Interest in Water Solutions

How We Evaluate Our Operations

We evaluate our results using, among other measures, contract profile and volumes, operating costs and expenses, Adjusted EBITDA and Distributable Cash Flow. Adjusted EBITDA and Distributable Cash Flow are non-GAAP measures and are defined below.

Contract Profile and Volumes

Our results are driven primarily by the volume of crude oil transportation capacity, natural gas transportation and storage capacity, NGL transportation capacity, and water transportation, gathering and disposal capacity under firm fee contracts, as well as the volume of natural gas that we process and the fees assessed for such services.

Operating Costs and Expenses

The primary components of our operating costs and expenses that we evaluate include cost of sales, cost of transportation services, operations and maintenance and general and administrative costs. Our operating expenses are driven primarily by expenses related to the operation, maintenance and growth of our asset base.

Adjusted EBITDA and Distributable Cash Flow

Adjusted EBITDA and Distributable Cash Flow are non-GAAP supplemental financial measures that management and external users of our consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess:


•	our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of Adjusted EBITDA, financing methods;


•	the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;


•	our ability to incur and service debt and fund capital expenditures; and


•	the viability of acquisitions and other capital expenditure projects and the returns on investment of various expansion and growth opportunities.

We believe that the presentation of Adjusted EBITDA and Distributable Cash Flow provides useful information to investors in assessing our financial condition and results of operations. Adjusted EBITDA and Distributable Cash Flow should not be considered alternatives to net income, operating income, net cash provided by operating activities or any other measure of financial performance or liquidity presented in accordance with GAAP, nor should Adjusted EBITDA and Distributable Cash Flow be considered alternatives to available cash, operating surplus, distributions of available cash from operating surplus or other definitions in our partnership agreement. Adjusted EBITDA and Distributable Cash Flow have important limitations as analytical tools because they exclude some but not all items that affect net income and net cash provided by operating activities. Additionally, because Adjusted EBITDA and Distributable Cash Flow may be defined differently by other companies in our industry, our definition of Adjusted EBITDA and Distributable Cash Flow may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

Non-GAAP Financial Measures

We generally define Adjusted EBITDA as net income excluding the impact of interest, income taxes, depreciation and amortization, non-cash income or loss related to derivative instruments, non-cash long-term compensation expense, impairment losses, gains or losses on asset or business disposals or acquisitions, gains or losses on the repurchase, redemption or early retirement of debt, and earnings from unconsolidated investments, but including the impact of distributions from unconsolidated investments. We also use Distributable Cash Flow, which we generally define as Adjusted EBITDA, plus preferred distributions received from Pony Express in excess of its distributable cash flow attributable to our net interest and adjusted for deficiency payments received from or utilized by Pony Express shippers, less cash interest expense, maintenance capital expenditures, distributions to noncontrolling interests in excess of earnings allocated to noncontrolling interests, and certain cash reserves permitted by our partnership agreement , to analyze our performance. Maintenance capital expenditures are cash expenditures incurred (including expenditures for the construction or development of new capital assets) that we expect to maintain our long-term operating income or operating capacity. These expenditures typically include certain system integrity, compliance and safety improvements. As discussed in Note 2 – Summary of Significant Accounting Policies , prior to December 31, 2015, we received preferred distributions from Pony Express. Effective January 1, 2016 with our acquisition of an additional 31.3% membership interest in Pony Express, distributable cash flow from Pony Express is distributed pro rata based on ownership.

Pony Express collects deficiency payments for barrels committed by the customer to be transported in a month but not physically received for transport or delivered to the customers' agreed upon destination point. These deficiency payments are recorded as a deferred liability until the barrels are physically transported and delivered by TEP. Earnings at Pony Express prior to December 31, 2015 were allocated between TEP and noncontrolling interests in accordance with a substantive profit sharing arrangement rather than pro rata by ownership. Distributions made by Pony Express to its noncontrolling interests reduce the Distributable Cash Flow available to TEP.

Distributable Cash Flow and Adjusted EBITDA are not presentations made in accordance with GAAP. The following table presents a reconciliation of Adjusted EBITDA to net income and net cash provided by operating activities and a reconciliation of Distributable Cash Flow to net cash provided by operating activities, the most directly comparable GAAP financial measures, for each of the periods indicated:



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(in thousands)
Reconciliation of Adjusted EBITDA to Net Income
Net income attributable to partners	$	92,048		$	44,899		$	136,118		$	77,218
Add:
Interest expense, net of noncontrolling interest	9,233			3,893			16,732			7,333
Depreciation and amortization expense, net of noncontrolling interest	21,840			18,302			43,807			38,835
Distributions from unconsolidated investment	29,656			—			29,656			—
Non-cash (gain) loss related to derivative instruments, net of noncontrolling interest	(18,791		)	131			(9,801		)	41
Non-cash compensation expense	1,469			1,727			2,635			3,254
Non-cash loss from disposal of assets	1,849			—			1,849			4,483
Less:
Equity in earnings of unconsolidated investment	(23,321		)	—			(23,321		)	—
Non-cash loss allocated to noncontrolling interest	—			—			—			(9,377		)
Adjusted EBITDA	$	113,983		$	68,952		$	197,675		$	121,787
Reconciliation of Adjusted EBITDA and Distributable Cash Flow to Net Cash Provided by Operating Activities
Net cash provided by operating activities	$	107,789		$	63,579		$	196,546		$	112,218
Add:
Interest expense, net of noncontrolling interest	9,233			3,893			16,732			7,333
Other, including changes in operating working capital	(3,039		)	1,480			(15,603		)	2,236
Adjusted EBITDA	$	113,983		$	68,952		$	197,675		$	121,787
Add:
Pony Express deficiency payments received, net	8,621			3,416			15,778			3,708
Less:
Cash interest cost	(8,412		)	(3,482		)	(15,233		)	(6,513		)
Maintenance capital expenditures	(2,089		)	(3,067		)	(4,257		)	(4,578		)
Distributions to noncontrolling interest in excess of earnings	—			(8,894		)	—			(10,997		)
Distributable Cash Flow	$	112,103		$	56,925		$	193,963		$	103,407

The following table presents a reconciliation of Adjusted EBITDA by segment to segment operating income, the most directly comparable GAAP financial measure, for each of the periods indicated:



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(in thousands)
Reconciliation of Adjusted EBITDA to Operating Income in the Crude Oil Transportation & Logistics Segment ⁽¹⁾
Operating income	$	53,726		$	45,515		$	106,392		$	59,788
Add:
Depreciation and amortization expense, net of noncontrolling interest	13,246			9,196			26,164			20,429
Adjusted EBITDA attributable to noncontrolling interests	(1,067		)	(8,391		)	(2,110		)	986
Non-cash gain related to derivative instruments, net of noncontrolling interest	(145		)	—			(145		)	—
Less:
Non-cash loss allocated to noncontrolling interest	—			—			—			(9,377		)
Segment Adjusted EBITDA	$	65,760		$	46,320		$	130,301		$	71,826
Reconciliation of Adjusted EBITDA to Operating Income in the Natural Gas Transportation & Logistics Segment ⁽¹⁾
Operating income	$	10,100		$	9,937		$	20,764		$	22,490
Add:
Depreciation and amortization expense	5,479			5,754			11,357			11,825
Distributions from unconsolidated investment	29,656			—			29,656			—
Non-cash loss related to derivative instruments	307			131			351			41
Other income, net	221			769			787			1,481
Segment Adjusted EBITDA	$	45,763		$	16,591		$	62,915		$	35,837
Reconciliation of Adjusted EBITDA to Operating (Loss) Income in the Processing & Logistics Segment ⁽¹⁾
Operating (loss) income	$	(1,372	)	$	3,666		$	(1,194	)	$	4,720
Add:
Depreciation and amortization expense, net of noncontrolling interest	3,115			3,352			6,286			6,581
Non-cash loss from disposal of assets	1,849			—			1,849			4,483
Adjusted EBITDA attributable to noncontrolling interests	(43		)	59			(41		)	11
Segment Adjusted EBITDA	$	3,549		$	7,077		$	6,900		$	15,795
Total Segment Adjusted EBITDA	$	115,072		$	69,988		$	200,116		$	123,458
Corporate general and administrative costs	(1,089		)	(1,036		)	(2,441		)	(1,671		)
Total Adjusted EBITDA	$	113,983		$	68,952		$	197,675		$	121,787


⁽¹⁾	Segment results as presented represent total operating income and Adjusted EBITDA, including intersegment activity, for the Crude Oil Transportation & Logistics, Natural Gas Transportation & Logistics, and Processing & Logistics segments. For reconciliations to the consolidated financial data, see Note 13 – Reporting Segments to the accompanying condensed consolidated financial statements.

Results of Operations

The following provides a summary of our consolidated results of operations for the periods indicated:



	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
	(in thousands, except operating data)
Revenues:
Crude oil transportation services	$	93,322		$	74,022		$	187,894		$	124,403
Natural gas transportation services	28,682			29,041			57,962			61,189
Sales of natural gas, NGLs, and crude oil	16,830			20,011			30,756			41,880
Processing and other revenues	8,097			9,896			15,724			20,173
Total Revenues	146,931			132,970			292,336			247,645
Operating Costs and Expenses:
Cost of sales (exclusive of depreciation and amortization shown below)	15,958			17,180			29,526			36,773
Cost of transportation services (exclusive of depreciation and amortization shown below)	14,240			13,492			30,396			24,207
Operations and maintenance	13,864			12,408			26,341			21,983
Depreciation and amortization	21,576			20,355			43,268			40,960
General and administrative	13,909			13,451			26,925			26,140
Taxes, other than income taxes	5,639			(271		)	13,145			11,026
Loss on disposal of assets	1,849			—			1,849			4,483
Total Operating Costs and Expenses	87,035			76,615			171,450			165,572
Operating Income	59,896			56,355			120,886			82,073
Other Income (Expense):
Interest expense, net	(9,233		)	(3,893		)	(16,732		)	(7,333		)
Unrealized gain on derivative instrument	18,953			—			10,007			—
Equity in earnings of unconsolidated investment	23,321			—			23,321			—
Other income, net	221			769			787			1,481
Total Other Income (Expense)	33,262			(3,124		)	17,383			(5,852		)
Net income	93,158			53,231			138,269			76,221
Net (income) loss attributable to noncontrolling interests	(1,110		)	(8,332		)	(2,151		)	997
Net income attributable to partners	$	92,048		$	44,899		$	136,118		$	77,218
Other Financial Data: ⁽¹⁾
Adjusted EBITDA	$	113,983		$	68,952		$	197,675		$	121,787
Operating Data:
Crude oil transportation average throughput (Bbls/d) ⁽²⁾	286,217			237,184			288,746			201,495
Gas transportation average firm contracted volumes (MMcf/d) ⁽³⁾	1,478			1,520			1,476			1,564
Natural gas processing inlet volumes (MMcf/d)	106			130			102			138


⁽¹⁾	For more information regarding Adjusted EBITDA and a reconciliation of Adjusted EBITDA to its most directly comparable GAAP measure, please see "Non-GAAP Financial Measures" above.


⁽²⁾	Approximate average daily throughput for the three and six months ended June 30, 2015 is reflective of the volumetric ramp up due to commercial in-service of the Pony Express System beginning in October 2014 and delays in the construction and expansion efforts of third-party pipelines with which Pony Express shares joint tariffs.


⁽³⁾	Excludes firm contracted volumes of Rockies Express.

Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015

Revenues. Total revenues were $146.9 million for the three months ended June 30, 2016 , compared to $133.0 million for the three months ended June 30, 2015 , which represents an increase of $14.0 million , or 10% , in total revenues. The overall increase in revenue was largely driven by increased revenues of $18.3 million in the Crude Oil Transportation & Logistics segment, partially offset by decreased revenues of $3.4 million and $0.8 million in the Processing & Logistics and Natural Gas Transportation & Logistics segments, respectively, as discussed further below.

Operating costs and expenses . Operating costs and expenses were $87.0 million for the three months ended June 30, 2016 compared to $76.6 million for the three months ended June 30, 2015 , which represents an increase of $10.4 million , or 14% . The overall increase in operating costs and expenses was primarily driven by increased operating costs and expenses of $10.0 million and $1.6 million in the Crude Oil Transportation & Logistics and Processing & Logistics segments, respectively, partially offset by decreased operating costs and expenses of $1.0 million in the Natural Gas Transportation & Logistics segment, as discussed further below.

Interest expense, net. Interest expense of $9.2 million for the three months ended June 30, 2016 and $3.9 million for the three months ended June 30, 2015 were primarily composed of interest and fees associated with our revolving credit facility. The increase in interest and fees associated with our revolving credit facility is primarily due to increased borrowings to fund a portion of our December 2015 acquisition of BNN Western, LLC ("Western") and our recent acquisitions of an additional 31.3% membership interest in Pony Express effective January 1, 2016 and 25% membership interest in Rockies Express effective May 6, 2016.

Unrealized gain on derivative instrument. Unrealized gain on derivative instrument of $19.0 million represents the change in fair value of the call option received from TD as part of the acquisition of an additional 31.3% membership interest in Pony Express effective January 1, 2016. The call option grants TEP the right to repurchase at a price of $42.50 the 6,518,000 common units issued to TD as a portion of the consideration for the acquisition.

Equity in earnings of unconsolidated investment. Equity in earnings of unconsolidated investment of $23.3 million for the three months ended June 30, 2016 reflects our portion of earnings and the amortization of a negative basis difference of $2.1 million associated with our acquisition of a 25% membership interest in Rockies Express effective May 6, 2016. The equity in earnings for the three months ended June 30, 2016 includes recognition of our portion of the $65 million settlement received by Rockies Express related to the lawsuit between Interior and Rockies Express as discussed in Note 12 – Legal and Environmental Matters .

Other income, net. Other income, net typically includes rental income and income earned from certain customers related to the capital costs we incurred to connect these customers to our system. Other income for the three months ended June 30, 2016 was $0.2 million compared to $0.8 million for the three months ended June 30, 2015 .

Net (income) loss attributable to noncontrolling interests. Net income attributable to noncontrolling interests of $1.1 million for the three months ended June 30, 2016 primarily reflects the net income allocated to TD's 2% noncontrolling interest in Pony Express. Net income attributable to noncontrolling interest of $8.3 million for the three months ended June 30, 2015 primarily reflects income allocated to TD's 33.3% noncontrolling interest of Pony Express.

Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015

Revenues. Total revenues were $292.3 million for the six months ended June 30, 2016 , compared to $247.6 million for the six months ended June 30, 2015 , which represents an increase of $44.7 million , or 18% , in total revenues. The overall increase in revenue was largely driven by increased revenues of $62.4 million in the Crude Oil Transportation & Logistics segment, partially offset by decreased revenues of $14.2 million and $3.4 million in the Processing & Logistics and Natural Gas Transportation & Logistics segments, respectively, as discussed further below.

Operating costs and expenses . Operating costs and expenses were $171.5 million for the six months ended June 30, 2016 compared to $165.6 million for the six months ended June 30, 2015 , which represents an increase of $5.9 million , or 4% . The overall increase in operating costs and expenses is primarily driven by increased operating costs and expenses of $15.8 million in the Crude Oil Transportation & Logistics segment, partially offset by decreased operating costs and expenses of $8.3 million and $1.7 million in the Processing & Logistics and Natural Gas Transportation & Logistics segments, respectively, as discussed further below.

Interest expense, net. Interest expense of $16.7 million for the six months ended June 30, 2016 was primarily composed of interest and fees associated with our revolving credit facility. Interest expense of $7.3 million for the six months ended June 30, 2015 was primarily composed of interest and fees associated with our revolving credit facility, partially offset by interest income of $0.4 million on the cash balance swept to TD under the Pony Express cash management agreement. The increase in interest and fees associated with our revolving credit facility is primarily due to increased borrowings to fund a portion of our 2015 acquisitions and our recent acquisitions of an additional 31.3% membership interest in Pony Express effective January 1, 2016 and a 25% membership interest in Rockies Express effective May 6, 2016.

Unrealized gain on derivative instrument. Unrealized gain on derivative instrument of $10.0 million represents the change in fair value of the call option received from TD as part of the acquisition of an additional 31.3% membership interest in Pony Express effective January 1, 2016 as discussed above.

Equity in earnings of unconsolidated investment. Equity in earnings of unconsolidated investment of $23.3 million for the six months ended June 30, 2016 represents earnings associated with our acquisition of a 25% membership interest in Rockies Express as discussed above.

Other income, net. Other income, net typically includes rental income and income earned from certain customers related to the capital costs we incurred to connect these customers to our system. Other income for the six months ended June 30, 2016 was $0.8 million compared to $1.5 million for the six months ended June 30, 2015 .

Net (income) loss attributable to noncontrolling interests. Net income attributable to noncontrolling interests of $2.2 million for the six months ended June 30, 2016 primarily reflects the net income allocated to TD's 2% noncontrolling interest in Pony Express. Net loss attributable to noncontrolling interest of $1.0 million for the six months ended June 30, 2015 primarily reflects the net loss allocated to TD's 66.7% noncontrolling interest in Pony Express for the period from January 1, 2015 to February 28, 2015 and TD's 33.3% noncontrolling interest for the period from March 1, 2015 to June 30, 2015.

The following provides a summary of our Crude Oil Transportation & Logistics segment results of operations for the periods indicated:



Segment Financial Data - Crude Oil Transportation & Logistics ⁽¹⁾	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
	(in thousands)
Revenues:
Crude oil transportation services	$	93,322	$	74,022		$	187,894	$	124,403
Sales of natural gas, NGLs, and crude oil	148		1,197			148		1,197
Total revenues	93,470		75,219			188,042		125,600
Operating costs and expenses:
Cost of sales	—		986			—		986
Cost of transportation services	14,152		11,528			28,647		20,237
Operations and maintenance	3,210		2,015			7,041		3,430
Depreciation and amortization	12,973		11,301			25,612		22,534
General and administrative	5,336		5,155			10,370		10,310
Taxes, other than income taxes	4,073		(1,281		)	9,980		8,315
Total operating costs and expenses	39,744		29,704			81,650		65,812
Operating income	$	53,726	$	45,515		$	106,392	$	59,788


⁽¹⁾	Segment results as presented represent total revenue and operating income, including intersegment activity. For reconciliations to the consolidated financial data, see Note 13 – Reporting Segments to the accompanying condensed consolidated financial statements.

Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015

Revenues. Crude Oil Transportation & Logistics segment revenues were $93.5 million for the three months ended June 30, 2016 , compared to $75.2 million for the three months ended June 30, 2015 , which represents an increase of $18.3 million , or 24% , in segment revenues primarily due to increased revenues of $13.4 million from a full period of operations on the lateral in Northeast Colorado, which began commercial operations during the second quarter of 2015, and a $2.1 million increase in incremental barrels shipped during the three months ended June 30, 2016 .

Operating costs and expenses . Operating costs and expenses in the Crude Oil Transportation & Logistics segment were $39.7 million for the three months ended June 30, 2016 compared to $29.7 million for the three months ended June 30, 2015 , which represents an increase of $10.0 million , or 34% . The overall increase in operating costs and expenses was due to a $5.4 million increase in taxes, other than income taxes, a $2.6 million increase in cost of transportation services, a $1.7 million increase in depreciation and amortization and a $1.2 million increase in operations and maintenance costs, all primarily driven by the costs associated with a full period of operations on the lateral in Northeast Colorado, which began commercial operations during the second quarter of 2015. The increase in taxes, other than income taxes, as a result of the lateral in Northeast Colorado was partially offset by a reduction in property tax estimates during the three months ended June 30, 2016 . For the three months ended June 30, 2015 , Pony Express recognized a net credit in taxes, other than income taxes, of $1.3 million as a result of revised property tax estimates as a result of successful appeals with state taxing authorities on the assessed value of property.

Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015

Revenues. Crude Oil Transportation & Logistics segment revenues were $188.0 million for the six months ended June 30, 2016 , compared to $125.6 million for the six months ended June 30, 2015 , which represents an increase of $62.4 million , or 50% , in segment revenues primarily due to increased revenues of $41.1 million from a full period of operations on the lateral in Northeast Colorado, which began commercial operations during the second quarter of 2015, approximately $9.9 million related to the activation of one of our joint tariffs in the second quarter of 2015, and a $9.4 million increase in incremental barrels shipped during the six months ended June 30, 2016 .

Operating costs and expenses . Operating costs and expenses in the Crude Oil Transportation & Logistics segment were $81.7 million for the six months ended June 30, 2016 compared to $65.8 million for the six months ended June 30, 2015 , which represents an increase of $15.8 million , or 24% . The overall increase in operating costs and expenses was primarily driven by a $8.4 million increase in cost of transportation services, a $3.6 million increase in operations and maintenance costs, a $3.1 million increase in depreciation and amortization and a $1.7 million increase in taxes, other than income taxes all primarily driven by the costs associated with a full period of operations on the lateral in Northeast Colorado, which began commercial operations during the second quarter of 2015.

The following provides a summary of our Natural Gas Transportation & Logistics segment results of operations for the periods indicated:



Segment Financial Data - Natural Gas Transportation & Logistics ⁽¹⁾	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016		2015
	(in thousands)
Revenues:
Natural gas transportation services	$	30,092	$	30,385		$	60,727	$	63,879
Sales of natural gas, NGLs, and crude oil	48		574			396		679
Processing and other revenues	10		10			14		21
Total revenues	30,150		30,969			61,137		64,579
Operating costs and expenses:
Cost of sales	373		(203		)	1,519		(129		)
Cost of transportation services	842		2,794			3,297		6,110
Operations and maintenance	7,806		7,359			13,686		13,099
Depreciation and amortization	5,479		5,754			11,357		11,825
General and administrative	4,408		4,424			8,196		8,685
Taxes, other than income taxes	1,142		904			2,318		2,499
Total operating costs and expenses	20,050		21,032			40,373		42,089
Operating income	$	10,100	$	9,937		$	20,764	$	22,490


⁽¹⁾	Segment results as presented represent total revenue and operating income, including intersegment activity. For reconciliations to the consolidated financial data, see Note 13 – Reporting Segments to the accompanying condensed consolidated financial statements.

Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015

Revenues. Natural Gas Transportation & Logistics segment revenues were $30.2 million for the three months ended June 30, 2016 , compared to $31.0 million for the three months ended June 30, 2015 , which represents a decrease of $0.8 million , or 3% . The decrease in segment revenues was primarily due to a $0.5 million decrease in sales of natural gas, NGLs, and crude oil as a result of lower volumes sold and a 30% decrease in natural gas prices.

Operating costs and expenses . Operating costs and expenses in the Natural Gas Transportation & Logistics segment were $20.1 million for the three months ended June 30, 2016 compared to $21.0 million for the three months ended June 30, 2015 , which represents a decrease of $1.0 million , or 5% . The overall decrease in operating costs and expenses was primarily driven by a $2.0 million decrease in the cost of transportation services due to lower costs associated with fuel reimbursements as a result of decreased volumes and prices. The decrease was partially offset by a $0.6 million increase in cost of sales and a $0.4 million increase in operations and maintenance due to increased pipeline integrity work at Trailblazer during the three months ended June 30, 2016. Cost of sales during the three months ended June 30, 2015 was negative due to a reduction in our fuel tracker obligations at Trailblazer driven by the FERC approval of our annual fuel tracker filing.

Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015

Revenues. Natural Gas Transportation & Logistics segment revenues were $61.1 million for the six months ended June 30, 2016 , compared to $64.6 million for the six months ended June 30, 2015 , which represents a decrease of $3.4 million , or 5% , in segment revenues as a result of a $3.2 million decrease in natural gas transportation services primarily driven by decreased prices on fuel reimbursements and warmer weather conditions that created less demand for short-term transportation capacity during the six months ended June 30, 2016 compared to the six months ended June 30, 2015, partially offset by increased tariff rates recognized at TIGT subsequent to the rate case settlement effective May 1, 2016.

Operating costs and expenses . Operating costs and expenses in the Natural Gas Transportation & Logistics segment were $40.4 million for the six months ended June 30, 2016 , compared to $42.1 million for the six months ended June 30, 2015 , which represents a decrease of $1.7 million , or 4% . The overall decrease in operating costs and expenses was primarily driven by a $2.8 million decrease in cost of transportation services due to lower costs associated with fuel reimbursements as a result of decreased prices, a $0.5 million decrease in general and administrative costs due to a reduction in allocated costs to the segment, and a $0.5 million decrease in depreciation and amortization due to lower depreciation rates as of May 1, 2016 as a result of the TIGT System rate case settlement. These decreases were partially offset by a $1.6 million increase in cost of sales due to increased volumes of natural gas sold, partially offset by a 13% decrease in natural gas prices, and a $0.6 million increase in operations and maintenance due to increased pipeline integrity work at Trailblazer during the six months ended June 30, 2016. Cost of sales during the six months ended June 30, 2015 were negative due to a reduction in our fuel tracker obligations at Trailblazer driven by the FERC approval of our annual fuel tracker filing.

The following provides a summary of our Processing & Logistics segment results of operations for the periods indicated:



Segment Financial Data - Processing & Logistics ⁽¹⁾	Three Months Ended June 30,					Six Months Ended June 30,
Segment Financial Data - Processing & Logistics ⁽¹⁾	2016			2015		2016			2015
	(in thousands)
Revenues:
Sales of natural gas, NGLs, and crude oil	$	16,634		$	18,240	$	30,212		$	40,004
Processing and other revenues	8,087			9,886		15,710			20,152
Total revenues	24,721			28,126		45,922			60,156
Operating costs and expenses:
Cost of sales	15,649			16,397		28,081			35,916
Cost of transportation services	592			514		1,143			550
Operations and maintenance	2,848			3,034		5,614			5,454
Depreciation and amortization	3,124			3,300		6,299			6,601
General and administrative	1,607			1,109		3,283			2,220
Taxes, other than income taxes	424			106		847			212
Loss on disposal of assets	1,849			—		1,849			4,483
Total operating costs and expenses	26,093			24,460		47,116			55,436
Operating (loss) income	$	(1,372	)	$	3,666	$	(1,194	)	$	4,720


⁽¹⁾	Segment results as presented represent total revenue and operating income, including intersegment activity. For reconciliations to the consolidated financial data, see Note 13 – Reporting Segments to the accompanying condensed consolidated financial statements.

Three Months Ended June 30, 2016 Compared to the Three Months Ended June 30, 2015

Revenues. Processing & Logistics segment revenues were $24.7 million for the three months ended June 30, 2016 , compared to $28.1 million for the three months ended June 30, 2015 , which represents a $3.4 million , or 12% , decrease in segment revenues. The decrease in segment revenues was primarily due to a $1.8 million decrease in processing and other revenues driven by lower processing fees at TMID due to decreased volumes processed, partially offset by increased revenue of $0.4 million primarily attributable to BNN Western, LLC ("Western"), which was acquired on December 16, 2015, and BNN West Texas, LLC ("West Texas"), which commenced operations in March 2016, and a $1.6 million decrease in the sales of natural gas, NGLs, and crude oil driven by lower NGL sales of $1.5 million due to a 20% decrease in NGL prices and lower volumes processed.

Operating costs and expenses . Operating costs and expenses in the Processing & Logistics segment were $26.1 million for the three months ended June 30, 2016 compared to $24.5 million for the three months ended June 30, 2015 , which represents an increase of $1.6 million , or 7% . The increase in operating costs and expenses was driven by a $1.8 million loss on Western assets destroyed by fire as a result of a lightning strike during the three months ended June 30, 2016 and a $0.5 million increase in general and administrative costs due to increased costs allocated to Water Solutions as a result of increased operating income related to our acquisitions of Western and West Texas. These increases were partially offset by a $0.7 million decrease primarily in cost of sales due to decreased NGL prices and volumes processed as discussed above.

Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015

Revenues. Processing & Logistics segment revenues were $45.9 million for the six months ended June 30, 2016 , compared to $60.2 million for the six months ended June 30, 2015 , which represents a $14.2 million , or 24% , decrease in segment revenues. The decrease in segment revenues was primarily due to a $9.8 million decrease in the sales of natural gas, NGLs, and crude oil driven by lower NGL sales of $9.0 million due to a 10% decrease in NGL prices and lower volumes processed and a $4.4 million decrease in processing and other revenues driven by lower processing fees at TMID due to decreased volumes processed, partially offset by a $0.3 million increase in revenue primarily attributable to the recently acquired Western and West Texas assets.

Operating costs and expenses . Operating costs and expenses in the Processing & Logistics segment were $47.1 million for the six months ended June 30, 2016 compared to $55.4 million for the six months ended June 30, 2015 , which represents a decrease of $8.3 million , or 15% . The decrease in operating costs and expenses was driven by a decrease of $7.8 million in cost of sales, primarily due to decreased NGL prices and volumes processed as discussed above, and a decrease of $2.6 million in loss on disposal of assets as a result of the $1.8 million loss at Western during the six months ended June 30, 2016 as discussed above, compared to a $4.5 million non-cash loss recognized on the sale of compressor assets at TMID in 2015. These decreases were partially offset by a $1.1 million increase in general and administrative costs due to increased costs allocated to Water Solutions as a result of increased operating income related to our acquisitions of Western and West Texas, a $0.6 million increase in taxes, other than income taxes, due to higher property tax estimates for 2016 as a result of the Western acquisition, and a $0.6 million increase in cost of transportation services due to costs associated with Western, which was acquired on December 16, 2015.

Liquidity and Capital Resources Overview

Our primary sources of liquidity for the three months ended June 30, 2016 were borrowings under our revolving credit facility, cash generated from operations, and proceeds from the issuance of common units. We expect our sources of liquidity in the future to include:


•	cash generated from our operations;


•	borrowing capacity available under our revolving credit facility; and


•	future issuances of additional partnership units and/or debt securities.

We believe that cash on hand, cash generated from operations and availability under our revolving credit facility will be adequate to meet our operating needs, our planned short-term maintenance capital and debt service requirements and our planned cash distributions to unitholders. We believe that future internal growth projects or potential acquisitions will be funded primarily through a combination of borrowings under our revolving credit facility and issuances of debt and/or equity securities.

Our total liquidity as of June 30, 2016 and December 31, 2015 was as follows:



	June 30, 2016			December 31, 2015
	(in thousands)
Cash on hand	$	1,943		$	1,611

Total capacity under the revolving credit facility	1,750,000			1,100,000
Less: Outstanding borrowings under the revolving credit facility ⁽¹⁾	(1,278,000		)	(753,000		)
Available capacity under the revolving credit facility	472,000			347,000
Total liquidity	$	473,943		$	348,611


⁽¹⁾	As of July 29, 2016, our outstanding borrowings under the revolving credit facility were approximately $1.423 billion .

Revolving Credit Facility

Equity Distribution Agreements

On October 31, 2014, we entered into an equity distribution agreement pursuant to which we may sell from time to time through a group of managers, as our sales agents, common units representing limited partner interests having an aggregate offering price of up to $200 million . On May 13, 2015 the amount was subsequently amended to $100.2 million in order to account for follow-on equity offerings under our S-3 shelf registration statement. On May 17, 2016, we entered into a new equity distribution agreement allowing for the sale of common units with an aggregate offering price of up to $657.5 million . Sales of the common units, if any, will be made by means of ordinary brokers' transactions, to or through a market maker or directly on or through an electronic communication network, a "dark pool" or any similar market venue, or as otherwise agreed by the Partnership and one or more of the managers. We intend to use the net cash proceeds from any sale of the units for general partnership purposes, which may include, among other things, the exercise of the Partnership's right to repurchase all or a portion of the 6,518,000 common units issued by the Partnership to TD in connection with the Partnership's acquisition of an additional 31.3% of Pony Express in January 2016, repayment or refinancing of debt, funding for acquisitions, capital expenditures and additions to working capital.

During the six months ended June 30, 2016 , we issued and sold 6,081,138 common units with a weighted average sales price of $43.63 per unit under our equity distribution agreements for net cash proceeds of approximately $261.8 million (net of approximately $3.6 million in commissions and professional service expenses). As of June 30, 2016 , approximately $488.1 million in aggregate offering price remained available to be issued and sold under the equity distribution agreements.

Private Placement

Working Capital

Working capital is the amount by which current assets exceed current liabilities. While various other factors may impact our working capital requirements from period to period, our working capital requirements have typically been, and we expect will continue to be, driven by changes in accounts receivable and accounts payable. Factors impacting changes in accounts receivable and accounts payable could include the timing of collections from customers, payments to suppliers, and the level of spending for capital expenditures. Changes in the market prices of energy commodities, primarily NGLs, that we buy and sell in the normal course of business can also impact the timing of changes in accounts receivable and accounts payable.

As of June 30, 2016 , we had a working capital deficit of $24.8 million compared to a working capital deficit of $11.7 million at December 31, 2015 , which represents a decrease in working capital of $13.1 million . The overall decrease in working capital was primarily attributable to the following:


•	an increase in deferred revenue of $16.4 million primarily from deficiency payments collected by Pony Express; and


•	a decrease of $4.7 million in accounts receivable primarily due to a decrease in incremental barrels shipped at Pony Express in June 2016 compared to December 2015.

These working capital decreases were partially offset by a decrease of $4.8 million in accounts payable, primarily driven by the timing of project invoices and payment of contractor retainages related to the construction of the Pony Express lateral in Northeast Colorado.

A material adverse change in operations, available financing under our revolving credit facility, or available financing from the equity or debt capital markets could impact our ability to fund our requirements for liquidity and capital resources in the future.

Cash Flows

The following table and discussion presents a summary of our cash flow for the periods indicated:



	Six Months Ended June 30,
	2016			2015
	(in thousands)
Net cash provided by (used in):
Operating activities	$	196,546		$	112,218
Investing activities	$	(521,272	)	$	(754,192	)
Financing activities	$	325,058		$	642,885

Six Months Ended June 30, 2016 Compared to the Six Months Ended June 30, 2015

Operating Activities. Cash flows provided by operating activities were $196.5 million and $112.2 million for the six months ended June 30, 2016 and 2015 , respectively. The increase in net cash flows provided by operating activities of $84.3 million was primarily driven by the increase in operating results as discussed above, distributions received from Rockies Express, and a net increase in cash inflows from changes in working capital, primarily driven by a $16.8 million increase in net cash inflows from accounts receivable due to collection of receivables during the six months ended June 30, 2016 associated primarily with incremental barrels shipped at Pony Express in December 2015, and a $12.0 million increase in deferred revenue associated primarily with deficiency payments received by Pony Express.

Investing Activities. Cash flows used in investing activities were $521.3 million and $754.2 million for the six months ended June 30, 2016 and 2015 , respectively. During the six months ended June 30, 2016 , net cash used in investing activities were driven by cash outflows of $436.0 million for the acquisition of a 25% membership interest in Rockies Express on May 6, 2016, $49.1 million for a portion of the acquisition of an additional 31.3% membership interest in Pony Express on January 1, 2016, the remainder of which is classified as a financing activity as discussed below, and capital expenditures of $28.5 million , primarily due to post in-service spending on Pony Express System projects. During the six months ended June 30, 2015 , net cash used in investing activities were driven by the $700.0 million cash outflow for the acquisition of an additional 33.3% membership interest in Pony Express, which allowed TD to continue funding the pipeline construction at Pony Express, and capital expenditures of $49.5 million , that were primarily due to construction of the Pony Express System, including the lateral in Northeast Colorado.

Financing Activities. Cash flows provided by financing activities were $325.1 million and $642.9 million for the six months ended June 30, 2016 and 2015 , respectively. Financing cash inflows for the six months ended June 30, 2016 were primarily driven by:


•	net borrowings under the revolving credit facility of $525.0 million ;


•	the issuance of 6,081,138 common units under the Equity Distribution Agreements for net cash proceeds of $261.8 million ;


•	the issuance of 2,416,987 common units representing limited partnership interests in a private placement transaction for net cash proceeds of $90.0 million ; and


•	contributions from noncontrolling interests of $7.3 million , which primarily consisted of contributions from TD to Pony Express.

These financing cash inflows were partially offset by cash outflows of:


•	$425.9 million for the portion of the acquisition of an additional 31.3% membership interest in Pony Express which exceeds the cumulative capital spending on the underlying assets acquired; and


•	distributions to unitholders of $127.9 million .

Cash flows provided by financing activities for the six months ended June 30, 2015 were primarily driven by:


•	net cash proceeds of $551.7 million from the issuance of 11,200,000 common units in a public offering;


•	net borrowings under the revolving credit facility of $147.0 million ; and


•	contributions from noncontrolling interests of $16.3 million , primarily driven by contributions from TD to Pony Express.

These financing cash inflows were partially offset by distributions to unitholders of $67.1 million .

Distributions

We do not have a legal obligation to pay distributions except as provided in our partnership agreement. A distribution of $0.755 per unit, or $79.6 million in the aggregate, for the three months ended June 30, 2016 was announced on July 6, 2016 and will be paid on August 12, 2016 to unitholders of record on July 29, 2016. As of August 3, 2016 , we had a total of 72,943,325 common and general partner units outstanding, which equates to an aggregate minimum quarterly distribution of approximately $21.0 million per quarter and approximately $83.9 million per year. We intend to continue to pay quarterly distributions at or above the amount of the minimum quarterly distribution, which is $0.2875 per unit.

Capital Requirements

The midstream energy business can be capital-intensive, requiring significant investment to maintain and upgrade existing operations. Our capital requirements have consisted primarily of, and we anticipate will continue to consist of, the following:


•	maintenance capital expenditures, which are cash expenditures incurred (including expenditures for the construction or development of new capital assets) that we expect to maintain our long-term operating income or operating capacity. These expenditures typically include certain system integrity, compliance and safety improvements; and


•	expansion capital expenditures, which are cash expenditures to increase our operating income or operating capacity over the long-term. Expansion capital expenditures include acquisitions or capital improvements (such as additions to or improvements on the capital assets owned, or acquisition or construction of new capital assets).

We expect to incur approximately $49 million for capital expenditures in 2016 , of which approximately $37 million is expected for expansion projects and approximately $12 million, net of anticipated reimbursements from affiliates, is expected for maintenance capital expenditures.

The determination of capital expenditures as maintenance or expansion is made at the individual asset level during our budgeting process and as we approve, execute, and monitor our capital spending. The following table summarizes the maintenance and expansion capital expenditures incurred at our consolidated entities:



	Six Months Ended June 30,
	2016		2015
	(in thousands)
Maintenance capital expenditures	$	4,263	$	4,578
Expansion capital expenditures	20,537		117,746
Total capital expenditures incurred	$	24,800	$	122,324

Capital expenditures incurred represent capital expenditures paid and accrued during the period, inclusive of Pony Express capital expenditures paid by TD on behalf of Pony Express and settled via the cash management agreement during periods prior to December 31, 2015. The decrease in maintenance capital expenditures to $4.3 million for the six months ended June 30, 2016 from $4.6 million for the six months ended June 30, 2015 is primarily driven by decreased maintenance capital expenditures in the Natural Gas Transportation & Logistics segment. Maintenance capital expenditures on our assets occur on a regular schedule, but most major maintenance projects are not required every year so the level of maintenance capital expenditures naturally varies from year to year and from quarter to quarter. The decrease in expansion capital expenditures to $20.5 million for the six months ended June 30, 2016 from $117.7 million for the six months ended June 30, 2015 is primarily driven by spending on the Pony Express System lateral in Northeast Colorado prior to commencement of commercial operations in the second quarter of 2015. Expansion capital expenditures of $20.5 million for the six months ended June 30, 2016 consisted primarily of post in-service spending on Pony Express System projects.

We intend to make cash distributions to our unitholders and our general partner. Due to our cash distribution policy, we expect that we will distribute to our unitholders most of the cash generated by our operations. We expect to fund future capital expenditures with funds generated from our operations, borrowings under our revolving credit facility, the issuance of additional partnership units and/or the issuance of long-term debt. If these sources are not sufficient, we may reduce our discretionary spending.

Contractual Obligations

There have been no material changes in our contractual obligations as reported in our 2015 Form 10-K.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

The critical accounting policies and estimates used in the preparation of our condensed consolidated financial statements are set forth in our 2015 Form 10-K for the year ended December 31, 2015 and have not changed. Our disclosure of critical accounting policies and estimates with respect to goodwill is repeated below for the purpose of providing additional information regarding the impairment testing performed during the first quarter of 2016.



Description	Judgments and Uncertainties	Effect if Actual Results Differ from Assumptions
Impairment of Goodwill
We evaluate goodwill for impairment annually in the third quarter, and whenever events or changes in circumstances indicate it is more likely than not that the fair value of a reporting unit is less than its carrying amount.	We determine fair value using widely accepted valuation techniques, primarily discounted cash flow and market multiple analyses. These techniques are also used when assigning the purchase price to acquired assets and liabilities. These types of analyses require us to make assumptions and estimates regarding industry and economic factors and the profitability of future business strategies. Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, including anticipated volumes, contract renewals and changes in our regulated rates, and selecting the discount rate that reflects the risk inherent in future cash flows. It is our policy to conduct impairment testing based on our current business strategy in light of present industry and economic conditions, as well as future expectations.	We primarily use a discounted cash flow analysis, supplemented by a market approach analysis, to perform the assessment. Key assumptions in the analysis include the use of an appropriate discount rate, terminal year multiples, and estimated future cash flows including an estimate of operating and general and administrative costs. In estimating cash flows, we incorporate current market information, as well as historical and other factors, into our forecasted commodity prices. If our assumptions are not appropriate, or future events indicate that our goodwill is impaired, our net income would be impacted by the amount by which the carrying value exceeds the fair value of the reporting unit, to the extent of the balance of goodwill. A prolonged period of lower commodity prices may adversely affect our estimate of future operating results, which could result in future goodwill impairment for reporting units due to the potential impact on our operations and cash flows. We completed our impairment testing of goodwill in the third quarter of 2015 using the methodology described herein, and determined there was no impairment. As a result of a decreased commodity prices in late 2015 and into early 2016, which caused a significant drop in the volumes anticipated from several producers from which TMID receives natural gas for processing, we identified a potential impairment trigger with respect to the $79.2 million of goodwill at the TMID reporting unit, which is a component of our Processing & Logistics segment. We tested TMID's goodwill for impairment as of December 31, 2015 and determined that the fair value of the reporting unit exceeds the carrying value by approximately 21%. As a result, no impairment charge was recorded, however our analysis includes assumptions of a gradual recovery of commodity prices and a corresponding increase in volumes over time. If our outlook for long-term commodity prices is not realized, or our producers further decrease volumes, we could have an impairment in the future. While commodity prices do not have a significant direct exposure to the cash flows projected at TMID, the current commodity price environment has had an indirect impact on TMID’s business as certain producers have significantly reduced their anticipated volumes. Keeping all other assumptions constant, an increase in the discount rate applied of approximately 1.38% or a decrease in overall cash flows by more than 16% would result in a step one failure, however we do not believe that these represent reasonably likely assumptions. If the reporting unit fails step one in the future, we would be required to perform step two of the goodwill impairment test and up to $79.2 million of goodwill at the TMID reporting unit could be written off in the period that the impairment is triggered.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Commodity Price Risk

As of June 30, 2016 approximately 91% of our reserved processing capacity was subject to firm or volumetric fee contracts, with the majority of fee revenue based on the volumes actually processed. The remaining 9% was subject to commodity sensitive contracts such as percent of proceeds or keep whole processing contracts. The profitability of our commodity sensitive processing contracts that include keep whole or percent of proceeds components is affected by volatility in prevailing NGL and natural gas prices. We do not currently hedge the commodity exposure in our commodity sensitive contracts in our Processing & Logistics segment and we do not expect to in the foreseeable future. Starting in 2014, the prices of crude oil, natural gas, and NGLs were extremely volatile and declined significantly. Downward pressure and volatility on commodity prices continued in 2015 and the first half of 2016 and may continue for the foreseeable future. These declines directly and indirectly resulted in lower realizations and processing volumes on our percent of proceeds and keep whole processing contracts. Our Processing & Logistics segment comprised approximately 3% of our Adjusted EBITDA for both the three and six months ended June 30, 2016 .

We have a limited amount of direct commodity price exposure related to crude oil collected as part of our contractual pipeline loss allowance at Pony Express. During the second quarter of 2016, we entered into a derivative contract for the sale of 85,000 barrels of crude oil, which will settle in August 2016. The fair value of these swaps was an asset of approximately $148,000 at June 30, 2016 .

Historically, we have also had a limited amount of direct commodity price exposure related to natural gas collected related to electrical compression costs and lost and unaccounted for gas on the TIGT System. We have entered into derivative contracts with third parties for a substantial majority of the gas we expect to collect during the current year for the purpose of hedging our commodity price exposures. As of June 30, 2016 , we had natural gas swaps outstanding with a notional volume of approximately 0.8 Bcf short, representing a portion of the natural gas that is expected to be sold by our Natural Gas Transportation & Logistics segment through the first quarter of 2017. The fair value of these swaps was a liability of approximately $351,000 at June 30, 2016 .

We measure the risk of price changes in our natural gas swaps utilizing a sensitivity analysis model. The sensitivity analysis measures the potential income or loss (i.e., the change in fair value of the derivative instruments) based upon a hypothetical 10% movement in the underlying quoted market prices. In addition to these variables, the fair value of each portfolio is influenced by fluctuations in the notional amounts of the instruments and the discount rates used to determine the present values. We enter into derivative contracts solely for the purpose of mitigating the risks that accompany certain of our business activities and, therefore, both the sensitivity analysis model and the change in the market value of our outstanding derivative contracts are offset largely by changes in the value of the underlying physical commodity prices. A hypothetical 10% increase in the crude oil price forward curve would result in a decrease of approximately $0.4 million in the net fair value of our crude oil derivative instruments asset for the quarter ended June 30, 2016 . A hypothetical 10% increase in the natural gas price forward curve would result in a decrease of approximately $0.2 million in the fair value of our natural gas derivative instruments liability for the quarter ended June 30, 2016 as a result of our hedging program. For the purpose of determining the change in fair value associated with the hypothetical natural gas price increase scenario, we have assumed a parallel shift in the forward curve through the end of 2016.

The Commodity Futures Trading Commission ("CFTC") has promulgated regulations to implement the Dodd-Frank Wall Street Reform and Consumer Protection Act's changes to the Commodity Exchange Act, including the definition of commodity-based swaps subject to those regulations. The CFTC regulations are intended to implement new reporting and record keeping requirements related to those swap transactions and a mandatory clearing and exchange-execution regime for various types, categories or classes of swaps, subject to certain exemptions, including the trade-option and end-user exemptions. Although we anticipate that most, if not all, of our swap transactions should qualify for an exemption to the clearing and exchange-execution requirements, we will still be subject to record keeping and reporting requirements. Other changes to the Commodity Exchange Act made as a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the CFTC's implementing regulations could significantly increase the cost of entering into new swaps.

Interest Rate Risk

As described in "Liquidity and Capital Resources Overview" above, TEP currently has a $1.75 billion revolving credit facility with borrowings of approximately $1.3 billion as of June 30, 2016 . Borrowings under the revolving credit facility will bear interest, at our option, at either (a) a base rate, which will be a rate equal to the greatest of (i) the prime rate, (ii) the U.S. federal funds rate plus 0.5% and (iii) a one-month reserve adjusted Eurodollar rate plus 1.00% or (b) a reserve adjusted Eurodollar Rate, plus, in each case, an applicable margin. For loans bearing interest based on the base rate, the applicable margin was initially 1.00%, and for loans bearing interest based on the reserve adjusted Eurodollar rate, the applicable margin was initially 2.00%. After June 25, 2014, the applicable margin ranges from 0.75% to 2.75%, based upon our total leverage ratio and whether we have elected the base rate or the reserve adjusted Eurodollar rate. We do not currently hedge the interest rate risk on our borrowings under the revolving credit facility. However, in the future we may consider hedging the interest rate risk or may consider choosing longer Eurodollar borrowing terms in order to fix all or a portion of our borrowings for a period of time. We estimate that a 1% increase in interest rates would decrease the fair value of the debt by $0.3 million based on our debt obligations as of June 30, 2016 .

Credit Risk

We are exposed to credit risk. Credit risk represents the loss that we would incur if a counterparty fails to perform under its contractual obligations. We manage our exposure to credit risk associated with customers to whom we extend credit through a credit approval process which includes credit analysis, the establishment of credit limits and ongoing monitoring procedures. We may request letters of credit, cash collateral, prepayments or guarantees as forms of credit support. We have historically experienced only minimal credit losses in connection with our receivables.

A substantial majority of our revenue is produced under long-term firm fee contracts with high-quality customers. The customer base we currently serve under these contracts generally has a strong credit profile, with slightly under 50% of our revenues derived from customers who have an investment grade credit rating or are part of corporate families with investment grade credit ratings as of June 30, 2016 . This represents a decrease in the portion of our revenues derived from customers with an investment grade credit rating from 2015, primarily as a result of credit downgrades at several of our customers and throughout the industry due to the current commodity price environment.

We also have indirect credit risk exposure with respect to our investment in Rockies Express. See Item 1A. — Risk Factors for additional information.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a- 15(e) or Rule 15d- 15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report, and has concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms including, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

See Note 12 – Legal and Environmental Matters to the condensed consolidated financial statements included in Part I—Item 1.—Financial Statements of this Quarterly Report, which is incorporated here by reference.

Item 1A. Risk Factors

Item 1A of our 2015 Form 10-K for the year ended December 31, 2015 and Item 1A of our Form 10-Q for the three months ended March 31, 2016 set forth information relating to important risks and uncertainties that could materially adversely affect our business, financial condition or operating results. Those risk factors continue to be relevant to an understanding of our business, financial condition and operating results for the quarter ended June 30, 2016 . Other than as set forth below, there have been no material changes to the risk factors contained in our 2015 Form 10-K for the year ended December 31, 2015 and our Form 10-Q for the three months ended March 31, 2016.

The rates and terms and conditions of our regulated assets are subject to review and possible adjustment by federal and state regulators, which could adversely affect our business, results of operations, financial condition and ability to make quarterly cash distributions to our unitholders.

Our shippers or other interested stakeholders, such as state natural gas utility regulatory agencies, may challenge the rates or the terms and conditions of service applicable to our natural gas or crude oil pipeline tariffs, unless they have entered into agreements not to challenge such tariffs. The FERC has authority to investigate our rates and terms and conditions of service pursuant to NGA Section 5 for natural gas pipelines and the ICA for common carrier oil pipelines. Our crude oil contract shippers have generally agreed not to complain or protest rates unless they are in conflict with their contracts. FERC generally does not regulate crude oil transportation contracts, but contract rates must be filed with FERC and tariff rules and regulations generally apply to contract shippers. Our NGL pipeline is leased to a third party who obtained a temporary waiver for itself from the FERC from the tariff, filing and reporting requirements of the ICA, and during the term of the lease, we operate and maintain the pipeline at the lessee's discretion.

With regard to our natural gas pipelines, Trailblazer initiated a rate proceeding with the FERC pursuant to Section 4 of the NGA on July 1, 2013 to implement a general rate increase to its recourse rates, initiate a rolled-in rate structure for expansion facilities certificated in 2001, and adopt miscellaneous other updates to its General Terms and Conditions in its tariff. On February 24, 2014, Trailblazer submitted to the FERC an uncontested offer of settlement and stipulation to resolve the proceeding by, among other things: (a) setting new maximum recourse rates based upon a “black box” cost of service of approximately $21.1 million; (b) revising the charges and methods for recovery of fuel costs such that the actual volumes of natural gas and costs of electric power incurred to operate Trailblazer’s compressor stations, as well as FL&U gas, are tracked and the charges adjusted in annual periodic rate filings made pursuant to Trailblazer's tariff; (c) providing for revenue sharing of certain interruptible and short-term firm service revenues with eligible maximum recourse rate firm service shippers; (d) establishing a rate moratorium until January 1, 2016; and (e) requiring Trailblazer to file a general rate case with rates to be effective no later than January 1, 2019. The FERC accepted the settlement agreement by letter order on May 29, 2014. Per the terms of the settlement, Trailblazer is required to file a new general rate case with rates to be effective no later than January 1, 2019, and no Settling Party, as defined in the settlement, was permitted to file to change the settlement rates or any other provisions set forth in the settlement prior to January 1, 2016.

On October 30, 2015, TIGT filed a general rate case with the FERC pursuant to Section 4 of the NGA. The rate case proposed a general system-wide increase in the maximum tariff rates for all firm and interruptible services offered by TIGT. In addition, TIGT proposed certain changes to the transportation rate design of its system to replace the current rate zone structure with a single “postage stamp” rate. TIGT also proposed new incremental charges, including (i) a charge for deliveries made to points without certain electronic flow measurement equipment, and (ii) a Cost Recovery Mechanism, or CRM, charge to completely or partially reimburse TIGT for certain costs it incurred to maintain system safety, environmental compliance and reliability. TIGT also proposed to replace its fixed FL&U charge with a FL&U tracker that would compensate TIGT for its actual FL&U expenses and adjust each year to reflect the previous period's under/over collection and the forecasted FL&U expense for the upcoming period. TIGT also proposed to implement a power cost tracker to recover the actual power costs incurred by TIGT to power its compressors. Finally, TIGT proposed certain revisions to its FERC Gas Tariff addressing a number of other rate and non-rate matters. Under the NGA and the FERC's regulations, TIGT's shippers and other interested parties, including the FERC's Trial Staff, had a right to challenge any aspect of TIGT's rate case filing. Accordingly, numerous TIGT customers protested aspects of TIGT's NGA Section 4 rate filing.

On November 30, 2015, the FERC issued an order accepting and suspending the proposed rates and a majority of the proposed tariff records to be effective upon motion May 1, 2016, subject to refund, certain modifications to TIGT's proposed CRM charge, and the outcome of an evidentiary hearing before a FERC Administrative Law Judge (the “Suspension Order”). In the Suspension Order, the FERC also accepted two tariff records related to force majeure events and reservation charge crediting to be effective December 1, 2015, subject to certain modifications. On December 21, 2015, TIGT made a compliance filing with the FERC to modify TIGT's proposed CRM charge and update the tariff records related to force majeure events and reservation charge crediting as directed by the FERC in the Suspension Order. No comments or protests were filed in response to the compliance filing and FERC accepted the compliance filing on February 1, 2016. On March 22, 2016, a Settlement Judge was appointed in the case to assist the participants with exploring the possibility of settlement. On March 31, 2016, the FERC issued an order denying a request for rehearing with respect to its challenge of TIGT's proposed CRM. The FERC granted in part and denied in part a motion for technical conference, and denied a rehearing request made in the alternative on this issue, and retained for resolution through hearing the pro forma tariff records related to TIGT's proposed charge at delivery points lacking electronic flow measurement and removed from hearing the other issues related to the pro forma tariff records. The FERC also directed TIGT to provide additional information related to certain pro forma tariff records, which TIGT filed on April 14, 2016. One participant filed comments in response to TIGT’s April 14, 2016 filing requesting, inter alia , the FERC to reject certain of TIGT’s proposed pro forma tariff sections, and seeking a technical conference. TIGT filed an answer to such comments, and requested that the FERC deny the request to reject certain proposed pro forma tariff provisions and reject the request for a technical conference. Additional FERC action is pending with respect to the resolution of such pro forma tariff records.

On April 28, 2016, TIGT filed a motion to place the suspended rates and tariff sheets into effect May 1, 2016 and subsequently filed an errata to that motion on May 10, 2016. On June 23, 2016, the FERC issued an order accepting such tariff sheets, effective May 1, 2016, as TIGT requested. TIGT’s proposed rates and tariff sheets (with the exception of the proposed pro forma tariff sections as described above) are now in effect, subject to refund.

On April 27, 2016, TIGT filed a motion to suspend the procedural schedule as the active participants in the proceeding were able to reach a settlement in principal. On May 5, 2016, the Chief Judge granted the motion and suspended the procedural schedule. On June 8, 2016, TIGT filed a Stipulation and Agreement and appendices thereto (the “Settlement”) which, if approved by the FERC, would resolve all matters that could have been raised in TIGT’s Section 4 general rate case filing, as well as any continuing or outstanding issues left unresolved from Docket Nos. RP98-117 and RP11-1494, with the exception of those issues remaining subject to disposition pursuant to the FERC's March 31, 2016 order, as more fully described above and in the Settlement. The Settlement is supported, or not opposed, by customers representing a majority of the contracted responsibility for costs of firm capacity on TIGT for the year ended December 31, 2015 and settles all rate-related issues set for hearing in the case, including the issues of a cost recovery mechanism and a non-Electronic Flow Measurement charge. Both FERC Trial Staff and the LDC Customer Group filed comments in support of the Settlement; no participant filed in opposition to the Settlement. The Settlement remains subject to the approval of the FERC.

On our interstate crude oil pipeline system, the Pony Express System, shippers may generally challenge new or existing rates at any time unless they have contractually agreed not to. As a result of settlement or by order of the FERC following hearing, our rates may be reduced. If a shipper files a lawful complaint, and if the complaint is not resolved with that shipper, to the extent the FERC determines after hearing that we have collected payment on rates that were not previously just and reasonable, we may be required to pay reparations to that shipper for up to two years prior to the date on which a complaint was filed. Regardless of the prospective just and reasonable rate, reparations may not be required below the last rates determined by the FERC to be just and reasonable. In other words, crude oil pipelines are not required to make reparations that refund revenues collected pursuant to rates previously determined to be just and reasonable.

In July 2016, the United States Court of Appeals for the District of Columbia Circuit issued its opinion in United Airlines, Inc. , et al . v. FERC , finding that FERC had acted arbitrarily and capriciously when it failed to demonstrate that permitting an interstate petroleum products pipeline organized as a limited partnership to include an income tax allowance in the cost of service underlying its rates in addition to the discounted cash flow return on equity would not result in the pipeline partnership owners double-recovering their income taxes. The court vacated FERC’s order and remanded to FERC to consider mechanisms for demonstrating that there is no double recovery as a result of the income tax allowance. There is not likely to be a definitive resolution of these issues for some time, and the ultimate outcome of this proceeding is not certain and could result in changes going forward to the FERC’s treatment of income tax allowances in the cost of service or to the discounted cash flow return on equity. Depending upon the resolution of these issues, the cost of service rates of our interstate natural gas pipelines and interstate crude oil pipeline could be affected to the extent we propose new rates or changes to our existing rates or if our rates are subject to complaint or challenge by the FERC.

Successful challenges to rates charged on our natural gas and crude oil pipeline systems, or to the terms and conditions of service on those systems, could have a material adverse effect on our business, results of operations, financial condition and ability to make quarterly cash distributions to our unitholders.

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

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit No.		Description

10.1		Amendment No. 4 to Credit Agreement, dated as of April 27, 2016, by and among Tallgrass Energy Partners, LP, Barclays Bank PLC, as administrative agent, and a syndicate of lenders named therein (incorporated by reference to Exhibit 10.1 to the Partnership's Current Report on Form 8-K filed on April 28, 2016).

10.2*		Membership Interest Purchase Agreement, dated as of March 29, 2016, by and between Sempra REX Holdings, LLC and TEP REX Holdings, LLC (as successor by assignment to Rockies Express Holdings, LLC).

10.3*		Assignment and Assumption Agreement, dated as of May 6, 2016, by and among Rockies Express Holdings, LLC, TEP REX Holdings, LLC and, for the limited purposes set forth therein, Tallgrass Development, LP.

10.4*		Second Amended and Restated Limited Liability Company Agreement of Rockies Express Pipeline LLC, dated effective as of January 1, 2010, among Rockies Express Holdings, LLC (as successor by assignment to Kinder Morgan W2E Pipeline LLC), TEP REX Holdings, LLC (as successor by assignment to Sempra REX Holdings, LLC and P&S Project I, LLC), and P66REX LLC (f/k/a COPREX LLC).

10.5*		Amendment No. 1 to Second Amended and Restated Limited Liability Company Agreement of Rockies Express Pipeline LLC, dated effective as of November 13, 2012, among Kinder Morgan W2E Pipeline LLC, TEP REX Holdings, LLC (as successor by assignment to Sempra REX Holdings, LLC and P&S Project I, LLC), Rockies Express Holdings, LLC and P66REX LLC (f/k/a COPREX LLC).

10.6*		Amendment No. 2 to Second Amended and Restated Limited Liability Company Agreement, dated effective as of May 5, 2016, among Sempra REX Holdings, LLC and P&S Project I, LLC, Rockies Express Holdings, LLC and P66REX LLC.

12.1*		Computation of Ratio of Earnings to Fixed Charges

31.1*		Rule 13a-14(a)/15d-14(a) Certification of David G. Dehaemers, Jr.

31.2*		Rule 13a-14(a)/15d-14(a) Certification of Gary J. Brauchle.

32.1*		Section 1350 Certification of David G. Dehaemers, Jr.

32.2*		Section 1350 Certification of Gary J. Brauchle.

101.INS*		XBRL Instance Document.

101.SCH*		XBRL Taxonomy Extension Schema Document.

101.CAL*		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		XBRL Taxonomy Extension Presentation Linkbase Document.


* -	filed herewith

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.



		Tallgrass Energy Partners, LP
		(registrant)
		By:	Tallgrass MLP GP, LLC, its general partner

Date:	August 3, 2016	By:	/s/ Gary J. Brauchle
			Name:	Gary J. Brauchle
			Title:	Executive Vice President and Chief Financial Officer

Exhibit 10.2

MEMBERSHIP INTEREST PURCHASE AGREEMENT

dated as of March 29, 2016

by and between

SEMPRA REX HOLDINGS, LLC,

and

ROCKIES EXPRESS HOLDINGS, LLC

TABLE OF CONTENTS



Article I DEFINITIONS	1
Section 1.1 Definitions.	1
Section 1.2 Construction.	4
Article II PURCHASE AND SALE; CLOSING	4
Section 2.1 Purchase and Sale.	4
Section 2.2 Purchase Price.	5
Section 2.3 Closing.	5
Section 2.4 Transfer Taxes.	5
Article III REPRESENTATIONS AND WARRANTIES OF SELLER	6
Section 3.1 Organization and Existence.	6
Section 3.2 Authority and Approval.	6
Section 3.3 No Conflict; Consent.	6
Section 3.4 Title to Subject Interest.	7
Section 3.5 Litigation.	7
Section 3.6 Brokerage Arrangements.	7
Section 3.7 Taxes.	7
Section 3.8 Contracts	8
Article IV REPRESENTATIONS AND WARRANTIES OF Buyer	8
Section 4.1 Organization and Existence.	8
Section 4.2 Authority and Approval.	8
Section 4.3 No Conflict; Consents.	9
Section 4.4 Brokerage Arrangements.	9
Section 4.5 Litigation.	9
Section 4.6 Investment Intent.	10
Section 4.7 Certain Matters.	10
Article V COVENANTS	10
Section 5.1 ROFR.	10
Section 5.2 Company Approvals.	11
Section 5.3 No Solicitation of Other Bids.	11
Section 5.4 Purchase Following Closing.	11
Section 5.5 Confidentiality.	12
Section 5.6 Post-Closing Audits and Examinations.	12
Section 5.7 Tallgrass Holdco Payment.	12
Article VI CONDITIONS TO CLOSING	12
Sections 6.1 Conditions to Obligations of Buyer.	12
Sections 6.2 Conditions to Obligations of Seller.	14
Article VII TERMINATION	16
Section 7.1 Termination.	16
Section 7.2 Effect of Termination.	17
Article VIII INDEMNITY	18
Section 8.1 Indemnification.	18
Section 8.2 Notification and Defense of Claim.	18
Section 8.3 Limitations.	20
Article IX MISCELLANEOUS	20
Section 9.1 Acknowledgments.	20

Table of Contents
(Continued)



Section 9.2 Cooperation; Further Assurances.	20
Section 9.3 Expenses.	21
Section 9.4 Notices.	21
Section 9.5 Governing Law.	22
Section 9.6 Initial Public Statements.	23
Section 9.7 Survival.	23
Section 9.8 Entire Agreement; Amendments and Waivers.	23
Section 9.9 Conflicting Provisions.	24
Section 9.10 Binding Effect and Assignment; Certain Restrictions.	24
Section 9.11 Severability.	25
Section 9.12 Interpretation.	25
Section 9.13 Headings and Exhibits.	25
Section 9.13 Multiple Counterparts.	26

EXHIBITS

Exhibit A - Form of Assignment Agreement

Exhibit B - Transfer Notice

Exhibit C - Joinder Agreement

Exhibit D - Letter Agreement

MEMBERSHIP INTEREST PURCHASE AGREEMENT

This Membership Interest Purchase Agreement (this " Agreement ") is made and effective as of March 29, 2016 (the “ Effective Date ”), by and between Sempra REX Holdings, LLC, a Delaware limited liability company (the " Seller "), and Rockies Express Holdings, LLC, a Delaware limited liability company (" Tallgrass Holdco " and together with any Person executing a joinder to this Agreement on a several basis, " Buyer ").

RECITALS

WHEREAS, Seller owns a twenty-five percent (25%) membership interest (the " Subject Interest ") in Rockies Express Pipeline LLC, a Delaware limited liability company (the " Company ");

WHEREAS, Seller desires to sell and transfer to Buyer the Subject Interest pursuant to the terms of this Agreement and the Assignment Agreement, and Buyer desires to purchase and acquire the Subject Interest in accordance with the terms of this Agreement and the Assignment Agreement;

NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants, agreements and conditions contained herein, the parties hereto agree as follows:

Article I
DEFINITIONS


Section 1.1	Definitions .

The respective terms defined in this Section 1.1 shall, when used in this Agreement, have the respective meanings specified herein, with each such definition equally applicable to both singular and plural forms of the terms so defined:

" Action " means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, whether civil, criminal, administrative, regulatory or otherwise, and whether at law or in equity.

" Affiliate ," when used with respect to a Person, means any other Person that directly or indirectly Controls, is Controlled by or is under common Control with such Person.

" Agreement " has the meaning ascribed to such term in the preamble.

" Assignment Agreement " means the Assignment Agreement substantially in the form of Exhibit A attached hereto, pursuant to which Seller will assign the Subject Interest to Buyer and Buyer will assume all of Seller’s obligations with respect to the Subject Interest under the REX LLC Agreement arising from and after such assignment.

" Business Day " means any day except Saturday, Sunday or any other day on which commercial banks located in the State of New York are authorized or required by Law to be closed for business.

" Buyer " has the meaning ascribed to such term in the preamble.

" Claim " has the meaning ascribed to such term in Section 8.1 .

" Closing " has the meaning ascribed to such term in Section 2.3(a) .

" Closing Date " has the meaning ascribed to such term in Section 2.3(a) .

" Code " means the Internal Revenue Code of 1986, as amended.

" Company " has the meaning ascribed to such term in the recitals.

" Control " and its derivatives mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

" Delaware LLC Act " means the Delaware Limited Liability Company Act, as amended.

" Effective Date " has the meaning ascribed to such term in the preamble.

" GAAP " means generally accepted accounting principles in the United States of America.

" Governmental Authority " means any federal, state, municipal or other government, governmental court, department, commission, board, bureau, agency or instrumentality.

" Governmental Order " means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

" Indemnified Party " and " Indemnified Parties " has the meaning ascribed to such term in Section 8.1 .

" Law " means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree, or rule of law of any Governmental Authority.

" Lien " means any mortgage, deed of trust, lien, security interest, pledge, conditional sales contract, charge, restriction (whether on voting, sale, transfer, disposition or otherwise and excluding any restrictions in this Agreement or in the REX LLC Agreement) or other encumbrance of every type and description.

" Material Adverse Effect " means a material adverse effect on or material adverse change in (i) the assets, liabilities, financial condition, or results of operations of the Company, other than any effect or change (a) that impacts the natural gas transportation industry generally, (b) in United States or global political conditions (including any acts of war or terrorist activities), (c) in global, United States or regional economic conditions or financial, banking or securities markets in general, (d) in wholesale or retail markets for or costs of commodities or supplies, including natural gas and fuel, (e) in weather, meteorological events or other natural disasters or natural occurrences, (f) in Law or regulatory policy or the interpretation or enforcement thereof, including any rate or tariff, (g) in GAAP or the interpretation thereof, (h) from any labor strike, request for representation, organizing campaign, work stoppage, slowdown or other labor dispute, (i) arising from the announcement, execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby, or (j) arising from the negligence or willful misconduct of Buyer or any of its Affiliates; provided , that in the case of clauses (a), (b), (c), (d), (e), (f) and (g), the impact on the Company is not materially disproportionate to the impact on similarly situated parties in the natural gas transportation industry, or (ii) the ability of Seller to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement.

" Notice " has the meaning ascribed to such term in Section 9.4 .

" P66 Holdco " means P66REX LLC, a Delaware limited liability company formerly known as COPREX LLC.

" Permitted Lien " means any Lien set forth in or created by the REX LLC Agreement or under the Securities Act or any other applicable securities laws.

" Person " means an individual or entity, including any partnership, corporation, association, trust, limited liability company, joint venture, Governmental Authority, unincorporated organization or other entity.

" Purchase Price " has the meaning ascribed to such term in Section 2.2 .

" Representative " means, with respect to any Person, any and all directors, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

" REX LLC Agreement " means that certain Second Amended and Restated Limited Liability Company Agreement of the Company dated effective as of January 1, 2010, among Tallgrass Holdco (as successor by assignment to Kinder Morgan W2E Pipeline LLC), Seller, and P66 Holdco, as amended by that certain Amendment No. 1 to Second Amended and Restated Limited Liability Company Agreement of the Company effective November 13, 2012, among Kinder Morgan W2E Pipeline LLC, Seller, Tallgrass Holdco, and P66 Holdco.

" ROFR " means that certain right of first refusal as set forth in Section 7.1.3 of the REX LLC Agreement.

" Securities Act " means the Securities Act of 1933, as amended.

" Seller " has the meaning ascribed to such term in the preamble.

" Subject Interest " has the meaning ascribed to such term in the recitals.

" Tallgrass Holdco " has the meaning ascribed to such term in the preamble.

" Tax " means any and all U.S. federal, state, local or foreign net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, capital stock, profits, license, license fee, environmental, customs duty, unclaimed property or escheat payments, alternative fuels, mercantile, lease, service, withholding, payroll, employment, unemployment, social security, disability, excise, severance, registration, stamp, occupation, premium, property (real or personal), windfall profits, fuel, value added, alternative or add on minimum, estimated or other similar taxes, duties, levies, customs, tariffs, imposts or assessments (including public utility commission property tax assessments) imposed by any Governmental Authority, together with any interest, penalties or additions thereto payable to any Governmental Authority in respect thereof or any liability for the payment of any amounts of any of the foregoing types as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby liability for payment of such amounts was determined or taken into account with reference to the liability of any other Person.

" Tax Return " means any return, declaration, report, statement, election, claim for refund or other written document, together with all attachments, amendments and supplements thereto, filed with or provided to, or required to be filed with or provided to, a Governmental Authority in respect of Taxes.

" Transaction " means (1) the sale and transfer of the Subject Interest and (2) the delivery of the Purchase Price.

" Transfer Taxes " has the meaning ascribed to such term in Section 2.4 .

" Ultra Agreement " has the meaning ascribed to such term in Section 4.7 .


Section 1.2	Construction .

In constructing this Agreement: (a) the word "includes" and its derivatives means "includes, without limitation" and corresponding derivative expressions; (b) the currency amounts referred to herein, unless otherwise specified, are in United States dollars; (c) whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified; (d) unless otherwise specified, all references in this Agreement to "Article," "Section," "Exhibit," "preamble" or "recitals" shall be references to an Article, Section, Exhibit, preamble or recitals hereto; and (e) whenever the context requires, the words used in this Agreement shall include the masculine, feminine and neuter and singular and the plural.

ARTICLE II

PURCHASE AND SALE; CLOSING


Section 2.1	Purchase and Sale .

Upon the terms and subject to the conditions set forth in this Agreement and in the Assignment Agreement, on the Closing Date, Seller shall sell to Buyer, and Buyer shall purchase from Seller, all of Seller's right, title and interest in and to the Subject Interest, free and clear of all Liens, other than Permitted Liens, for the consideration specified in Section 2.2.


Section 2.2	Purchase Price .

The aggregate purchase price for the Subject Interest shall be $440,000,000, plus any cash contributions paid by Seller to Company with respect to the Subject Interest from the Effective Date until the Closing Date, less any cash distributions by the Company paid to Seller with respect to the Subject Interest from the Effective Date until the Closing Date (the "Purchase Price"). In addition, Tallgrass Holdco will pay Seller any amount due pursuant to Section 5.7.


Section 2.3	Closing .

(a)

Subject to the terms and conditions of this Agreement, the purchase and sale of the Subject Interest contemplated hereby shall take place at a closing (the "Closing") on a date and at a time specified by Tallgrass Holdco, which must be no earlier than three Business Days after satisfaction or waiver of the conditions to Closing set forth in Article VI (except those conditions that by their nature will be satisfied at the Closing), and not later than five Business Days following the later of (i) ten Business Days following expiration of the Offer Period (as defined in the REX LLC Agreement), or (ii) forty-five days after the Effective Date, at the offices of Tallgrass Holdco at 4200 W. 115th Street, Suite 350, Leawood, Kansas 66211, or at such other time or on such other date or at such other place as Seller and Tallgrass Holdco may mutually agree upon in writing (the day on which the Closing takes place being the "Closing Date"). Tallgrass Holdco will give the parties no less than three Business Days’ prior written notice of its specified Closing Date.


(b)	At the Closing, Buyer shall deliver to Seller:


(i)	the Purchase Price by wire transfer of immediately available funds to an account of Seller designated in writing by Seller to Buyer no later than two Business Days prior to the Closing Date; and


(ii)	the Assignment Agreement and all other agreements, documents, instruments or certificates required to be delivered by Buyer at or prior to the Closing pursuant to Section 6.2 of this Agreement.


(c)	At the Closing, Seller shall deliver to Buyer the Assignment Agreement and all other agreements, documents, instruments or certificates required to be delivered by Seller at or prior to the Closing pursuant to Section 6.1 of this Agreement.


Section 2.4	Transfer Taxes .

All transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees arising out of or in connection with the transactions effected pursuant to this Agreement (the "Transfer Taxes") shall be borne equally by Buyer and Seller. Seller shall file all necessary Tax Returns and other documentation with respect to such Transfer Taxes, Buyer shall cooperate with respect thereto as necessary, and in the event Transfer Taxes are owed, Buyer shall

transfer an amount equal to fifty percent (50%) of such Transfer Taxes to Seller within 30 days of receiving a Tax Return reflecting the Transfer Taxes owed.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller hereby represents and warrants to Buyer as follows:


Section 3.1	Organization and Existence .

Seller is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has all requisite limited liability company power and authority to own, operate and lease its properties and assets and to carry on its business as now conducted. Seller does not own, or have any interest in, any other assets other than the Subject Interest.


Section 3.2	Authority and Approval .

(a)

Seller has full limited liability company power and authority to execute and deliver this Agreement and the Assignment Agreement, to consummate the transactions contemplated hereby and thereby and to perform all of the obligations hereof and thereof to be performed by it. The execution and delivery by Seller of this Agreement and the Assignment Agreement, the consummation of the transactions contemplated hereby and thereby and the performance of all of the obligations hereof and thereof to be performed by Seller have been duly authorized and approved by all requisite limited liability company action on the part of Seller. No approval by the shareholders of Sempra Energy is required to be obtained in connection with the execution, delivery and performance of this Agreement and the Assignment Agreement or the consummation of the transactions contemplated hereby or thereby.

(b)

This Agreement has been duly executed and delivered by Seller and constitutes the valid and legally binding obligation of Seller, enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity (whether applied in a proceeding at law or in equity). When executed and delivered by each of the parties party thereto, the Assignment Agreement will constitute a valid and legally binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity (whether applied in a proceeding at law or in equity).


Section 3.3	No Conflict; Consents .

Except as set forth in the REX LLC Agreement:

(a)

the execution, delivery and performance of this Agreement by Seller does not, and the execution, delivery and performance of the Assignment Agreement by Seller will not, and the fulfillment and compliance with the terms and conditions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not, (i) violate, conflict with, result in any breach of, or require the consent of any Person under, any of the terms, conditions or provisions of the certificate of formation, limited liability company

agreement or other organizational documents of Seller; (ii) conflict with or violate any provision of any Law or Governmental Order applicable to Seller; or (iii) conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or result in the suspension, termination or cancellation of, or in a right of suspension, termination or cancellation of, any indenture, mortgage, agreement, contract, commitment, license, concession, permit, lease, joint venture or other instrument to which Seller is a party or to which its properties are subject; other than, in the case of each of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect; and

(b)

no consent, approval, license, permit, order or authorization of any Governmental Authority or other Person is required to be obtained or made by Seller with respect to the Subject Interest in connection with the execution, delivery and performance of this Agreement and the Assignment Agreement or the consummation of the transactions contemplated hereby or thereby except as have been waived or obtained.


Section 3.4	Title to Subject Interest .

Seller owns, beneficially and of record, the Subject Interest free and clear of all Liens, other than Permitted Liens, and will convey good and indefeasible title, free and clear of all Liens, other than Permitted Liens, to the Subject Interest to Buyer on the Closing Date. The Subject Interest is not subject to any agreements or understandings with respect to the voting, transfer or other rights and obligations of any of the Subject Interest (except as contemplated by this Agreement, the REX LLC Agreement, including, without limitation, the ROFR, and restrictions under applicable federal and state securities laws).


Section 3.5	Litigation .

As of the Effective Date, there are no Actions pending or threatened that (a) question or involve the validity or enforceability of any of Seller's obligations under this Agreement or the Assignment Agreement, or (b) seek (i) to prevent or delay the consummation by Seller of the transactions contemplated by this Agreement or the Assignment Agreement or (ii) damages in connection with any such consummation.


Section 3.6	Brokerage Arrangements.

Seller has not entered (directly or indirectly) into any agreement with any Person that would obligate Seller or any of its Affiliates or any other Person to pay any commission, brokerage or "finder’s fee" or other similar fee in connection with this Agreement, the Assignment Agreement or the transactions contemplated hereby or thereby.


Section 3.7	Taxes .

Seller is not a "foreign person" within the meaning of Section 1445(f)(3) of the Code. Seller has not received any notice of assessment or proposed assessment in connection with any Tax or Tax Return, and there are no pending, proposed or threatened Tax audits or examinations of or Tax claims asserted against Seller, with respect to the Subject Interest. To Seller’s knowledge, there are no Tax proceedings presently pending with regard to any Tax Returns or Taxes of Seller with respect to the Subject Interest and no notice has been received from any Governmental Authority of the expected commencement of such a proceeding. Seller has not extended or waived, or sought the extension or waiver of, the application of Section 6229 of the Code or any statute of limitations of any jurisdiction regarding the assessment or collection of any Taxes with respect to the Subject Interest. Seller has not taken a position on any Tax Return with respect to the Subject Interest or any income, gain, loss, distribution or payment from the Company that is inconsistent from the Tax reporting position taken by the Company with respect to such items or events. Seller has claimed depreciation deductions related to the Company's assets for federal income tax purposes only by virtue of its

distributive share of Company items. The Transaction, together with any other prior transfers of the Subject Interest by Seller and the prior owners of such Subject Interest during the twelve month period prior to the Effective Date, will not result in a termination of the Company for purposes of Section 708 of the Code.


Section 3.8	Contracts .

Seller, on behalf of the Company, has not entered into any contracts, leases, deeds, mortgages, licenses, instruments, notes, commitments, undertakings, indentures, joint ventures or any other agreements, commitments or legally binding arrangements, whether written or oral.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer hereby represents and warrants to Seller as follows:


Section 4.1	Organization and Existence .

Buyer is a limited liability company duly formed, validly existing and in good standing under the laws of the state of its organization and has all requisite limited liability company power and authority to own, operate and lease its properties and assets and to carry on its business as now conducted.


Section 4.2	Authority and Approval .

(a)

Buyer has full limited liability company power and authority to execute and deliver this Agreement and the Assignment Agreement, to consummate the transactions contemplated hereby and thereby and to perform all of the obligations hereof and thereof to be performed by it. The execution and delivery of this Agreement and the Assignment Agreement, the consummation of the transactions contemplated hereby and thereby and the performance of all of the obligations hereof and thereof to be performed by Buyer have been duly authorized and approved by all requisite limited liability company action of Buyer.

(b)

This Agreement has been duly executed and delivered by or on behalf of Buyer and constitutes the valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity (whether applied in a proceeding at law or in equity). When executed and delivered by each of the parties party thereto, the Assignment Agreement will constitute a valid and legally binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity (whether applied in a proceeding at law or in equity).


Section 4.3	No Conflict; Consents .

Except as set forth in the REX LLC Agreement:


(a)	The execution, delivery and performance of this Agreement by Buyer does not, and the execution, delivery and performance of the Assignment Agreement by Buyer will not, and the fulfillment and compliance with the terms and conditions hereof and thereof and the consummation of the transactions contemplated hereby and thereby will not, (i) violate, conflict

with, result in any breach of, or require the consent of any Person under, any of the terms, conditions or provisions of the certificate of formation, limited liability company agreement or other organizational documents of Buyer; (ii) conflict with or violate any provision of any Law or Governmental Order applicable to Buyer or any property or asset of the Buyer; or (iii) conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or result in the suspension, termination or cancellation of, or in a right of suspension, termination or cancellation of, any indenture, mortgage, agreement, contract, commitment, license, concession, permit, lease, joint venture or other instrument to which Buyer is a party or by which it is bound or to which any of its property is subject; other than, in the case of each of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on the ability of Buyer to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement; and


(b)	No consent, approval, license, permit, order or authorization of any Governmental Authority or other Person is required to be obtained or made by or with respect to Buyer in connection with the execution, delivery, and performance of this Agreement or the Assignment Agreement or the consummation of the transactions contemplated hereby and thereby, except as have been waived or obtained.


Section 4.4	Brokerage Arrangements .

Buyer has not entered (directly or indirectly) into any agreement with any Person that would obligate Buyer or any of its Affiliates or any other Person to pay any commission, brokerage or "finder’s fee" or other similar fee in connection with this Agreement, the Assignment Agreement or the transactions contemplated hereby or thereby.


Section 4.5	Litigation .

As of the Effective Date, there are no Actions pending or threatened that (a) question or involve the validity or enforceability of any of Buyer's obligations under this Agreement or the Assignment Agreement or (b) seek (i) to prevent or delay the consummation by Buyer of the transactions contemplated by this Agreement or the Assignment Agreement or (ii) damages in connection with any such consummation.


Section 4.6	Investment Intent .

Buyer is accepting the Subject Interest for its own account with the present intention of holding the Subject Interest for investment purposes and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act or state securities laws. Buyer is an “accredited investor” (as defined in Rule 501 under the Securities Act) and has sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of its investment in the Subject Interest. Buyer acknowledges that the Subject Interest has not been and will not be registered under the Securities Act or any applicable state securities law, and that such Subject Interest may not be transferred or sold except pursuant to the registration provisions of the Securities Act or pursuant to an applicable exemption therefrom and pursuant to state securities laws and regulations as applicable.


Section 4.7	Certain Matters .

As of the Effective Date, the Firm Transportation Service Agreement dated June 5, 2008 between Ultra Resources, Inc. and the Company (bearing contract no. 553082), as amended by the Firm Transportation Negotiated Rate Agreement dated June 5, 2008, each as have been amended from time to time (the “Ultra Agreement”) has terminated. As of the Effective Date, neither Tallgrass Holdco, the Company, nor any of their respective officers has any agreement or arrangement with Ultra Petroleum Corp. or any of its Affiliates to (i) enter into an agreement in lieu

of or to otherwise replace the Ultra Agreement, in whole or in part, or (ii) satisfy or discharge, in whole or in part, any claims, damages or other amounts owed under the Ultra Agreement, nor are any proposals pending between the Company or Tallgrass Holdco, on the one hand, and Ultra Petroleum Corp. or any of its Affiliates or any of their respective Representatives, on the other hand, with respect to any such agreement or arrangement.

ARTICLE V

COVENANTS


Section 5.1	ROFR .

In accordance with Section 7.1.2 and Section 7.1.3 of the REX LLC Agreement, Seller shall promptly (and in any event within three Business Days following the Effective Date) deliver to P66 Holdco a transfer notice, substantially in the form of Exhibit B attached hereto. The execution of this Agreement by Seller and Tallgrass Holdco is deemed to be delivery of a transfer notice to Tallgrass Holdco, as an Optionee (as defined in the REX LLC Agreement), pursuant to the ROFR and an irrevocable election by Tallgrass Holdco, as an Optionee, to exercise the ROFR with respect to its proportionate share of the Subject Interest on the terms and conditions set forth herein. If P66 Holdco elects to exercise the ROFR for its proportionate share of the Subject Interest, it shall enter into a joinder agreement in the form of Exhibit C. If P66 Holdco does not elect to exercise the ROFR for its proportionate share of the Subject Interest, then the Optionees will have failed to purchase the entire Subject Interest pursuant to the terms and conditions of Section 7.1.3 of the REX LLC Agreement, and Seller shall be entitled to consummate the sale to Tallgrass Holdco, as Transferee (as defined in the REX LLC Agreement), of 100% of the Subject Interest pursuant to the terms of this Agreement.


Section 5.2	Company Approvals .

(a)

Prior to the Closing, Seller will approve, with such approval effective as of immediately prior to the Closing, as a member of the Company in accordance with the REX LLC Agreement, amending and extending those certain Firm Transportation Service Agreements numbered 551979, 553078 and 553372 between the Company and Encana Marketing (USA), Inc., on substantially the terms as previously presented to the members of the Company prior to the Effective Date (as modified prior to the Closing).

(b)

The parties acknowledge that, at the Closing, the Company and Sempra Rockies Marketing, LLC will enter into the letter agreement in the form of Exhibit D attached hereto. Buyer and Tallgrass Holdco shall cause the officers of the Company to execute and deliver such letter agreement, and Seller shall cause Sempra Rockies Marketing, LLC to execute and deliver such letter agreement. At the Closing, Buyer and Tallgrass Holdco will approve and ratify, with such approval and ratification effective as of immediately following the Closing, as a member of the Company in accordance with the REX LLC Agreement, the Company’s entering into the letter agreement in the form of Exhibit D attached hereto.

Section 5.3 No Solicitation of Other Bids .

(a)

Seller shall not, and shall not authorize or permit any of its Affiliates or any of its or their Representatives to, directly or indirectly, (i) encourage, solicit, initiate, facilitate or continue inquiries regarding an Acquisition Proposal; (ii) enter into discussions or negotiations with, or provide any information to, any Person concerning a possible Acquisition Proposal; or (iii) enter into any agreements or other instruments (whether or not binding) regarding an Acquisition Proposal. Seller shall immediately cease and cause to be terminated, and shall cause its Affiliates and all of its and their Representatives to immediately cease and cause to be terminated, all existing discussions or negotiations with any Persons conducted heretofore with respect to, or that could lead to, an Acquisition Proposal. For purposes hereof, "Acquisition Proposal" shall

mean any inquiry, proposal or offer from any Person (other than Buyer or any of its Affiliates or in accordance with the ROFR) concerning the purchase of the Subject Interest.

(b)

In addition to the other obligations under this Section 5.3, Seller shall promptly (and in any event within three Business Days after receipt thereof by Seller or its Representatives) advise Buyer orally and in writing of Seller’s receipt of any Acquisition Proposal, any request for information with respect to any Acquisition Proposal, or any inquiry with respect to an Acquisition Proposal, and the material terms and conditions of such Acquisition Proposal, request or inquiry.


Section 5.4	Purchase Following Closing .

If, during the period beginning on the Closing Date and ending on the first anniversary of the Closing Date, Tallgrass Holdco or any of its Affiliates acquires, in whole or in part, the membership interest in the Company held by P66 Holdco (or its successor) for total consideration that is greater on a proportional basis than the Purchase Price received by Seller, then Tallgrass Holdco will pay Seller cash in an amount equal to such proportional difference within two Business Days following such acquisition by wire transfer of immediately available funds to an account of Seller designated in writing by Seller to Tallgrass Holdco. Notwithstanding the foregoing, Tallgrass Holdco will not owe Seller any payment if Tallgrass Holdco acquires P66 Holdco's membership interest in the Company as a result of exercising its rights under the ROFR during such twelve month period in connection with a proposed sale by P66 Holdco (or its successor) to a Person other than Tallgrass Holdco or its Affiliates.

Section 5.5 Confidentiality .

Buyer and Seller shall, and shall cause each of their respective Affiliates and Representatives to, abide by the terms of Section 2.5 of the REX LLC Agreement (including the survivability of such obligations) with respect to any information provided by a party to the other party pursuant to this Agreement, all such information being deemed "Confidential Information" for purposes of Section 2.5 of the REX LLC Agreement; provided, that any disclosures in any initial public announcement or statement issued by either party pursuant to Section 9.6 will not be deemed “Confidential Information” following the making of such initial public announcement or statement.


Section 5.6	Post-Closing Audits and Examinations .

In the event of any Tax audits or examinations affecting a pre-Closing taxable year of the Company that result in a change to the distributive share of income, gain, loss, or deduction with respect to the Subject Interest, Buyer will notify, or cause the Company to notify, the Seller of such audit or examination, and in addition, Buyer will provide, or will take the necessary steps to cause the Company to provide, to Seller amended Tax returns and associated Tax filings related to the Subject Interest for such pre-Closing years of the Company.


Section 5.7	Tallgrass Holdco Payment .

If Tallgrass Holdco acquires the entire Subject Interest from Seller, then at Closing, concurrent with payment of other amounts due Seller from Tallgrass Holdco under this Agreement, Tallgrass Holdco will pay Seller cash in an amount equal to Two Million Five Hundred Thousand Dollars ($2,500,000.00).

ARTICLE VI

CONDITIONS TO CLOSING


Section 6.1	Conditions to Obligations of Buyer .

The obligations of Buyer to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, or Buyer's waiver in its sole discretion, at or prior to the Closing, of each of the following conditions:

(a)

Other than the representations and warranties of Seller contained in Section 3.1, Section 3.2, Section 3.4, and Section 3.6, the representations and warranties of Seller contained in this Agreement, the Assignment Agreement and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the Effective Date and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Seller contained in Section 3.1, Section 3.2, Section 3.4, and Section 3.6 shall be true and correct in all respects on and as of the Effective Date and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).

(b)

Seller shall have duly performed and complied in all material respects with each agreement and covenant required by this Agreement and the Assignment Agreement to be performed or complied with by it prior to or on the Closing Date; provided, that, with respect to agreements and covenants that are qualified by materiality, Seller shall have performed such agreements and covenants, as so qualified, in all respects.

(c)

No temporary restraining order or preliminary or permanent injunction or other order by any court of competent jurisdiction preventing consummation of the transactions contemplated by this Agreement shall have been issued and be continuing in effect, and the transactions contemplated by this Agreement and the Assignment Agreement shall not have been prohibited under any applicable federal or state Law.


(d)	The consent of Seller pursuant to Section 5.2(a) shall have been received by the Company and Buyer prior to the Closing.


(e)	Seller shall have delivered to Buyer that certain letter agreement in the form of Exhibit D attached hereto duly executed and delivered by Sempra Rockies Marketing, LLC.


(f)	From the date of this Agreement, there shall not have occurred any Material Adverse Effect, nor shall any event or events have occurred that, individually or in the aggregate, with or without the lapse of time, would reasonably be expected to result in a Material Adverse Effect.


(g)	Seller shall have duly executed and delivered the Assignment Agreement to Buyer.


(h)	Buyer shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Seller, that each of the conditions set forth in Section 6.1(a) and Section 6.1(b) have been satisfied.


(i)	Buyer shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Seller certifying that attached thereto are true and complete copies of all resolutions adopted by the Seller authorizing the execution, delivery and performance of this Agreement

and the Assignment Agreement and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted by the Seller in connection with the transactions contemplated hereby and thereby.


(j)	Seller shall have delivered a written resignation of Seller's director serving on the Board (as defined in the REX LLC Agreement) of the Company, such resignation to be effective as of the Closing Date.


(k)	Seller shall have delivered to Buyer a good standing certificate for the Seller from the Secretary of State of Delaware.


(l)	Seller shall have delivered to Buyer a certificate pursuant to Treasury Regulations Section 1.1445-2(b) that Seller is not a foreign person within the meaning of Section 1445 of the Code.


(m)	Seller shall have delivered to Buyer such other documents or instruments as Buyer reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.


Section 6.2	Conditions to Obligations of Seller .

The obligations of Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, or Seller's waiver in its sole discretion, at or prior to the Closing, of each of the following conditions:

(a)

Other than the representations and warranties of Buyer contained in Section 4.1, Section 4.2 and Section 4.4, the representations and warranties of Buyer contained in this Agreement and the Assignment Agreement and any certificate or other writing delivered pursuant hereto shall be true and correct in all respects (in the case of any representation or warranty qualified by materiality or Material Adverse Effect) or in all material respects (in the case of any representation or warranty not qualified by materiality or Material Adverse Effect) on and as of the Effective Date and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects). The representations and warranties of Buyer contained in Section 4.1, Section 4.2 and Section 4.4 shall be true and correct in all respects on and as of the Effective Date and on and as of the Closing Date with the same effect as though made at and as of such date (except those representations and warranties that address matters only as of a specified date, the accuracy of which shall be determined as of that specified date in all respects).

(b)

Buyer shall have duly performed and complied in all material respects with each agreement and covenant required by this Agreement and the Assignment Agreement to be performed or complied with by it prior to or on the Closing Date; provided, that, with respect to agreements and covenants that are qualified by materiality, Buyer shall have performed such agreements and covenants, as so qualified, in all respects.

(c)


(d)	Seller shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Buyer, that each of the conditions set forth in Section 6.2(a) and Section 6.2(b) have been satisfied.

(e)

Seller shall have received a certificate of the Secretary or an Assistant Secretary (or equivalent officer) of Buyer certifying that attached thereto are true and complete copies of all resolutions adopted by Buyer authorizing the execution, delivery and performance of this Agreement and the Assignment Agreement and the consummation of the transactions contemplated hereby and thereby, and that all such resolutions are in full force and effect and are all the resolutions adopted by the Buyer in connection with the transactions contemplated hereby and thereby.


(f)	Buyer shall have delivered to Seller a good standing certificate for the Buyer from the secretary of state of the state of its origination.


(g)	Buyer shall have delivered to Seller cash in an amount equal to the Purchase Price, and Tallgrass Holdco shall have delivered to Seller in cash any amount due pursuant to Section 5.7, in each case by wire transfer in immediately available funds, to an account or accounts designated at least two Business Days prior to the Closing Date by Seller in a written notice to Buyer and Tallgrass Holdco.


(h)	Buyer shall have duly executed and delivered the Assignment Agreement to Seller.


(i)	Buyer shall have delivered to Seller such other documents or instruments as Seller reasonably requests and are reasonably necessary to consummate the transactions contemplated by this Agreement.


(j)	Buyer and Tallgrass Holdco shall have delivered the approval and ratification required pursuant to Section 5.2(b).


(k)	Buyer shall have delivered to Sempra Rockies Marketing, LLC and Seller that certain letter agreement in the form of Exhibit D attached hereto duly executed and delivered by the Company.

(l)

Tallgrass Holdco shall have duly performed and complied in all material respects with each agreement and covenant required by this Agreement and the Assignment Agreement to be performed or complied with by it prior to or on the Closing Date; provided, that, with respect to agreements and covenants that are qualified by materiality, Tallgrass Holdco shall have performed such agreements and covenants, as so qualified, in all respects. Seller shall have received a certificate, dated the Closing Date and signed by a duly authorized officer of Tallgrass Holdco, that the conditions set forth in this Section 6.2(l) have been satisfied.

ARTICLE VII

TERMINATION


Section 7.1	Termination .

This Agreement may be terminated at any time prior to the Closing:


(a)	by the mutual written consent of Seller and Buyer;


(b)	by Buyer by written notice to Seller if:

(i)

Buyer is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Seller pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VI and such breach, inaccuracy or failure has not been cured by Seller within ten days of Seller's receipt of written notice of such breach from Buyer; or

(ii)

any of the conditions set forth in Section 6.1 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by the first Business Day following the seventieth (70th) calendar day from the Effective Date, unless such failure shall be due to the failure of Buyer to perform or comply with any of the covenants or agreements hereof to be performed or complied with by it prior to the Closing;


(c)	by Seller by written notice to Buyer if:

(i)

Seller is not then in material breach of any provision of this Agreement and there has been a breach, inaccuracy in or failure to perform any representation, warranty, covenant or agreement made by Buyer pursuant to this Agreement that would give rise to the failure of any of the conditions specified in Article VI and such breach, inaccuracy or failure has not been cured by Buyer within ten days of Buyer's receipt of written notice of such breach from Seller; or

(ii)

any of the conditions set forth in Section 6.2 shall not have been, or if it becomes apparent that any of such conditions will not be, fulfilled by the first Business Day following the seventieth (70th) calendar day from the Effective Date, unless such failure shall be due to the failure of Seller to perform or comply with any of the covenants or agreements hereof to be performed or complied with by it prior to the Closing;

(d)

by Buyer or Seller by written notice to the other party or parties in the event that (i) there shall be any Law that makes consummation of the transactions contemplated by this Agreement illegal or otherwise prohibited or (ii) any Governmental Authority shall have issued a Governmental Order restraining or enjoining the transactions contemplated by this Agreement, and such Governmental Order shall have become final and non-appealable; or


(e)	by Buyer or Seller by written notice to the other party or parties in the event that the Closing has not occurred on or before July 1, 2016; unless such failure of the Closing to occur shall be due to the failure of the terminating party to perform or comply with any of the covenants or agreements hereof to be performed or complied with by it prior to the Closing.


Section 7.2	Effect of Termination .


(a)	If this Agreement is terminated pursuant to Section 7.1, all obligations of the parties under this Agreement will terminate, except that Section 5.5 (with respect to confidentiality obligations) and Article VIII (with respect to indemnity) will each survive in accordance with its terms, and Section 9.3 (with respect to expenses) and Section 9.5 will survive.


(b)	If this Agreement is terminated by Buyer pursuant to Section 7.1(b), then Buyer’s right to pursue all legal remedies will survive such termination unimpaired and nothing in this Section 7.2 shall be deemed to release Seller from any liability for any breach of the terms, conditions, covenants, representations, warranties and other provisions of this Agreement.


(c)	If this Agreement is terminated by Seller pursuant to Section 7.1(c), then Seller's right to pursue all legal remedies will survive such termination unimpaired and nothing in this Section 7.2 shall be deemed to release Buyer from any liability for any breach of the terms, conditions, covenants, representations, warranties and other provisions of this Agreement.


(d)	If P66 Holdco elects to exercise the ROFR and executes the joinder agreement attached as Exhibit C, then:


(i)	P66 Holdco and Tallgrass Holdco shall each be considered a Buyer for all purposes of this Agreement and their rights and obligations hereunder shall be several and not joint with respect to the portion of the Subject Interest each such Buyer has agreed to purchase under the ROFR;

(ii)

if (x) this Agreement is terminated by the mutual written consent of P66 Holdco and Seller pursuant to Section 7.1(a), (y) P66 Holdco terminates this Agreement pursuant to Section 7.1(b), or (z) Seller terminates this Agreement pursuant to Section 7.1(c) as a result of P66 Holdco’s failure to perform or comply with any of the covenants or agreements of this Agreement to be performed or complied with by it prior to the Closing, then: (A) this Agreement will terminate solely with respect to P66 Holdco, with the effect provided in this Section 7.2; and (B) Tallgrass Holdco shall have the right and obligation to purchase the entire Subject Interest pursuant to the terms hereof; and

(iii)

if (x) this Agreement is terminated by the mutual written consent of Tallgrass Holdco and Seller pursuant to Section 7.1(a), (y) Tallgrass Holdco terminates this Agreement pursuant to Section 7.1(b), or (z) Seller terminates this Agreement pursuant to Section 7.1(c) as a result of Tallgrass Holdco's failure to perform or comply with any of the covenants or agreements of this Agreement to be performed or complied with by it prior to the Closing, then: (A) this Agreement will terminate solely with respect to Tallgrass Holdco, with the effect provided in this Section 7.2; and (B) P66 Holdco may elect to either (1) terminate this Agreement without further liability on its part, in which case any further attempts by Seller to transfer the Subject Interest shall be subject to Article 7 of the REX LLC Agreement, or (2) elect to purchase the entire Subject Interest pursuant to the terms hereof.

ARTICLE VIII

INDEMNITY


Section 8.1	Indemnification.

Subject to the terms and conditions set forth in this Article VIII, Tallgrass Holdco agrees to hold harmless, save, defend and indemnify Seller, its Affiliates and their respective officers, directors, members, managers, employees, successors and assigns (each, an "Indemnified Party" and collectively the "Indemnified Parties") from and against all any and all liabilities, judgments, costs and other expenses (including reasonable legal fees and expenses), obligations, causes of action at law or in equity and other claims of any and every kind as a result of any claim made by or on behalf of P66 Holdco that relates to or arises out of this Agreement or any of the transactions contemplated hereby (a "Claim"). Notwithstanding the foregoing, Tallgrass Holdco will not be liable as an indemnitor under this Agreement for any consequential, incidental, special, indirect, punitive or exemplary damages suffered or incurred by an Indemnified Party; provided, however, that the foregoing shall not apply to any such damages that are awarded on account of a Claim made by or on behalf of P66 Holdco against an Indemnified Party, and Tallgrass Holdco and Seller hereby agree that any such damages awarded against an Indemnified Party on account of a Claim made by or on behalf of P66 Holdco shall constitute direct damages of the Indemnified Party.


Section 8.2	Notification and Defense of Claim .


(a)	An Indemnified Party shall promptly notify Tallgrass Holdco in writing upon its discovery of facts giving rise to a potential Claim (a “Claim Notice”), including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial or otherwise, and such notice

shall include a formal demand for indemnification under this Agreement and contain a description of the nature and estimated amount (if then known) of such Claim; provided, that, subject to Section 8.3 below, the failure to so notify or a delay in notifying Tallgrass Holdco will not relieve it of its obligations hereunder, except to the extent that Tallgrass Holdco is actually prejudiced as a result thereof. If requested by Tallgrass Holdco or its counsel, the Indemnified Party will, at the sole cost and expense of Tallgrass Holdco, reasonably cooperate with Tallgrass Holdco in the investigation, defense and settlement of such Claim. Without limiting the foregoing, Indemnified Party will provide Tallgrass Holdco with all records, documents, materials and information in its possession or control, and reasonable access to personnel, relevant to such Claim. If it gives written notice of its intention to do so to the Indemnified Party within thirty (30) days after receipt of the Claim Notice, except as provided in Section 8.2(c) below, Tallgrass Holdco will have the right to assume, conduct and control the defense of any Claim and all negotiations for its settlement or compromise, which may be conducted in the name and on behalf of Tallgrass Holdco or the Indemnified Party, as may be appropriate. Except as provided in Section 8.2(c) below, Tallgrass Holdco will have the right to select counsel (that is reasonably satisfactory to the Indemnified Party) to provide representation in connection with such Claim. The Indemnified Party may in its sole discretion, and at its expense (but subject to Section 8.2(c) below), participate with its own counsel in the defense of any such Claim. If the Indemnified Party elects to so participate, except as provided in Section 8.2(c) below, Tallgrass Holdco shall have no obligation to indemnify such Indemnified Party or any other person for the expenses and fees of counsel incurred by such Indemnified Party in connection with such participation.

(b)

An Indemnified Party shall agree to any settlement, compromise or discharge of a Claim that Tallgrass Holdco may recommend that (and Tallgrass Holdco shall not enter into any settlement, compromise or discharge of a Claim without the prior written consent of the Indemnified Party unless such settlement, compromise or discharge) by its terms (i) obligates Tallgrass Holdco to pay to discharge in full the liability in connection with such Claim, (ii) releases such Indemnified Party completely and unconditionally in connection with such Claim, (iii) does not contain any finding, statement or admission of fault or culpability by any Indemnified Party, and (iv) does not contain any sanction or restriction upon the conduct or operation of any business by such Indemnified Party. Tallgrass Holdco will not be liable to indemnify an Indemnified Party under this Agreement for any amounts paid in settlement of any Claim without Tallgrass Holdco's prior written consent. Indemnified Party shall not settle any action or claim in any manner which would impose any penalty or limitation on Tallgrass Holdco without Tallgrass Holdco’s prior written consent. Neither Tallgrass Holdco, nor any Indemnified Party, will unreasonably withhold, condition or delay its consent to any proposed settlement, compromise or discharge of any such Claim.

(c)

Notwithstanding the foregoing, if (i) Tallgrass Holdco does not assume the defense of any Claim in accordance with the thirty (30) day period specified in Section 8.2(a), or (ii) the named parties to the proceeding for the Claim include both an Indemnified Party and Tallgrass Holdco (or any of its Affiliates) and either Tallgrass Holdco or an Indemnified Party determines, based on the advice of counsel, that there may be one or more legal defenses available to it that are materially different from or additional to those available to the other party or that a conflict of interest between those parties would reasonably be expected to exist in respect thereto, then the named Indemnified Party or Parties shall have the right, by prior written notice given to Tallgrass Holdco, to control the defense of the Claim; provided that Tallgrass Holdco shall be entitled, at its expense, to participate in (but not control) that defense. In those circumstances, the named Indemnified Party or Parties shall defend the Claim in good faith and have full control of such defense and proceedings with respect to such Indemnified Parties; provided, however, that the Indemnified Parties may not enter into any settlement, compromise or discharge of such Claim if indemnification

is to be sought hereunder, without Tallgrass Holdco’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). If requested by an Indemnified Party or its counsel, Tallgrass Holdco agrees, at its sole cost and expense, to reasonably cooperate with such Indemnified Party and its counsel in contesting any Claim for which an Indemnified Party is conducting the defense, including providing reasonable access to documents, records and information in its possession or control relevant to such Claim.

(d)

Subject to the terms and provisions of this Article VIII, Tallgrass Holdco shall reimburse any and all costs, expenses, legal fees, expert fees and other charges reasonably incurred by an Indemnified Party pursuant to Section 8.2(c) as they are incurred (to be reimbursed within thirty (30) days following receipt of invoices for those charges); provided, however, that Tallgrass Holdco may condition any reimbursement on receipt of a promise by Seller and/or such Indemnified Party to repay those amounts if it is ultimately determined that Tallgrass Holdco was not required to indemnify the Indemnified Parties for those amounts hereunder.


Section 8.3	Limitations .

Tallgrass Holdco will not have any liability under Section 8.1 unless the Claim Notice is received by Tallgrass Holdco within twenty-four (24) months following the Closing Date. In no event will Tallgrass Holdco have aggregate liability under Section 8.1 in excess of $10,000,000.

ARTICLE IX

MISCELLANEOUS


Section 9.1	Acknowledgements .

Buyer acknowledges that except for the representations and warranties expressly and specifically set forth in Article III, the Subject Interest is being sold “AS-IS, WHERE-IS,” and neither the Seller nor any of its Affiliates or Representatives makes any other express or implied representation or warranty with respect to the Seller, the Subject Interest, the Company or the transactions contemplated by this Agreement or the Assignment Agreement. Seller acknowledges that except for the representations and warranties expressly and specifically set forth in Article IV, neither the Buyer nor any of its Affiliates or Representatives makes any other express or implied representation or warranty with respect to the Buyer, the Subject Interest, the Company or the transactions contemplated by this Agreement or the Assignment Agreement. Each party acknowledges that it has relied on the representations and warranties of the other party expressly and specifically set forth in this Agreement. Such representations and warranties constitute the sole and exclusive representations and warranties of the parties hereto in connection with the transactions contemplated hereby, and the parties hereto understand, acknowledge and agree that all other representations and warranties of any kind or nature, whether expressed, implied or statutory, oral or written, past or present, are specifically disclaimed, whether made the parties, any of their respective Affiliates, or any of their respective Representatives.


Section 9.2	Cooperation; Further Assurances .

The parties shall use their respective commercially reasonable efforts to obtain all approvals and consents (if any) required by or necessary for the transactions contemplated by this Agreement and the Assignment Agreement, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things required by or necessary to consummate and make effective the transactions contemplated by this Agreement and the Assignment Agreement.


Section 9.3	Expenses .

Except as otherwise provided herein and regardless of whether the transactions contemplated hereby are consummated, each party shall pay its own expenses incident to this Agreement and the Assignment Agreement and all action taken in preparation for carrying this Agreement and the Assignment Agreement into effect.


Section 9.4	Notices .

Any notice, request, instruction, correspondence or other document to be given hereunder by any party hereto to another party hereto (herein collectively called "Notice") shall be in writing and delivered in person, by courier service requiring acknowledgment of receipt of delivery, or by certified or registered mail (return receipt requested, postage prepaid), as follows:

If to Seller, addressed to:

Sempra REX Holdings, LLC

488 8 ^th Avenue

San Diego, California 92101

Attention: President

Tel: (619) 696-2000

with copies (which shall not constitute notice) to:

Sempra U.S. Gas & Power, LLC

488 8 ^th Avenue

San Diego, California 92101

Attention: General Counsel

Tel: (619) 696-2000

If to Tallgrass Holdco, addressed to:

Rockies Express Holdings, LLC

4200 W. 115th Street, Suite 350

Leawood, KS 66211

Attention: William R. Moler

Tel: (913) 928-6008

with copies (which shall not constitute notice) to:

Rockies Express Holdings, LLC

4200 W. 115th Street, Suite 350

Leawood, KS 66211

Attention: General Counsel's Office

Tel: (913) 928-6038

If to P66 Holdco: as provided in the Joinder Agreement.

Notice given by personal delivery or courier service shall be effective upon actual receipt. Notice given by certified or registered mail shall be effective four (4) Business Days after mailing. Any party may change any address to which Notice is to be given to it by giving Notice as provided above of such change of address.


Section 9.5	Governing Law .

(a)

This Agreement shall be subject to and governed by the laws of the State of Delaware. Each of the parties agree that any legal proceeding with respect to or arising out of this Agreement or the Assignment Agreement shall be brought in the United States District Court for New York or the courts of the State of New York, in the City of New York. By execution and delivery of this Agreement, each of the parties irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and to the appellate courts therefrom. Each of the parties irrevocably consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified airmail, postage prepaid, at the applicable address set forth in Section 9.4 (or at such address as may be subsequently changed in accordance with Section 9.4).


(b)	EACH OF THE PARTIES TO THIS AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ASSIGNMENT AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE ASSIGNMENT AGREEMENT.


(c)	Each party to this Agreement waives, to the fullest extent permitted by Law, any right it may have to receive damages from any other party based on any theory of liability for any special, indirect, consequential (including lost profits), exemplary or punitive damages.

(d)

Each of the parties agree that the rights and remedies for failure to comply with this Agreement shall include having the provisions of this Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the non-breaching party and that money damages would not provide an adequate remedy to the non-breaching party, and the breaching party hereby waives any requirements for the non-breaching party to post a bond or other security in connection therewith. Any such specific or equitable relief granted shall not be exclusive and each of the parties shall be entitled to pursue any other remedy available to it at law or in equity.


Section 9.6	Initial Public Statements .

The parties shall consult with each other regarding any initial public announcement or statement with respect to this Agreement and the transactions contemplated hereby, and no party shall issue any such initial public announcement or statement, without first providing the other parties at least twenty-four (24) hours’ prior notice of such initial public announcement or statement. For the avoidance of doubt, nothing contained in this Agreement shall prohibit a party, or such party's Affiliate, from making any public disclosures required by applicable Law or obligations pursuant to any listing agreement with any national securities exchange, as reasonably determined by the party making such public disclosure, provided that, each party making any such public disclosure shall endeavor to provide prior notice of such public disclosure to the other parties.


Section 9.7	Survival .

All the provisions of this Agreement shall survive the Closing, notwithstanding any investigation at any time made by or on behalf of any party hereto, provided that the representations and warranties set forth in Article III and Article IV shall terminate and expire on the two year anniversary of the Closing Date, except (i) the representations and warranties of Seller set forth in Section 3.1 (Organization and Existence), Section 3.2 (Authority and Approval), Section 3.4 (Title to Subject Interest) and Section 3.6 (Brokerage Arrangements) shall survive forever, and (ii) the representations and warranties of Buyer set forth in Section 4.1 (Organization and Existence), Section 4.2 (Authority and Approval) and Section 4.4 (Brokerage Arrangements) shall survive forever. Notwithstanding the foregoing, any

claims asserted in good faith with reasonable specificity (to the extent known at such time) and in writing by notice from the non-breaching party to the breaching party prior to the expiration date of the applicable survival period shall not thereafter be barred by the expiration of the relevant representation or warranty and such claims shall survive until finally resolved.


Section 9.8	Entire Agreement; Amendments and Waivers .

(a)

This Agreement and the Assignment Agreement constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. Each party to this Agreement agrees that no other party to this Agreement (including its agents and Representatives) has made any representation, warranty, covenant or agreement to or with such party relating to this Agreement or the transactions contemplated hereby, other than those expressly set forth herein and in the Assignment Agreement.


(b)	No supplement, modification or waiver of this Agreement shall be binding unless executed in writing by each party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.


Section 9.9	Conflicting Provisions .

This Agreement and the Assignment Agreement, read as a whole, set forth the parties’ rights, responsibilities and liabilities with respect to the transactions contemplated by this Agreement. In this Agreement and the Assignment Agreement, and as between them, specific provisions prevail over general provisions. In the event of a conflict between this Agreement and the Assignment Agreement, this Agreement shall control.


Section 9.10	Binding Effect and Assignment; Certain Restrictions .

(a)

This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective permitted successors and assigns, but neither this Agreement nor any of the rights, benefits or obligations hereunder shall be assigned or transferred, by operation of law or otherwise, by any party hereto without the prior written consent of each other party; provided, however, that (i) Tallgrass Holdco may assign its rights and obligations under this Agreement to a direct or indirect wholly owned subsidiary of Tallgrass Energy Partners, LP for purposes of having such entity take ownership of some or all of the Subject Interest so long as Tallgrass Holdco remains jointly and severally obligated to satisfy all of Tallgrass Holdco’s obligations under this Agreement, as a Buyer or otherwise, and (ii) if P66 Holdco elects to exercise the ROFR and executes the joinder agreement attached as Exhibit C, P66 Holdco may assign its rights and obligations under this Agreement to a direct or indirect wholly owned subsidiary of Phillips 66 Partners LP for purposes of having such entity take ownership of some or all of the Subject Interest so long as P66 Holdco remains jointly and severally obligated to satisfy all of P66 Holdco’s obligations under this Agreement, as a Buyer or otherwise. Nothing in this Agreement, express or implied, is intended to confer upon any person or entity other than the parties hereto and their respective permitted successors and assigns, any rights, benefits or obligations hereunder.


(b)	Beginning on the Effective Date and ending twenty-four months following the Closing Date (or, if Tallgrass Holdco has received one or more Claim Notice(s) during such period then ending on the date, if later, that all such potential Claim(s) have been fully and finally resolved and any amounts owed to the Indemnified Parties under Article VIII have been paid

in full), Tallgrass Holdco (both individually and as a Buyer) shall not (i) assign, sell, transfer, divest or otherwise dispose of the portion of the Subject Interest in the Company it acquires pursuant to this Agreement and the Assignment Agreement, in whole or in part, to any Person or (ii) merge or consolidate with or into any Person (excluding a merger or consolidation where Tallgrass Holdco is the surviving entity), in each case unless in connection with the consummation of such transaction, the assignee/acquirer of such membership interest or the surviving entity in such merger or consolidation, as applicable, agrees to assume in full and discharge when due, on a joint and several basis, the obligations of Tallgrass Holdco (both individually and as a Buyer) under this Agreement and the Assignment Agreement (but in the case of clause (i) above, with the percentage of the obligations so assumed limited to the relative portion of the Subject Interest so assigned or acquired in such transaction). For avoidance of doubt, but without limiting or waiving any rights or remedies of Seller at law or in equity, the foregoing does not apply to the fifty percent (50%) membership interest in the Company held by Tallgrass Holdco on the Effective Date. Any such assignment, sale, transfer, divestiture, disposal, merger or consolidation in violation of the restrictions set forth in this Section 9.10(b) shall be null and void.

(c)

Beginning on the Effective Date and ending twenty-four months following the Closing Date, if P66 Holdco elects to exercise the ROFR and executes the joinder agreement attached as Exhibit C, P66 Holdco (both individually and as a Buyer) shall not (i) assign, sell, transfer, divest or otherwise dispose of the portion of the Subject Interest in the Company it acquires pursuant to this Agreement and the Assignment Agreement, in whole or in part, to any Person or (ii) merge or consolidate with or into any Person (excluding a merger or consolidation where P66 Holdco is the surviving entity), in each case unless in connection with the consummation of such transaction, the assignee/acquirer of such membership interest or the surviving entity in such merger or consolidation, as applicable, agrees to assume in full and discharge when due, on a joint and several basis, the obligations of P66 Holdco (both individually and as a Buyer) under this Agreement and the Assignment Agreement (but in the case of clause (i) above, with the percentage of the obligations so assumed limited to the relative portion of the Subject Interest so assigned or acquired in such transaction). For avoidance of doubt, but without limiting or waiving any rights or remedies of Seller at law or in equity, the foregoing does not apply to the twenty-five percent (25%) membership interest in the Company held by P66 Holdco on the Effective Date. Any such assignment, sale, transfer, divestiture, disposal, merger or consolidation in violation of the restrictions set forth in this Section 9.10(c) shall be null and void.


Section 9.11	Severability .

If any provision of the Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by decree of a court of last resort, the parties shall promptly meet and negotiate in good faith substitute provisions for those rendered or declared illegal or unenforceable so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner, but all of the remaining provisions of this Agreement shall remain in full force and effect.


Section 9.12	Interpretation .

It is expressly agreed by the parties that neither this Agreement nor the Assignment Agreement shall be construed against any party, and no consideration shall be given or presumption made, on the basis of who drafted this Agreement, the Assignment Agreement or any provision hereof or thereof or who supplied the form of this Agreement or the Assignment Agreement. Each party agrees that this Agreement has been purposefully drawn and correctly reflects its understanding of the transactions contemplated by this Agreement and, therefore, waives the application of any law,

regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.


Section 9.13	Headings and Exhibits .

The headings of the several Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The Exhibits referred to herein are attached hereto and incorporated herein by this reference, and unless the context expressly requires otherwise, such Exhibits are incorporated in the definition of "Agreement."


Section 9.14	Multiple Counterparts .

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Each party agrees that the execution and delivery of this Agreement and the Assignment Agreement by facsimile or other electronic transmission shall have the same force and effect as delivery of original signatures.

* * * * *

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

SELLER:

SEMPRA REX HOLDINGS, LLC

By: /s/ William R. Engelbrecht

Name: William R. Engelbrecht

Title: Vice President

BUYER:

ROCKIES EXPRESS HOLDINGS, LLC

By:

Name:

Title:

Signature Page to Membership Interest Purchase Agreement

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

SELLER:

SEMPRA REX HOLDINGS, LLC

By:

Name:

Title:

BUYER:

ROCKIES EXPRESS HOLDINGS, LLC

By: /s/ David G. Dehaemers, Jr.

Name: David G. Dehaemers, Jr.

Title: Chief Executive Officer

Signature Page to Membership Interest Sale Agreement

Exhibit A

Form of Assignment Agreement

[See Attached]

ASSIGNMENT AGREEMENT

This ASSIGNMENT AGREEMENT (this " Assignment "), dated as of [________], is entered into by and between Sempra REX Holdings, LLC, a Delaware limited liability company (" Assignor "), [_______________] (" Assignee ") and [Rockies Express Holdings, LLC, a Delaware limited liability company (“ Tallgrass Holdco ”) / P66REX LLC, a Delaware limited liability company (“ P66 Holdco ”)]. Assignor, Assignee and [Tallgrass Holdco/P66 Holdco] may be referred to individually as a "Party" or collectively as the "Parties."

RECITALS

Pursuant to the terms of a Membership Interest Purchase Agreement (the " Purchase Agreement ", with capitalized terms used but not defined herein having the respective meanings set forth in the Purchase Agreement), dated as of March 29, 2016, among Assignor and Assignee, Assignor will transfer to Assignee [____ percent (___%)] membership interest (the " Subject Interest ") in Rockies Express Pipeline LLC, a Delaware limited liability company (the " Company ").

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

AGREEMENT

1.1. Assignment and Assumption of the Subject Interest . Assignor hereby grants, contributes, bargains, conveys, assigns, transfers, sets over and delivers the Subject Interest to Assignee, and Assignee hereby accepts the Subject Interest. With effect from and after such assignment, Assignee hereby agrees to assume and discharge, when due, any and all obligations arising under the REX LLC Agreement with respect to the Subject Interest after the Closing (the “ Assumed Obligations ”). For avoidance of doubt, each of Assignee, [Tallgrass Holdco/P66 Holdco] and Assignor hereby acknowledge and agree that Assignor shall have no liability nor responsibility for the Assumed Obligations from and after the Closing.

1.2 No Other Representations or Warranties . Except for the representations and warranties of Assignor expressly and specifically set forth in Article III of the Purchase Agreement or any certificate delivered by Assignor at the Closing, (x) the Subject Interest is being assigned and transferred “AS-IS, WHERE-IS” and with all faults, and (y) Assignor expressly disclaims any representations or warranties of any kind or nature, express, statutory or implied, with respect thereto.

1.3. Purchase Agreement . This Assignment is subject to, in all respects, the terms and conditions of the Purchase Agreement, and nothing contained herein is meant to enlarge, diminish or otherwise alter the terms and conditions of the Purchase Agreement or the Parties’ duties and obligations contained therein. To the extent there is a conflict between this Assignment and the Purchase Agreement, the terms of the Purchase Agreement will control.

1.4. Binding Effect . This Assignment shall be binding upon and inure to the benefit of the Parties and their respective heirs, successors and assigns.

1.5. Governing Law . This Assignment and the transactions contemplated hereby will be governed by and interpreted in accordance with the laws of the State of Delaware, without regard to principles of conflicts of laws. Each of the Parties agree that any legal proceeding with respect to or arising out of this Assignment or the Purchase Agreement shall be brought in the United States District Court for New York or the courts of the State of New York, in the City of New York. By execution and delivery of this Assignment, each of the Parties irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and to the appellate courts therefrom. Each of the Parties irrevocably consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified airmail, postage prepaid, at the applicable address set forth in Section 9.4 of the Purchase Agreement (or at such address as may be subsequently changed in accordance with Section 9.4 of the Purchase Agreement). EACH OF THE PARTIES TO THIS ASSIGNMENT IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO THIS ASSIGNMENT OR THE PURCHASE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS ASSIGNMENT OR THE PURCHASE AGREEMENT. Each Party to this Assignment waives, to the fullest extent permitted by Law, any right it may have to receive damages from any other party based

on any theory of liability for any special, indirect, consequential (including lost profits), exemplary or punitive damages. Each Party to this Assignment agrees that the rights and remedies for failure to comply with this Assignment shall include having the provisions of this Assignment specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the non-breaching Party and that money damages would not provide an adequate remedy to the non-breaching Party, and the breaching Party hereby waives any requirements for the non-breaching Party to post a bond or other security in connection therewith. Any such specific or equitable relief granted shall not be exclusive and each of the Parties shall be entitled to pursue any other remedy available to it at law or in equity.

1.6. Further Assurances . The Parties agree to execute all instruments and to take all actions that are reasonably necessary to effect the transactions contemplated hereby.

1.7. Counterparts . This Assignment may be signed in any number of counterparts, each of which will be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. Delivery of an executed counterpart of a signature page to this Assignment by facsimile or in electronic (i.e., "pdf" or "tif") format shall be effective as delivery of a manually executed counterpart of this Assignment.

[Signature Page Follows]

I N WITNESS WHEREOF, the Parties have executed this Assignment as of the date first written above.

ASSIGNOR:

SEMPRA REX HOLDINGS, LLC

By:

Name:

Title:

ASSIGNEE:

[ ]

By:

Name:

Title:

[TALLGRASS HOLDCO/P66 HOLDCO]:

[ ]

By:

Name:

Title:

Exhibit B

Form of Transfer Notice

[See Attached]

Sempra REX Holdings, LLC

488 8th Avenue

San Diego, CA 92101

March 30, 2016

VIA OVERNIGHT COURIER

P66REX LLC

c/o Phillips 66

600 North Dairy Ashford

Houston, Texas 77079

Attention: Manager, Joint Ventures


Re:	Rockies Express Pipeline LLC

Ladies and Gentlemen:

Reference is made to the Second Amended and Restated Limited Liability Company Agreement (as amended, the “ LLC Agreement ”) of Rockies Express Pipeline LLC (the “ Company ”) effective as of January 1, 2010, by and among Rockies Express Holdings, LLC, a Delaware limited liability company (as successor by assignment to Kinder Morgan W2E Pipeline LLC, the “ Tallgrass Member ”), Sempra REX Holdings, LLC, a Delaware limited liability company (as successor by assignment to P&S Project I, LLC, the “ Sempra Member ”), and P66REX LLC, a Delaware limited liability company (f/k/a COPREX LLC, a Delaware limited liability company, the “ Phillips 66 Member ”). Capitalized terms used but not defined in this letter have the meanings set forth in the LLC Agreement. In accordance with Section 12.1 of the LLC Agreement, this Transfer Notice is being sent by overnight courier and is therefore deemed to be received by the Phillips 66 Member on March 31, 2016.

The Sempra Member intends to sell the 25% Membership Interest in the Company owned by the Sempra Member (together, the “ Subject Interest ”) to the Tallgrass Member (in such capacity, together with any permitted assignee of the Tallgrass Member under Section 9.10(a) of the Purchase Agreement (defined below), the " Transferee "), pursuant to the terms of a Membership Interest Purchase Agreement effective as of March 29, 2016 (the “ Purchase Agreement ”), between the Sempra Member and the Tallgrass Member (the “ Sale ”). The purchase price for the Subject Interest under the Purchase Agreement is $440,000,000 (subject to adjustment as described in the Purchase Agreement), which shall be payable in cash at the closing. A fully executed copy of the Purchase Agreement accompanies this letter. The complete terms and conditions for the Sale are set forth in the Purchase Agreement and are incorporated herein.

As set forth in Section 5.1 of the Purchase Agreement, the execution of the Purchase Agreement by the Sempra Member and the Tallgrass Member is also deemed to be (i) delivery of a Transfer Notice to the Tallgrass Member, as an Optionee, pursuant to Section 7.1.2 of the LLC Agreement and (ii) an irrevocable election by the Tallgrass Member, as an Optionee, to exercise its right of first refusal with respect to its proportionate share of the Subject Interest pursuant to Section 7.1.3 of the LLC Agreement, on the same terms and conditions as set forth in this Transfer Notice and in the Purchase Agreement.

This letter serves as the Transfer Notice to you, the Phillips 66 Member, with respect to the proposed Sale, which is required to be delivered by the Sempra Member pursuant to Section 7.1.2 of the LLC Agreement. Pursuant to Section 7.1.3 of the LLC Agreement, the proposed Sale is subject to the right of the Phillips 66 Member, as an Optionee, to purchase up to its proportionate share of the Subject Interest on the same terms and conditions as set forth in this Transfer Notice and in the Purchase Agreement.

Pursuant to Section 7.1.3 of the LLC Agreement, if the Optionees do not collectively agree to purchase 100% of the Subject Interest, then the Sempra Member will be permitted to sell the entire Subject Interest to the Transferee. The Tallgrass Member has agreed to purchase its proportionate share of the Subject Interest as an Optionee, but is not willing to purchase more than its proportionate share of the Subject Interest as an Optionee. As a result, if the Phillips

66 Member elects to exercise its right of first refusal with respect to less than its proportionate share of the Subject Interest, then the Optionees will be deemed to have not elected to purchase all of the Subject Interest.

If the Phillips 66 Member desires to exercise its right of first refusal with respect to its proportionate share of the Subject Interest, then the Phillips 66 Member must execute and return to the Sempra Member the joinder agreement in the form attached as Exhibit C to the Purchase Agreement (the “ Joinder Agreement ”) within 30 days of receipt of the Transfer Notice, which is on or before April 30, 2016. The Sempra Member’s receipt of the Joinder Agreement will be deemed to constitute written notice to the Sempra Member of the Phillips 66 Member’s irrevocable election to accept the Sempra Member’s offer pursuant to this Transfer Notice, as required by Section 7.1.3 of the LLC Agreement. The closing of the purchase by Phillips 66 Member shall thereafter take place in accordance with Section 2.3 of the Purchase Agreement.

The executed Joinder Agreement should be delivered to the Sempra Member at the following address:

Sempra REX Holdings, LLC

488 8 ^th Avenue

San Diego, CA 92101

Fax: 619-696-2119

Attention: Vice President – Commercial Development

With copy to:

Sempra U.S. Gas & Power, LLC

488 8 ^th Avenue

San Diego, CA 92101

Fax: 619-696-1830

Attention: Vice President and General Counsel

If the Sempra Member has not received an executed Joinder Agreement from the Phillips 66 Member on or before April 30, 2016, then the Phillips 66 Member will be deemed to have rejected the offer, as provided by Section 7.1.3 of the LLC Agreement. If the Phillips 66 Member elects to exercise its right of first refusal with respect to less than its proportionate share of the Subject Interest, then the Optionees will be deemed to have not elected to purchase all of the Subject Interest. In either case, the Sempra Member will then be entitled to consummate the Sale to the Transferee for the entire Subject Interest at any time within 120 days thereafter pursuant to the terms of the Purchase Agreement.

[SIGNATURE PAGE FOLLOWS]

Please do not hesitate to contact the undersigned at (619) 696-4484 if you have any questions regarding the matters addressed in this letter.

Yours very truly,

Sempra REX Holdings, LLC

a Delaware limited liability company

By: _________________________________

Name: William Engelbrecht

Title: Vice President

cc: Phillips 66

600 N. Dairy Ashford (PW 8133)

Houston, Texas 77079

Attention: Deputy General Counsel, Commercial, Transportation and Marketing

P66REX LLC

c/o Phillips 66

3010 Briar Park Drive

Houston, Texas 77042

Attention: Van P. Williams

Diana Santos, REX Director for the Phillips 66 Member (via e-mail to Diana.Santos@p66.com)

Rockies Express Holdings, LLC

4200 W. 115th Street, Suite 350

Leawood, KS 66211

Attention: General Counsel

Exhibit C

Joinder Agreement

[See Attached]

JOINDER AGREEMENT

This Joinder Agreement (" Joinder Agreement "), effective as of [●], 2016 (the " Effective Date "), is entered into by P66REX LLC, a Delaware limited liability company (f/k/a COPREX LLC, a Delaware limited liability company, " P66 Holdco "), Sempra REX Holdings, LLC, a Delaware limited liability company (" Seller "), and Rockies Express Holdings, LLC, a Delaware limited liability company (" REX Holdings "). Capitalized terms used, but not defined, herein shall have the meaning ascribed to such terms in the Purchase Agreement (as defined below).

RECITALS

WHEREAS, Seller and REX Holdings entered into that certain Membership Interest Purchase Agreement, effective as of March 29, 2016 (as amended, restated, supplemented or otherwise modified from time to time, the " Purchase Agreement "), whereby Seller agreed to sell its 25% membership interest (the " Subject Interest ") in Rockies Express Pipeline LLC, a Delaware limited liability company (the " Company "), to REX Holdings (the " Sale ").

WHEREAS, pursuant to Section 5.1 of the Purchase Agreement, and in accordance with Section 7.1.2 and Section 7.1.3 of the REX LLC Agreement, Seller delivered to P66 Holdco notice of the Sale (the " Notice ").

WHEREAS, in accordance with the Notice and the REX LLC Agreement, the execution of this Joinder Agreement by P66 Holdco is deemed to be (i) an irrevocable election by P66 Holdco to exercise its right of first refusal with respect to its proportionate share of the Subject Interest and (ii) written notice to Seller of that fact, as required by Section 7.1.3 of the REX LLC Agreement.

WHEREAS, this Joinder Agreement supplements the Purchase Agreement and is delivered by P66 Holdco pursuant to Section 5.1 of the Purchase Agreement.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, P66 Holdco, Seller and REX Holdings hereby agree as follows:

1. Joinder. P66 Holdco acknowledges receipt of a true and correct copy of the Purchase Agreement. P66 Holdco hereby joins the Purchase Agreement and, as of the date hereof, becomes a Buyer under the Purchase Agreement as if an original party thereto, subject to all of the terms, obligations, covenants, conditions, limitations, restrictions and provisions applicable to Buyer and P66 Holdco contained in the Purchase Agreement, which rights and obligations shall be several and not joint with respect to P66 Holdco’s proportionate share of the Subject Interest as set forth in Section 7.2(d)(i) of the Purchase Agreement. By execution of this Joinder Agreement, P66 Holdco agrees that the Purchase Agreement shall be a binding obligation of P66 Holdco and any of its successors and permitted assigns, provided that, this Joinder Agreement, the Purchase Agreement and any of the rights, benefits or obligations hereunder or thereunder shall not be assigned or transferred by P66 Holdco, by operation of law or otherwise, without the prior written consent of each other party to the Purchase Agreement, except to the extent provided in Section 9.10 of the Purchase Agreement. P66 Holdco hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions applicable to Buyer and P66 Holdco contained in the Purchase Agreement.

2. Notices. For purposes of Section 9.4 of the Purchase Agreement, the notice address for P66 Holdco shall be:

P66REX LLC

c/o Phillips 66

600 North Dairy Ashford

Houston, Texas 77079

Attention: Manager, Joint Ventures

with copies (which shall not constitute notice) to:

Phillips 66

600 N. Dairy Ashford (PW 8133)

Houston, Texas 77079

Attention: Deputy General Counsel, Commercial, Transportation and Marketing


3.	Miscellaneous.

(a) No supplement, modification or waiver of this Joinder Agreement shall be binding unless executed in writing by P66 Holdco, Seller and REX Holdings.

(b) This Joinder Agreement shall be governed by, and construed in accordance with, the Laws of the State of Delaware, without regard to its conflict of law principles that would result in the application of the Laws of any other jurisdiction. Each party to this Joinder Agreement agrees that any legal proceeding with respect to or arising out of this Joinder Agreement, the Assignment Agreement or the Purchase Agreement shall be brought in the United States District Court for New York or the courts of the State of New York, in the City of New York. By execution and delivery of this Joinder Agreement, each party hereto irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and to the appellate courts therefrom. Each party to this Joinder Agreement irrevocably consents to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified airmail, postage prepaid, at the applicable address set forth in Section 9.4 of the Purchase Agreement (or at such address as may be subsequently changed in accordance with Section 9.4 of the Purchase Agreement). EACH OF THE PARTIES TO THIS JOINDER AGREEMENT IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING BETWEEN THE PARTIES ARISING OUT OF OR RELATING TO THIS JOINDER AGREEMENT, THE ASSIGNMENT AGREEMENT OR THE PURCHASE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. Each party to this Joinder Agreement waives, to the fullest extent permitted by Law, any right it may have to receive damages from any other party based on any theory of liability for any special, indirect, consequential (including lost profits), exemplary or punitive damages. Each party to this Joinder Agreement agrees that the rights and remedies for failure to comply with this Joinder Agreement shall include having the provisions of this Joinder Agreement specifically enforced by any court having equity jurisdiction, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the non-breaching parties and that money damages would not provide an adequate remedy to the non-breaching parties, and the breaching party hereby waives any requirements for the non-breaching parties to post a bond or other security in connection therewith. Any such specific or equitable relief granted shall not be exclusive and each of the parties shall be entitled to pursue any other remedy available to it at law or in equity.

(c) The provisions of this Joinder Agreement shall be deemed severable and the invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of the other provisions hereof.

(d) Delivery of an executed counterpart of a signature page to this Joinder Agreement by facsimile or in electronic (i.e., "pdf" or "tif") format shall be effective as delivery of a manually executed counterpart of this Joinder Agreement.

[ Remainder of page intentionally left blank ]

IN WITNESS WHEREOF, each of P66 Holdco, Seller and REX Holdings has executed this Joinder Agreement as of the date first above written.

P66 HOLDCO :

P66REX LLC

By:

Name:

Title:

SELLER:

SEMPRA REX HOLDINGS, LLC

By:

Name:

Title:

REX HOLDINGS:

ROCKIES EXPRESS HOLDINGS, LLC

By:

Name:

Title:

Exhibit D

Letter Agreement

[See Attached]

CONFIDENTIAL

PRIVILEGED SETTLEMENT COMMUNICATION

SUBJECT TO FRE 408

April [__], 2016

Andrew Scull

Sempra Rockies Marketing, LLC

488 8 ^th Avenue

San Diego, CA 92101

Re: Amendment to Negotiated Rate Agreement applicable to FTSA No. 553081

Dear Mr. Scull:

This binding Letter Agreement amends the Firm Transportation Negotiated Rate Agreement between Rockies Express Pipeline LLC (“Rockies Express”) and Sempra Rockies Marketing, LLC (“Shipper”) dated June 5, 2008 and designated Contract No. 553081 (the “NRA”), as amended by the settlement agreement that provides certainty regarding the scope and applicability of the Most Favored Nation rights applicable to Shipper (the “Settlement Agreement”), which was incorporated by reference in the NRA effective July 1, 2014. Rockies Express and Shipper are referred to herein together as the “Parties” and individually as a “Party.”

Rockies Express and the Shipper now hereby mutually acknowledge and agree to the following amendment of the Settlement Agreement:


1.	Section 3.2 of the Settlement Agreement is replaced in its entirety by the following:

“The Settling Shipper’s MFN Rights can only be triggered by Eligible Contracts as further described in this Section 3. “Eligible Contracts” are firm transportation contracts on Rockies Express’ mainline facilities, excluding the following: (i) transportation contracts providing for east-to-west transportation within Zone 3; (ii) those Foundation Shipper’s and Anchor Shippers’ Firm Transportation Service Agreements in effect on June 1, 2014; (iii) any amendment(s) to the Foundation Shipper’s or Anchor Shippers’ Firm Transportation Service Agreements (but only if such Firm Transportation Service Agreements were in effect on June 1, 2014) affecting the commercial terms of the same, including without limitation changes to rate, term, and/or volume, provided that substantially similar Foundation Shipper or Anchor Shipper amendment terms are also offered to the Settling Shipper either prior to, or within five days after, execution of such an amendment (regardless of whether Settling Shipper’s maximum daily transportation quantity is less than the Foundation Shipper or Anchor Shipper).”

If the amendments to the Settlement Agreement set forth in the immediately preceding paragraph are modified or conditioned, in any respect, by an order of the Federal Energy Regulatory Commission (“FERC”) upon a filing by Rockies Express to obtain FERC’s acceptance of the same, Rockies Express and Shipper shall each have thirty (30) days from and after the date of issuance of such order to determine whether such modification or condition is acceptable to such Party. If, within, such 30-day period, either Party notifies the other Party in writing that any such modification or condition is unacceptable, this Letter Agreement shall immediately terminate without liability or future obligation to either Party.

Except as expressly provided herein, all other terms and conditions of the NRA, including without limitation the Settlement Agreement and any amendments to the NRA, shall remain in full force and effect. The amendments identified herein shall not affect the rights and/or obligations of any party to the Settlement Agreement that is not a signatory of this Letter Agreement.

Please indicate Shipper’s agreement to this Letter Agreement by signing below. Upon the Parties’ mutual execution below, this Letter Agreement will constitute the legal, valid, binding and enforceable obligation of the Parties as of the date first written above. The Parties represent to each another that no further board or management approvals are necessary to give effect to this Letter Agreement.

370 Van Gordon Street Lakewood, CO 80228-1519 303.763.2950

Please do not hesitate to call me if you have any questions.

Thank you,

Matthew P. Sheehy

President

Rockies Express Pipeline LLC



ACCEPTED AND AGREED BY: Rockies Express Pipeline LLC By: ______________________________________ Name: ____________________________________ Title: _____________________________________ Date: _____________________________________	ACCEPTED AND AGREED BY: Sempra Rockies Marketing, LLC By: ______________________________________ Name: ___________________________________ Title: _____________________________________ Date: _____________________________________

Exhibit 10.3

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement (this “ Agreement ”) is made and effective as of May 6, 2016 (the “ Effective Date ”) by and between Rockies Express Holdings, LLC, a Delaware limited liability company (“ Assignor ”), and TEP REX Holdings, LLC, a Delaware limited liability company (“ Assignee ”). Additionally, Tallgrass Development, LP, a Delaware limited partnership (“ Development ”), is a party to this Agreement for the limited purposes set forth in Article III , Article VI and Article VII .

RECITALS

WHEREAS, Assignor has entered into that certain Membership Interest Purchase Agreement, dated as of March 29, 2016 (the “ Purchase Agreement ”) with Sempra REX Holdings, LLC, a Delaware limited liability company (“ Sempra ”), pursuant to which Assignor has agreed to acquire Sempra’s 25% membership interest (the “ Subject Interest ”) in Rockies Express Pipeline LLC, a Delaware limited liability company (the “ Company ”), in exchange for payment of the Purchase Price (as defined therein) and, as applicable, other consideration recited in the Purchase Agreement;

WHEREAS, Assignor, Sempra and P66 Holdco have entered into that certain Letter Agreement, dated as of April 27, 2016 (the “ Side Letter ”), pursuant to which P66 Holdco waived all of its rights under the Original REX LLC Agreement related to the transactions contemplated by the Purchase Agreement, including the ROFR, and in exchange for such waiver, Assignor and Sempra agreed to amend the Original REX LLC Agreement by executing, immediately prior to the Subject Interest Closing, Amendment No. 2 to Second Amended and Restated Limited Liability Company Agreement of the Company (the “ Amendment ,” and such Original REX LLC Agreement as amended by the Amendment, the “ REX LLC Agreement ”), which will, among other things, amend certain approval, consent and presence requirements set forth in the Original REX LLC Agreement;

WHEREAS, pursuant to Section 9.10(a) of the Purchase Agreement, Assignor may assign its rights and obligations under the Purchase Agreement to a wholly owned subsidiary of Tallgrass Energy Partners, LP, a Delaware limited partnership (the “ Partnership ”), for purposes of having such entity take ownership of some or all of the Subject Interest so long as Assignor remains jointly and severally obligated to satisfy all of Assignor’s obligations under the Purchase Agreement;

WHEREAS, Assignee is an indirect wholly owned subsidiary of the Partnership;

WHEREAS, Assignor desires to assign to Assignee its rights and obligations under the Purchase Agreement, and Assignee desires to accept from Assignor such rights and obligations, pursuant to the terms of this Agreement; and

WHEREAS, the conflicts committee of the Board of Directors (as hereinafter defined) (the “ Conflicts Committee ”) has previously found the Transaction to be fair and reasonable to the Partnership and the holders of its Common Units (other than Assignor and its Affiliates) and recommended that the board of directors (the “ Board of Directors ”) of Tallgrass MLP GP, LLC, the general partner of the Partnership (the “ General Partner ”), approve the Transaction and, subsequently, the Board of Directors has approved the Transaction.

NOW, THEREFORE, in consideration of the premises and the respective representations, warranties, covenants, agreements and conditions contained herein, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1 Definitions .

so defined. Capitalized terms used but not defined herein shall have the meanings given to such terms in the Purchase Agreement.

“ Action ” means any claim, action, cause of action, demand, lawsuit, arbitration, inquiry, audit, notice of violation, proceeding, litigation, citation, summons, subpoena or investigation of any nature, whether civil, criminal, administrative, regulatory or otherwise, and whether at law or in equity.

“ Affiliate ,” when used with respect to a Person, means any other Person that directly or indirectly Controls, is Controlled by or is under common Control with such first Person; provided, however, that (i) with respect to Assignor, the term “Affiliate” shall exclude the Partnership, the General Partner and the Partnership’s subsidiaries, (ii) with respect to the Assignee, the term “Affiliate” shall exclude Assignor, Development, and its general partner, Tallgrass Energy Holdings, LLC, and (iii) the Company shall be deemed to be an “Affiliate” (x) prior to the Closing, of Assignor and (y) on and after the Closing, of both Assignor and Assignee. No Person shall be deemed an Affiliate of any Person solely by reason of the exercise or existence of rights, interests or remedies under this Agreement.

“ Agreement ” has the meaning ascribed to such term in the preamble.

“ Amendment ” has the meaning ascribed to such term in the recitals.

“ Assignee ” has the meaning ascribed to such term in the preamble.

“ Assignee Claim ” has the meaning ascribed to such term in Section 6.1 .

“ Assignee Indemnified Parties ” has the meaning ascribed to such term in Section 6.1 .

“ Assignment ” has the meaning ascribed to such term in Section 2.1 .

“ Assignor ” has the meaning ascribed to such term in the preamble.

“ Assignor Claim ” has the meaning ascribed to such term in Section 6.2 .

“ Assignor Indemnified Parties ” has the meaning ascribed to such term in Section 6.2 .

“ Assumption ” has the meaning ascribed to such term in Section 2.2 .

“ Balance Sheet ” has the meaning ascribed to such term in Section 3.5 .

“ Balance Sheet Date ” has the meaning ascribed to such term in Section 3.5 .

“ Board of Directors ” has the meaning ascribed to such term in the recitals.

“ Business Day ” means any day except Saturday, Sunday or any other day on which commercial banks located in the State of Kansas are authorized or required by Law to be closed for business.

“ Ceiling Amount ” has the meaning ascribed to such term in Section 6.5(a) .

“ CERCLA ” means the Comprehensive Environmental Response, Compensation, and Liability Act.

“ Claim ” has the meaning ascribed to such term in Section 6.2 .

“ Claim Notice ” has the meaning ascribed to such term in Section 6.3(a) .

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Commission ” means the Securities and Exchange Commission.

“ Company ” has the meaning ascribed to such term in the recitals.

“ Company Assets ” means all of the assets owned by the Company on the Effective Date.

“ Conflicts Committee ” has the meaning ascribed to such term in the recitals.

“ Control ” and its derivatives mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“ Damages ” means, collectively, liabilities, judgments, costs and other expenses (including reasonable legal fees and expenses), obligations, causes of action at law or in equity and other claims of any and every kind.

“ Deductible Amount ” has the meaning ascribed to such term in Section 6.5(a) .

“ Development ” means Tallgrass Development, LP, a Delaware limited partnership.

“ Disclosure Schedules ” has the meaning ascribed to such term in Article III .

“ Effective Date ” has the meaning ascribed to such term in the preamble.

“ Environmental Laws ” means , without limitation, the following laws, in effect as of the Effective Date, as such law may be amended after the Effective Date: (a) the Resource Conservation and Recovery Act; (b) the Clean Air Act; (c) CERCLA; (d) the Federal Water Pollution Control Act; (e) the Safe Drinking Water Act; (f) the Toxic Substances Control Act; (g) the Emergency Planning and Community Right-to Know Act; (h) the National Environmental Policy Act; (i) the Pollution Prevention Act of 1990; (j) the Oil Pollution Act of 1990; (k) the Hazardous Materials Transportation Act; (l) the Federal Insecticide, Fungicide and Rodenticide Act; (m) all laws, statutes, rules, regulations, orders, judgments or decrees promulgated or issued with respect to the foregoing Environmental Laws by Governmental Authorities with jurisdiction in the premises; and (n) any other federal, state or local statutes, laws, common laws, ordinances, rules, regulations, orders, codes, decisions, injunctions or decrees that regulate or otherwise pertain to the protection of the environment, including, but not limited to, the management, control, discharge, emission, exposure, treatment, containment, handling, removal, use, generation, permitting, migration, storage, release, transportation, disposal, remediation, manufacture, processing or distribution of Hazardous Materials that are or may present a threat to human health or the environment.

“ FERC ” means the United States Federal Energy Regulatory Commission.

“ GAAP ” means generally accepted accounting principles in the United States of America.

“ General Partner ” has the meaning ascribed to such term in the recitals.

“ Governmental Authority ” means any federal, state, municipal or other government, governmental court, department, commission, board, bureau, agency or instrumentality.

“ Governmental Order ” means any order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Authority.

“ Hazardous Materials ” means any substance, whether solid, liquid or gaseous: (a) which is listed, defined or regulated as a “hazardous material,” “hazardous waste,” “solid waste,” “hazardous substance,” “toxic substance,” “pollutant” or “contaminant,” or words of similar meaning or import found in any applicable Environmental Law; (b) which is or contains asbestos, polychlorinated biphenyls, radon, urea formaldehyde foam insulation, explosives or radioactive materials; (c) which is any petroleum, petroleum hydrocarbons, petroleum substances, petroleum or

petrochemical products, natural gas, crude oil and any components, fractions or derivatives thereof, any oil or gas exploration or production waste, and any natural gas, synthetic gas and any mixtures thereof; (d) which is radioactive material, waste and pollutants, radiation, radionuclides and their progeny, or nuclear waste including used nuclear fuel; or (e) which causes or poses a threat to cause contamination or nuisance on any properties, or any adjacent property or a hazard to the environment or to the health or safety of persons on or about any properties.

“ Indebtedness for Borrowed Money ” means, with respect to any Person, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind; (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments; (c) all obligations of such Person under conditional sale or other title retention agreements relating to property acquired by such Person; (d) all obligations of such Person in respect of the deferred purchase price of property or services or any other similar obligation upon which interest charges are customarily paid (excluding trade accounts payable incurred in the ordinary course of business); (e) all Indebtedness for Borrowed Money of others secured by (or for which the holder of such Indebtedness for Borrowed Money has an existing right, contingent or otherwise, to be secured by) any encumbrance on property owned or acquired by such Person, whether or not the Indebtedness for Borrowed Money secured thereby has been assumed; (f) all assurances by such Person of Indebtedness for Borrowed Money of others; (g) all capital lease obligations of such Person; (h) all obligations, contingent or otherwise, of such Person as an account party in respect of letters of credit and letters of guaranty and (i) all obligations, contingent or otherwise, of such Person in respect of bankers’ acceptances.

“ Indemnified Party ” and “ Indemnified Parties ” have the meanings ascribed to such terms in Section 6.2 .

“ Indemnitor ” has the meaning ascribed to such term in Section 6.3(a) .

“ Intellectual Property ” means all intellectual or industrial property and rights therein, however denominated, throughout the world, whether or not registered, including all patent applications, patents, trademarks, service marks, trade styles or dress, mask works, copyrights (including copyrights in computer programs, software, computer code, documentation, drawings, specifications and data), works of authorship, moral rights of authorship, rights in designs, trade secrets, technology, inventions, invention disclosures, discoveries, improvements, know-how, proprietary rights, formulae, processes, methods, technical and business information, and confidential and proprietary information, and all other intellectual and industrial property rights, whether or not subject to statutory registration or protection and, with respect to each of the foregoing, all registrations and applications for registration, renewals, extensions, continuations, reexaminations, reissues, divisionals, improvements, modifications, derivative works, goodwill, and common law rights, and causes of action relating to any of the foregoing.

“ Knowledge ” means the knowledge of the personnel of Assignor and Development designated on Exhibit A .

“ Law ” means any statute, law, ordinance, regulation, rule, code, order, constitution, treaty, common law, judgment, decree or rule of law of any Governmental Authority.

“ Lien ” means any mortgage, deed of trust, lien, security interest, pledge, conditional sales contract, charge, restriction (whether on voting, sale, transfer, disposition or otherwise and excluding any restrictions in this Agreement, the Purchase Agreement or the REX LLC Agreement) or other encumbrance of every type and description.

“ Material Adverse Effect ” means a material adverse effect on or material adverse change in (i) the assets, liabilities, financial condition or results of operations of the Company, other than any effect or change (a) in the natural gas transportation industry generally (including any change in the prices of natural gas or other hydrocarbon products, industry margins or any regulatory changes or changes in applicable Law or GAAP), (b) in United States or global political or economic conditions or financial markets in general, or (c) resulting from the announcement of the transactions contemplated by this Agreement and the Purchase Agreement and the taking of any actions contemplated by this Agreement or the Purchase Agreement, provided, that in the case of clauses (a) and (b), the impact on the Company is not materially disproportionate to the impact on similarly situated parties in the natural gas transportation industry, or (ii) the ability of Assignor to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement.

“ Material Contract ” has the meaning ascribed to such term in Section 3.9 .

“ Minimum Claim Amount ” has the meaning ascribed to such term in Section 6.5(a) .

“ Notice ” has the meaning ascribed to such term in Section 7.4 .

“ Original REX LLC Agreement ” means that certain Second Amended and Restated Limited Liability Company Agreement of the Company dated effective as of January 1, 2010, among Assignor (as successor by assignment to Kinder Morgan W2E Pipeline LLC), Sempra and P66 Holdco, as amended by that certain Amendment No. 1 to Second Amended and Restated Limited Liability Company Agreement of the Company effective November 13, 2012, among Kinder Morgan W2E Pipeline LLC, Sempra, Assignor and P66 Holdco.

“ P66 Holdco ” means P66REX LLC, a Delaware limited liability company formerly known as COPREX LLC.

“ Partnership ” has the meaning ascribed to such term in the recitals.

“ Partnership 8-K ” has the meaning ascribed to such term in Section 3.5 .

“ Permit ” means any license, permit or authorization issued or granted or waived by a Governmental Authority that is necessary for the conduct of the Company’s business as now being conducted.

“ Permitted Lien ” means all: (i) mechanics’, materialmen’s, repairmen’s, employees’ contractors’ operators’, carriers’, workmen’s or other like Liens or charges arising by operation of law, in the ordinary course of business or incident to the construction or improvement of any of the Company Assets, in each case, for amounts not yet delinquent (including any amounts being withheld as provided by law); (ii) Liens arising under conditional sales contracts and equipment leases with third parties entered into in the ordinary course of business; (iii) immaterial defects and irregularities in title, encumbrances, exceptions and other matters that, singularly or in the aggregate, will not materially interfere with the ownership, use, value, operation or maintenance of the Company Assets to which they pertain; (iv) Liens for Taxes that are not yet due and payable; (v) pipeline, utility and similar easements and other rights in respect of surface operations; (vi) Liens supporting surety bonds, performance bonds and similar obligations issued in connection with the Company’s business; and (vii) all rights to consent, by required notices to, filings with, or other actions by Governmental Authorities or third parties in connection with the sale or conveyance of easements, rights of way, licenses, facilities or interests therein if they are customarily obtained subsequent to the sale or conveyance.

“ Person ” means an individual or entity, including any partnership, corporation, association, trust, limited liability company, joint venture, unincorporated organization or other entity.

“ Purchase Agreement ” has the meaning ascribed to such term in the recitals.

“ Representative ” means, with respect to any Person, any and all directors, partners, members, officers, employees, consultants, financial advisors, counsel, accountants and other agents of such Person.

“ REX LLC Agreement ” has the meaning ascribed to such term in the recitals.

“ ROFR ” means that certain right of first refusal set forth in Section 7.1.3 of the Original REX LLC Agreement.

“ Securities Act ” means the Securities Act of 1933, as amended.

“ Sempra ” has the meaning ascribed to such term in the recitals.

“ Side Letter ” has the meaning ascribed to such term in the recitals.

“ Subject Interest ” has the meaning ascribed to such term in the recitals.

“ Subject Interest Closing ” means the Closing as defined in the Purchase Agreement.

“ Subject Interest Closing Date ” means the Closing Date as defined in the Purchase Agreement.

“ Tax ” means any and all U.S. federal, state, local or foreign net income, gross income, gross receipts, sales, use, ad valorem, transfer, franchise, capital stock, profits, license, license fee, environmental, customs duty, unclaimed property or escheat payments, alternative fuels, mercantile, lease, service, withholding, payroll, employment, unemployment, social security, disability, excise, severance, registration, stamp, occupation, premium, property (real or personal), windfall profits, fuel, value added, alternative or add on minimum, estimated or other similar taxes, duties, levies, customs, tariffs, imposts or assessments (including public utility commission property tax assessments) imposed by any Governmental Authority, together with any interest, penalties or additions thereto payable to any Governmental Authority in respect thereof or any liability for the payment of any amounts of any of the foregoing types as a result of being a member of an affiliated, consolidated, combined or unitary group, or being a party to any agreement or arrangement whereby liability for payment of such amounts was determined or taken into account with reference to the liability of any other Person.

“ Tax Return ” means any return, declaration, report, statement, election, claim for refund or other written document, together with all attachments, amendments and supplements thereto, filed with or provided to, or required to be filed with or provided to, a Governmental Authority in respect of Taxes.

“ TEGP 8-K ” has the meaning ascribed to such term in Section 3.5(b) .

“ Third Party Proceeds ” has the meaning ascribed to such term in Section 6.5(b) .

“ Transaction ” has the meaning ascribed to such term in Section 2.2 .

“ Transfer Tax ” has the meaning ascribed to such term in Section 2.4 .

Section 1.2 Construction .

In constructing this Agreement: (a) the word “includes” and its derivatives means “includes, without limitation” and corresponding derivative expressions; (b) whenever this Agreement refers to a number of days, such number shall refer to calendar days unless Business Days are specified; (c) unless otherwise specified, all references in this Agreement to “Article,” “Section,” “Exhibit,” “preamble” or “recitals” shall be references to an Article, Section, Exhibit, preamble or recitals hereto; and (d) whenever the context requires, the words used in this Agreement shall include the masculine, feminine and neuter and singular and the plural.

ARTICLE II

ASSIGNMENT AND ASSUMPTION

Section 2.1 Assignment of Rights.

Assignor hereby conveys, assigns, transfers and delivers all of its rights under the Purchase Agreement to Assignee, such that, from and after the Effective Date, the Assignee shall have all of the rights and benefits of the Assignor under the Purchase Agreement (the “ Assignment ”).

Section 2.2 Assumption of Obligations.

Assignee hereby assumes the obligations and liabilities of Assignor arising under the Purchase Agreement immediately upon the Effective Date, and agrees to perform and observe all of the terms, covenants and conditions to which Assignor is bound under the Purchase Agreement (the “ Assumption ,” and together with the Assignment, the “ Transaction ”).

Section 2.3 Joinder.

Assignee acknowledges receipt of a true and correct copy of the Purchase Agreement. Assignee hereby joins the Purchase Agreement and, as of the date hereof, becomes a Buyer under the Purchase Agreement as if an original party thereto, subject to all of the terms, obligations, covenants, conditions, limitations, restrictions and provisions applicable to Buyer and Assignor contained in the Purchase Agreement. By execution of this Agreement, Assignee agrees that the Purchase Agreement shall be a binding obligation of Assignee and any of its successors and permitted assigns. Assignee hereby ratifies, as of the date hereof, and agrees to be bound by, all of the terms, provisions and conditions applicable to Buyer and Assignor contained in the Purchase Agreement; provided that Assignor shall remain jointly and severally obligated to satisfy all of Assignor’s obligations under the Purchase Agreement, as Buyer or otherwise.

Section 2.4 Transfer Taxes

The parties do not expect that any transfer, documentary, sales, use, stamp, registration and other similar Taxes and fees (the “ Transfer Taxes ”) will be incurred in connection with the transactions contemplated pursuant to this Agreement. In the event that any Transfer Taxes are due, such Transfer Taxes shall be borne by Assignee. The Assignee shall file all necessary Tax Returns and other documentation with respect to such Transfer Taxes. If required by applicable Law, Assignor shall, and shall cause its Affiliates to, join in the execution of any such Tax Returns and other documentation.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF DEVELOPMENT AND ASSIGNOR

Development and Assignor, jointly and severally, hereby represent and warrant to Assignee that, except as disclosed in the disclosure schedules delivered to Assignee on the date of this Agreement (collectively, the “ Disclosure Schedule ”) (it being understood that any information set forth on any Disclosure Schedule shall be deemed to apply to and qualify only the section or subsection of this Agreement to which it corresponds in number, unless it is reasonably apparent on its face that such information is relevant to other sections or subsections of this Agreement):

Section 3.1 Organization and Existence.


(a)	Assignor is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has all requisite limited liability company power and authority to own, operate and lease its properties and assets and to carry on its business as now conducted.


(b)	Development is a limited partnership duly formed, validly existing and in good standing under the laws of the State of Delaware and has all requisite limited partnership power and authority to own, operate and lease its properties and assets and to carry on its business as now conducted.

(c)

The Company is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware, and has all requisite limited liability company power and authority to own, operate and lease its properties and assets and to carry on its business as now conducted. The Company is duly licensed or qualified to do business and is in good standing in the states in which the character of the properties and assets owned or held by it or the nature of the business conducted by it requires it to be so licensed or qualified, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Assignor has made available to Assignee true and complete copies of the organizational documents of the Company in effect as of the date of this Agreement.

Section 3.2 Authority and Approval.

(a)

Assignor has full limited liability company power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform all of the obligations hereof to be performed by it. The execution and delivery by Assignor of this Agreement, the consummation of the transactions contemplated hereby and the performance of all of the obligations hereof to be performed by Assignor have been duly authorized and approved by all requisite limited liability company action on the part of Assignor.

(b)

Development has full limited partnership power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform all of the obligations hereof to be performed by it. The execution and delivery by Development of this Agreement, the consummation of the transactions contemplated hereby and the performance of all of the obligations hereof to be performed by Development have been duly authorized and approved by all requisite limited partnership action on the part of Development.

(c)

This Agreement has been duly executed and delivered by Assignor and Development and constitutes the valid and legally binding obligation of each of Assignor and Development, enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity (whether applied in a proceeding at law or in equity).

Section 3.3 No Conflict; Consents.

(a)

The execution, delivery and performance of this Agreement by Development and Assignor does not, and the fulfillment and compliance with the terms and conditions hereof and the consummation of the transactions contemplated hereby will not, (i) violate, conflict with, result in any breach of, or require the consent of any Person under, any of the terms, conditions or provisions of the certificate of formation, limited partnership agreement, limited liability company agreement or other organizational documents of Development or Assignor; (ii) violate, conflict with, result in any breach of, or require the consent of any Person under, any of the terms, conditions or provisions of the certificate of formation, limited liability company agreement or other organizational documents of the Company; (iii) conflict with or violate any provision of any Law or Governmental Order applicable to Development, Assignor or the Company; or (iv) conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or result in the suspension, termination or cancellation of, or in a right of suspension, termination or cancellation of, any indenture, mortgage, agreement, contract, commitment, license, concession, permit, lease, joint venture or other instrument to which Development, Assignor or the Company is a party or by which any of them, their respective properties or the Company Assets are bound; other than, in the case of each of clauses (iii) and (iv) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on the ability of Assignor to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement.

(b)

No notice to or consent, approval, license, permit, order or authorization of any Governmental Authority or other Person is required to be obtained or made by Development or Assignor in connection with the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, except (i) as have been waived or obtained or (ii) for those which individually or in the aggregate would not reasonably be

expected to have a material adverse effect on the ability of Assignor to perform its obligations under this Agreement or to consummate the transactions contemplated hereby (including such consents, approvals, licenses, permits, orders or authorizations that are not customarily obtained prior to the Subject Interest Closing and are reasonably expected to be obtained in the ordinary course of business following the Subject Interest Closing).

Section 3.4 Capitalization.


(a)	To Assignor’s Knowledge, the Subject Interest is not subject to any agreement or understandings with respect to the voting, transfer or other rights and obligations of the Subject Interest (except as contemplated by this Agreement, the Purchase Agreement, the REX LLC Agreement and restrictions under applicable federal and state securities laws).

(b)

There are (i) no authorized or outstanding subscriptions, warrants, options, convertible securities or other rights (contingent or otherwise) to purchase or otherwise acquire from the Company any equity interests of or in the Company, (ii) no commitments on the part of the Company to issue membership interests, subscriptions, warrants, options, convertible securities or other similar rights, and (iii) no equity securities of the Company reserved for issuance for any such purpose. Except as set forth in the REX LLC Agreement, the Company has no obligation (contingent or other) to purchase, redeem or otherwise acquire any of its equity securities. Except for this Agreement, the Purchase Agreement, the REX LLC Agreement and the Side Letter, to Assignor’s Knowledge, there is no voting trust or agreement, stockholders agreement, pledge agreement, buy-sell agreement, right of first refusal, preemptive right or proxy relating to any equity securities of the Company. The Company does not own any equity interests in any other Person.

Section 3.5 Financial Information; Undisclosed Liabilities.

(a)

Assignor has provided to Assignee a true and complete copy of the audited balance sheet as of December 31, 2015 (the “Balance Sheet Date”) for the Company on a consolidated basis (the “Balance Sheet”). The Balance Sheet presents fairly in all material respects the financial position of the Company as of the date thereof. As of the Balance Sheet Date, there are no off-balance sheet arrangements that have had or are reasonably likely to have a Material Adverse Effect. The Balance Sheet has been prepared in accordance with GAAP consistently applied throughout the periods presented, except that the Balance Sheet does not include any notes. Except as required by GAAP, there were no changes in the method of application of the Company’s accounting policies or changes in the method of applying the Company’s use of estimates in the preparation of the Balance Sheet as compared with past practice.

(b)

Except as otherwise disclosed in (i) the Current Report on Form 8-K filed by the Partnership with the Commission on April 28, 2016 (the “Partnership 8-K”), (ii) the Current Report on Form 8-K filed by Tallgrass Energy GP, LP with the Commission on April 28, 2016 (the “TEGP 8-K”) or (iii) Disclosure Schedule 3.5(b), there are no liabilities or obligations of the Company of any nature (whether known or unknown and whether accrued, absolute, contingent or otherwise) and there are no facts or circumstances that would reasonably be expected to result in any such liabilities or obligations, whether arising in the context of federal, state or local judicial, regulatory, administrative or permitting agency proceedings, other than (x) liabilities or obligations reflected or reserved against in the Balance Sheet or any unaudited balance sheet of the Company previously provided to Assignee, (y) current liabilities incurred in the ordinary course of business since December 31, 2015, and (z) liabilities or obligations (whether known or unknown and whether accrued, absolute, contingent or otherwise) that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 3.6 Title to Properties

(a)

Disclosure Schedule 3.6(a) lists all of the material items of real property (excluding Easements (as defined below)) used or held for use by the Company for the conduct of the Company’s business. As of the date hereof, the Company has (i) good and marketable fee simple title to the owned real property included on Disclosure Schedule 3.6(a), free and clear of any Liens (other than Permitted Liens or as set forth on Disclosure Schedule 3.6(a)) and (ii) a valid, binding and enforceable leasehold interest in each of the leased properties, as applicable, free and clear of any Liens (other than Permitted Liens or as set forth on Disclosure Schedule 3.6(a)). For purposes of this Section 3.6(a), “Easements” means any easements, rights of way, memorandum of easements, permits, servitudes, licenses, any instruments creating an interest in real property, and similar rights related to real property used in connection with the Company’s business.

(b)

The tangible personal property owned by the Company together with the tangible personal property owned by Affiliates of Assignor that provide services to or for the benefit of the Company includes all material tangible personal property that is necessary for the Company to conduct its operations in substantially the same manner as currently being conducted. The Company has good and defensible title to its material tangible personal property, free and clear of any Liens (other than Permitted Liens).

Section 3.7 Litigation; Compliance with Laws.

Except as otherwise disclosed in the Partnership 8-K or the TEGP 8-K or as set forth on Disclosure Schedule 3.7 :

(a)

There are no (i) civil, criminal or administrative actions, suits, claims, hearings, arbitrations, investigations or proceedings pending or, to Development’s and Assignor’s Knowledge, threatened against the Company, (ii) judgments, orders, decrees or injunctions of any Governmental Authority, whether at law or in equity, against the Company or (iii) to Development’s and Assignor’s Knowledge, pending or threatened investigations by any Governmental Authority against the Company, except in each case, for those items that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(b)

As of the Effective Date, there are no Actions pending or threatened that (a) question or involve the validity or enforceability of any of Development’s or Assignor’s obligations under this Agreement or the Purchase Agreement, or (b) seek (i) to prevent or delay the consummation by Development or Assignor of the transactions contemplated by this Agreement or the Purchase Agreement or (ii) damages in connection with any such consummation.


(c)	Neither Assignor nor the Company is in violation of or in default under any applicable Law or Governmental Order, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

Section 3.8 No Adverse Changes.

Except as set forth on Disclosure Schedule 3.8 , since the Balance Sheet Date:


(a)	there has been no Material Adverse Effect;


(b)	there has been no damage, destruction or loss to any material portion of the Company Assets, whether or not covered by insurance, in excess of $1,000,000;


(c)	there has been no delay in, or postponement of, the payment of any liabilities related to the Company, the Company Assets or the Company’s business, individually or in the aggregate, in excess of $1,000,000; and


(d)	there is no contract, commitment or agreement to do any of the foregoing.

Section 3.9 Taxes.

(a)

To the Knowledge of Development and Assignor, except as would not reasonably be expected to have a Material Adverse Effect, (i) all Tax Returns required to be filed by or with respect to the Company, the Company Assets or the operations of the Company have been filed on a timely basis (taking into account all extensions of due dates); (ii) all Taxes owed by the Company or any of its Affiliates with respect to the Company, the Company Assets or the operations of the Company which are or have become due, have been timely paid in full, other than Taxes the amount or validity of which is being contested in good faith by appropriate proceedings for which an adequate reserve has been established therefor; (iii) there are no Liens on any of the Company Assets that arose in connection with any failure (or alleged failure) to pay any Tax on the Company or its assets, other than Liens for Taxes not yet due and payable or the amount or validity of which is being contested in good faith by appropriate proceedings for which an adequate reserve has been established therefor; and (iv) there is no pending action, proceeding or investigation for assessment or collection of Taxes and no Tax assessment, deficiency or adjustment has been asserted or proposed with respect to the Company, the Company Assets or the operations of the Company.


(b)	In the twelve (12) month period ended December 31, 2015 and throughout the period in 2016 ending on the Subject Interest Closing Date, more than ninety percent (90%) of the gross income (as determined for federal income tax purposes) of the business operations conducted with the Company Assets was qualifying income, within the meaning of Section 7704(d) of the Code.


(c)	The Company has in effect an election under Section 754 of the Code for the taxable year that includes the Subject Interest Closing Date.

Section 3.10 Environmental Matters.

Except as disclosed in Disclosure Schedule 3.10 , or as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect:


(a)	the Company, the Company Assets and the operations and business of the Company are in compliance with applicable Environmental Laws;


(b)	no circumstances exist with respect to the Company, the Company Assets or the operations and business of the Company that give rise to an obligation by the Company to investigate or remediate the presence, on-site or offsite, of Hazardous Materials under any applicable Environmental Laws;


(c)	the Company has not received any written communication from a Governmental Authority that remains unresolved alleging that the Company may be in violation of any Environmental Law or any Permit issued pursuant to Environmental Law;


(d)	the Company, the Company Assets and the operations and business of the Company are not subject to any pending or, to the Knowledge of Development or Assignor, threatened, claim, action, suit, investigation, inquiry or proceeding under any Environmental Law (including

designation as a potentially responsible party under CERCLA or any similar local or state law);


(e)	all Permits, if any, required to be obtained or filed by the Company under any Environmental Law in connection with its assets, operations and business have been duly obtained or filed, are valid and currently in effect, and the Company and the Company Assets are in compliance with such authorizations; and


(f)	since the date Assignor acquired its 50% membership interest in the Company, there has been no release of any Hazardous Material into the environment by the Company, the Company Assets or the operations and business or the Company, or to the Knowledge of Development or Assignor, by a third party except in compliance with applicable Environmental Law.

Section 3.11 Licenses; Permits.


(a)	As of the date of this Agreement, except as set forth in Disclosure Schedule 3.11, the Company has all Permits, except, in each case, for such items for which the failure to obtain or have waived would not result in a Material Adverse Effect.


(b)	All Permits are validly held by the Company and are in full force and effect, except as would not reasonably be expected to have a Material Adverse Effect.


(c)	The Company has complied with all terms and conditions of the Permits, except as would not reasonably be expected to have a Material Adverse Effect.


(d)	There is no outstanding written notice, nor to Development’s and Assignor’s Knowledge, any other notice of revocation, cancellation or termination of any Permit, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.


(e)	No proceeding is pending or, to Development’s and Assignor’s Knowledge, threatened with respect to any alleged failure by the Company to have any material Permit necessary for the operation of any of the Company Assets or the conduct of the Company’s business or to be in compliance therewith.

Section 3.12 Contracts.


(a)	Disclosure Schedule 3.12(a) contains a true and complete listing of the following contracts and other agreements to which the Company is, or immediately after the Subject Interest Closing will be, a party (each such contract or agreement being referred to herein as a “Material Contract”):


(i)	contracts, agreements and instruments representing Indebtedness for Borrowed Money and all guarantees thereof;


(ii)	contracts containing covenants limiting the freedom of the Company to engage in any line of business or compete with any Person or operate at any location;


(iii)	price swaps, hedges, futures or similar instruments;


(iv)	contracts to which the Company, on the one hand, and an Affiliate of Assignor, on the other hand, is a party or is otherwise bound;


(v)	contracts containing any preferential rights to purchase or similar rights relating to any Company Assets;


(vi)	joint venture or partnership agreements, including any agreement or commitment to make any loan or capital contribution to any joint venture or partnership;


(vii)	contracts relating to the acquisition or disposition by the Company of any business (whether by acquisition or disposition of equity interests or assets) pursuant to which the Company has or will have any remaining material obligation or liability or benefit;


(viii)	contracts or agreements which, individually, require or entitle the Company to make or receive payments of at least $5,000,000 annually, provided that the calculation of the aggregate payments for any such agreement or contract shall not include payments attributable to any renewal periods or extensions for which the Company may exercise a renewal or extension option in its sole discretion; and


(ix)	licenses relating to Intellectual Property (whether as licensee or licensor) other than licenses with respect to software used or accessed by the Company under a “shrink wrap,” “click wrap” or “off the shelf” software license that is generally commercially available on standard terms.


(b)	Assignor has made available to Assignee a correct and complete copy of each Material Contract listed in Disclosure Schedule 3.12(a).

(c)

Except as would not reasonably be expected to result in a Material Adverse Effect or as disclosed in Disclosure Schedule 3.12(a), with respect to the Company: (i) each Material Contract is legal, valid and binding on and enforceable against the Company and in full force and effect; (ii) each Material Contract will continue to be legal, valid and binding on and enforceable against the Company, and in full force and effect on identical terms following the consummation of the transactions contemplated by this Agreement; (iii) the Company is not in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default by the Company, or permit termination, modification or acceleration, under any Material Contract; and (iv) to Development’s and Assignor’s Knowledge, no other party to any Material Contract is in breach or default, and no event has occurred which with notice or lapse of time would constitute a breach or default by such other party, or permit termination, modification or acceleration, under any Material Contract other than in accordance with its terms, nor has any other party repudiated any provision of any Material Contract.

Section 3.13 Employees.

The Company has no employees.

Section 3.14 Transactions with Affiliates.

Except as otherwise contemplated in this Agreement and the Purchase Agreement, the Company is not a party to, and immediately after the Subject Interest Closing will not be party to, any agreement, contract or arrangement between the Company, on the one hand, and any of its Affiliates prior to the Subject Interest Closing, on the other hand, other than those disclosed on Disclosure Schedule 3.12(a) .

Section 3.15 Insurance.

Assignor has provided Assignee a list of the material insurance policies that the Company holds or of which the Company is the beneficiary. Such policies are in full force and effect, and the Company has received no written notice of any pending or threatened termination of such policies.

Section 3.16 Intellectual Property Rights.

The Company owns or has the right to use all Intellectual Property necessary for or used in the conduct of the Company’s business as currently conducted by it, and, to Development’s and Assignor’s Knowledge, its products and services do not infringe upon, misappropriate or otherwise violate any Intellectual Property of any third party. All Intellectual Property owned by the Company, if any, is free and clear of any Liens (other than Permitted Liens). Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby will, with or without notice or lapse of time, result in, or give any other Person the right or option to cause or declare, a breach or termination of, or cancellation or reduction in, rights of the Company under any contract providing for the license of any Intellectual Property to the Company, except for any such terminations, cancellations or reductions that, individually or in the aggregate, would not have a Material Adverse Effect. There is no Intellectual Property-related action, suit, proceeding, hearing, investigation, notice or complaint pending or, to Development’s and Assignor’s Knowledge, threatened by any third party before any court or tribunal (including, without limitation, the United States Patent and Trademark Office or equivalent authority anywhere in the world) relating to the Company or its operations, nor has any claim or demand been made by any third party that alleges any infringement, misappropriation or violation of any Intellectual Property of any third party, or unfair competition or trade practices by the Company. Except as would not result in a Material Adverse Effect, the Company has taken reasonable measures to protect the confidentiality of all material trade secrets.

Section 3.17 Books and Records.

Accurate copies of the respective books of account, minute books and stock or other equity record books of the Company have been made available for inspection to Assignee.

Section 3.18 Regulatory Matters.

Since the Balance Sheet Date, the Company, the Company Assets and the business and operations of the Company have been in material compliance with (a) the applicable provisions of the Natural Gas Act of 1938, as amended, and (b) all applicable rules, regulations, orders and tariffs of the FERC and any state public utility commission having jurisdiction over any of the Company, the Company Assets and the business and operations of the Company. The Company has duly filed all forms and reports required to be filed by or with respect to the Company, the Company Assets and the business and operations of the Company with the FERC and any state public utility commission having jurisdiction over any of the Company, the Company Assets and the business and operations of the Company, and such forms and reports have been prepared in accordance with applicable Law, except to the extent that any noncompliance, either individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect.

Section 3.19 Purchase Agreement Breach.

Neither Assignor, nor to Assignor’s Knowledge, Sempra, is in breach of any of its representations, warranties or covenants contained in the Purchase Agreement.

Section 3.20 Brokerage Arrangements.

Assignor has not entered (directly or indirectly) into any agreement with any Person that would obligate Assignor or any of its Affiliates or any other Person to pay any commission, brokerage or “finder’s fee” or other similar fee in connection with this Agreement, the Purchase Agreement or the transactions contemplated hereby or thereby.

Section 3.21 Management Projections and Budget.

The projections and budgets identified on Disclosure Schedule 3.21 , which were provided to Assignee by Assignor and its Affiliates as part of Assignee’s review in connection with this Agreement, were prepared based upon assumptions that Assignor’s management believed to be reasonable as of the date thereof and were consistent with Assignor’s management’s expectations at the time they were prepared.

Section 3.22 Title to Subject Interest.

Upon the Subject Interest Closing, Assignee will have record title to and beneficial ownership of the Subject Interest.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF ASSIGNEE

Assignee hereby represents and warrants to Assignor as follows:

Section 4.1 Organization and Existence.

Assignee is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware and has all requisite limited liability company power and authority to own, operate and lease its properties and assets and to carry on its business as now conducted.

Section 4.2 Authority and Approval.

(a)

Assignee has full limited liability company power and authority to execute and deliver this Agreement, to consummate the transactions contemplated hereby and to perform all of the obligations hereof to be performed by it. The execution and delivery by Assignee of this Agreement, the consummation of the transactions contemplated hereby and the performance of all of the obligations hereof to be performed by Assignee have been duly authorized and approved by all requisite limited liability company action on the part of Assignee.

(b)

This Agreement has been duly executed and delivered by Assignee and constitutes the valid and legally binding obligation of Assignee, enforceable against it in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws affecting the enforcement of creditors’ rights and remedies generally and by general principles of equity (whether applied in a proceeding at law or in equity).

Section 4.3 No Conflict; Consents.

(a)

The execution, delivery and performance of this Agreement by Assignee does not, and the fulfillment and compliance with the terms and conditions hereof and the consummation of the transactions contemplated hereby will not, (i) violate, conflict with, result in any breach of, or require the consent of any Person under, any of the terms, conditions or provisions of the certificate of formation, limited liability company agreement or other organizational documents of Assignee; (ii) conflict with or violate any provision of any Law or Governmental Order applicable to Assignee; or (iii) conflict with, result in a breach of, constitute a default under (whether with notice or the lapse of time or both), or accelerate or permit the acceleration of the performance required by, or require any consent, authorization or approval under, or result in the suspension, termination or cancellation of, or in a right of suspension, termination or cancellation of, any indenture, mortgage, agreement, contract, commitment, license, concession, permit, lease, joint venture or other instrument to which Assignee is a party or by which it or its properties are bound; other than, in the case of each

of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on the ability of Assignee to perform its obligations under this Agreement or to consummate the transactions contemplated by this Agreement.

(b)

No notice to or consent, approval, license, permit, order or authorization of any Governmental Authority or other Person is required to be obtained or made by or with respect to Assignee in connection with the execution, delivery and performance of this Agreement or the Purchase Agreement or the consummation of the transactions contemplated hereby or thereby, except as have been waived or obtained; provided that no representation or warranty is made by Assignee herein with respect to the REX LLC Agreement.

Section 4.4 Brokerage Arrangements.

Assignee has not entered (directly or indirectly) into any agreement with any Person that would obligate Assignee or any of its Affiliates or any other Person to pay any commission, brokerage or “finder’s fee” or other similar fee in connection with this Agreement, the Purchase Agreement or the transactions contemplated hereby or thereby.

Section 4.5 Litigation.

As of the Effective Date, there are no Actions pending or threatened that (a) question or involve the validity or enforceability of any of Assignee’s obligations under this Agreement or (b) seek (i) to prevent or delay the consummation by Assignee of the transactions contemplated by this Agreement or the Purchase Agreement or (ii) damages in connection with any such consummation.

ARTICLE V

COVENANTS

Section 5.1 Confidentiality.

Assignor and Assignee shall, and shall cause each of their respective Affiliates and Representatives to, abide by the terms of Section 2.5 of the REX LLC Agreement (including the survivability of such obligations) with respect to any information provided by a party to the other party pursuant to this Agreement, all such information being deemed “Confidential Information” for purposes of Section 2.5 of the REX LLC Agreement; provided , however , that any disclosures in any public announcement or statement issued by either party pursuant to Section 7.6 will not be deemed “Confidential Information” following the making of such public announcement or statement.

ARTICLE VI

INDEMNIFICATION

Section 6.1 Indemnification of Assignee.

Subject to the limitations set forth in this Agreement, Development and Assignor, from and after the Effective Date, agree to, jointly and severally, hold harmless, save, defend and indemnify Assignee, its subsidiaries and securityholders, directors, officers and employees, and the respective officers, directors and employees of the Partnership and the General Partner, but otherwise excluding Development, its Affiliates and the Company (the “ Assignee Indemnified Parties ”), from and against any and all Damages suffered or incurred by any Assignee Indemnified Party as a result of or arising out of (a) any breach or inaccuracy of a representation or warranty of Development or Assignor in this Agreement or (b) any breach of any agreement or covenant on the part of Development or Assignor made under this Agreement or in connection with the transactions contemplated hereby (each, an “ Assignee Claim ”). For purposes of this Section 6.1 , whether Development or Assignor has breached any of its representations and warranties herein shall be determined without giving effect to any qualification as to “materiality” (including the word “material”).

Section 6.2 Indemnification of Assignor.

Subject to the limitations set forth in this Agreement, Assignee, from and after the Effective Date, agrees to hold harmless, save, defend and indemnify Assignor and its Affiliates (other than any of the Assignee Indemnified Parties) and their respective securityholders, directors, officers and employees (the “ Assignor Indemnified Parties ,” and together with the Assignee Indemnified Parties, each, an “ Indemnified Party ,” and collectively, the “ Indemnified Parties ”) from and against any and all Damages suffered or incurred by any Assignor Indemnified Party as a result of or arising out of (a) any breach or inaccuracy of a representation or warranty of Assignee in this Agreement, (b) any breach of any agreement or covenant on the part of Assignee made under this Agreement or in connection with the transactions contemplated hereby or (c) payments made by Assignor on Assignee’s behalf in respect of Assignee’s obligations under the Purchase Agreement except to the extent Assignor owes an indemnity to Assignee hereunder in relation thereto (each, an “ Assignor Claim ,” and together with Assignee Claims, each, a “ Claim ”). For purposes of this Section 6.2 , whether Assignor has breached any of its representations and warranties herein shall be determined without giving effect to any qualification as to “materiality” (including the word “material”).

Section 6.3 Notification and Defense of Claim.

(a)

An Indemnified Party shall promptly notify the applicable indemnitor pursuant to this Article VI (the “Indemnitor”) in writing upon its discovery of facts giving rise to a potential Claim (a “Claim Notice”), including receipt by it of notice of any demand, assertion, claim, action or proceeding, judicial or otherwise, and such notice shall include a formal demand for indemnification under this Agreement and contain a description of the nature and estimated amount (if then known) of such Claim; provided, however, that, subject to Section 6.4 below, the failure to so notify or a delay in notifying the Indemnitor will not relieve it of its obligations hereunder, except to the extent that the Indemnitor is actually prejudiced as a result thereof. If requested by the Indemnitor or its counsel, the Indemnified Party will, at the sole cost and expense of the Indemnitor, reasonably cooperate with the Indemnitor in the investigation, defense and settlement of such Claim. Without limiting the foregoing, Indemnified Party will provide the Indemnitor with all records, documents, materials and information in its possession or control and reasonable access to personnel, in each case that is relevant to such Claim. If it gives written notice of its intention to do so to the Indemnified Party within thirty (30) days after receipt of the Claim Notice, except as provided in Section 6.3(c) below, the Indemnitor will have the right to assume, conduct and control the defense of any Claim and all negotiations for its settlement or compromise, which may be conducted in the name and on behalf of the Indemitor or the Indemnified Party, as may be appropriate. Except as provided in Section 6.3(c) below, the Indemnitor will have the right to select counsel (that is reasonably satisfactory to the Indemnified Party) to provide representation in connection with such Claim. The Indemnified Party may in its sole discretion, and at its expense (but subject to Section 6.3(c) below), participate with its own counsel in the defense of any such Claim. If the Indemnified Party elects to so participate, except as provided in Section 6.3(c) below, the Indemnitor shall have no obligation to indemnify such Indemnified Party or any other person for the expenses and fees of counsel incurred by such Indemnified Party in connection with such participation.

(b)

An Indemnified Party shall agree to any settlement, compromise or discharge of a Claim that the applicable Indemnitor may recommend that (and the Indemnitor shall not enter into any settlement, compromise or discharge of a Claim without the prior written consent of the Indemnified Party unless such settlement, compromise or discharge) by its terms (i) obligates the Indemnitor to pay to discharge in full the liability in connection with such Claim, (ii) releases such Indemnified Party completely and unconditionally in connection with such Claim, (iii) does not contain any finding, statement or admission of fault or culpability by any Indemnified Party, and (iv) does not contain any sanction or restriction upon the conduct or operation of any business by such Indemnified Party. The Indemnitor will not be liable to indemnify an Indemnified Party under this Agreement for any amounts paid in settlement of

any Claim without the Indemnitor’s prior written consent. An Indemnified Party shall not settle any action or claim in any manner which would impose any penalty or limitation on the Indemnitor without the Indemnitor’s prior written consent. Neither the Indemnitor, nor any Indemnified Party, will unreasonably withhold, condition or delay its consent to any proposed settlement, compromise or discharge of any such Claim.

(c)

Notwithstanding the foregoing, if (i) the Indemnitor does not assume the defense of any Claim in accordance with the thirty (30) day period specified in Section 6.3(a), or (ii) the named parties to the proceeding for the Claim include both an Indemnified Party and the Indemnitor (or any of its Affiliates) and either the Indemnitor or an Indemnified Party determines, based on the advice of counsel, that there may be one or more legal defenses available to it that are materially different from or additional to those available to the other party or that a conflict of interest between those parties would reasonably be expected to exist in respect thereto, then the named Indemnified Party or Parties shall have the right, by prior written notice given to the Indemnitor, to control the defense of the Claim; provided, however, that the Indemnitor shall be entitled, at its expense, to participate in (but not control) that defense. In those circumstances, the named Indemnified Party or Parties shall defend the Claim in good faith and have full control of such defense and proceedings with respect to such Indemnified Parties; provided, however, that the Indemnified Parties may not enter into any settlement, compromise or discharge of such Claim if indemnification is to be sought hereunder, without the Indemnitor’s prior written consent (which consent shall not be unreasonably withheld, conditioned or delayed). If requested by an Indemnified Party or its counsel, the Indemnitor agrees, at its sole cost and expense, to reasonably cooperate with such Indemnified Party and its counsel in contesting any Claim for which an Indemnified Party is conducting the defense, including providing reasonable access to documents, records and information in its possession or control relevant to such Claim.

(d)

Subject to the terms and provisions of this Article VI, the Indemnitor shall reimburse any and all costs, expenses, legal fees, expert fees and other charges reasonably incurred by an Indemnified Party pursuant to Section 6.3(c) as they are incurred (to be reimbursed within thirty (30) days following receipt of invoices for those charges); provided, however, that the Indemnitor may condition any reimbursement on receipt of a promise by such Indemnified Party to repay those amounts if it is ultimately determined that the Indemnitor was not required to indemnify the Indemnified Parties for those amounts hereunder.

Section 6.4 Survival.

All the provisions of this Agreement shall survive the Effective Date, notwithstanding any investigation at any time made by or on behalf of any party hereto, provided that the representations and warranties set forth in Article III and Article IV shall terminate and expire on the date that is fifteen (15) months following the Effective Date, except (a) the representations and warranties of Development and Assignor set forth in Section 3.9 (Taxes) shall survive until the date that is ninety (90) days after the expiration of the applicable statutes of limitations (including all periods of extension and tolling), (b) the representations and warranties of Assignor set forth in Section 3.10 (Environmental Matters) shall terminate and expire on the third (3rd) anniversary of the Effective Date, (c) the representations and warranties of Development and Assignor set forth in Section 3.1 (Organization and Existence), Section 3.2 (Authority and Approval), Section 3.20 (Brokerage Arrangements), and Section 3.22 (Title to Subject Interest) shall survive forever and (d) the representations and warranties of the Assignee set forth in Section 4.1 (Organization and Existence), Section 4.2 (Authority and Approval) and Section 4.4 (Brokerage Arrangements) shall survive forever. After a representation and warranty has terminated and expired, no indemnification shall or may be sought pursuant to this Article VI on the basis of that representation and warranty by any Person who would have been entitled pursuant to this Article VI to indemnification on the basis of that representation and warranty prior to its termination and expiration, provided that in the case of each representation and warranty that shall terminate and expire as provided in this Section 6.4 , no claim presented in writing for indemnification pursuant to this Article VI on the basis of that representation and warranty prior to its termination and expiration shall be affected in any way by that termination and expiration. The

indemnification obligations under this Article VI or elsewhere in this Agreement shall apply regardless of whether any suit or action results solely or in part from the active, passive or concurrent negligence or strict liability of the indemnified party. The covenants and agreements entered into pursuant to this Agreement to be performed after the Effective Date shall survive the Effective Date.

Section 6.5 Limitations.

(a)

To the extent the Assignee Indemnified Parties would otherwise be entitled to indemnification for Damages pursuant to Section 6.1, Development and Assignor will only be liable if (i) the Damages with respect to any individual claim exceed $100,000 (the “Minimum Claim Amount”) and (ii) the Damages for all claims that exceed the Minimum Claim Amount exceed, in the aggregate, $4,500,000 (the “Deductible Amount”), and then Development and Assignor shall be liable only for Damages to the extent of any excess over the Deductible Amount; provided, however, that in any event, except with respect to indemnification for Damages arising out of (i) third party claims or (ii) the representations and warranties of Development and Assignor set forth in Section 3.1(a) and (b) (Organization and Existence), Section 3.2 (Authority and Approval), Section 3.3 (No Conflicts; Consent) (except to the extent such representation and warranty applies to the Company), Section 3.7(b) (Litigation), Section 3.19 (Purchase Agreement Breach), Section 3.20, (Brokerage Arrangements) and Section 3.22 (Title to Subject Interests), Assignee’s Damages shall be calculated net to the Subject Interest. In no event shall Development’s and Assignor’s aggregate liability to the Assignee Indemnified Parties under Section 6.1 exceed $45,000,000 (the “Ceiling Amount”). Notwithstanding the foregoing, the Deductible Amount and the Ceiling Amount shall not apply to breaches or inaccuracies of representations and warranties contained in Section 3.1, Section 3.2, Section 3.20 and Section 3.22.

(b)

Notwithstanding the foregoing but subject to the other limitations set forth in this Section 6.5, an Indemnitor’s obligations under this Article VI are limited to the amount of any Damages that remain after deducting therefrom any insurance proceeds and any indemnity, contribution or other similar payment actually received by an Indemnified Party in respect of any such indemnity claim, less any related costs and expenses, including the aggregate cost of pursuing any related insurance claims and any related increases in insurance premiums or other charge-backs (the “Third Party Proceeds”). No Indemnified Party has any obligation to seek to recover any Third Party Proceeds in connection with making a claim under this Article VI. Promptly after receiving any insurance proceeds, indemnity, contribution or other similar payment, an Indemnified Party shall reimburse the applicable Indemnitor for the amount of such Third Party Proceeds, such that the applicable Indemnitor has paid no more than it is obligated pay pursuant to this Article VI after taking into account any applicable reductions under this Section 6.5(b) and the other limitations set forth in this Section 6.5.


(c)	Notwithstanding the foregoing, no Indemnitor will be liable under this Agreement for any consequential, incidental, special, indirect, punitive or exemplary damages suffered or incurred by an Indemnified Party.

Section 6.6 Sole Remedy.

No party shall have liability under this Agreement or the transactions contemplated hereby except as provided in this Article VI (other than claims or causes of action arising from fraud).

ARTICLE VII

MISCELLANEOUS

Section 7.1 Acknowledgements.

Each party acknowledges that it has relied on the representations and warranties of the other party expressly and specifically set forth in this Agreement, including, in the case of Assignee, the Disclosure Schedules attached hereto. Such representations and warranties constitute the sole and exclusive representations and warranties of the parties hereto in connection with the transactions contemplated hereby, and the parties hereto understand, acknowledge and agree that all other representations and warranties of any kind or nature, whether expressed, implied or statutory, oral or written, past or present, are specifically disclaimed.

Section 7.2 Cooperation; Further Assurances.

The parties hereto shall use their respective commercially reasonable efforts to obtain all approvals and consents required by or necessary for the transactions contemplated by this Agreement. Each party acknowledges that certain actions may be necessary with respect to the matters and actions contemplated by this Agreement such as making notifications and obtaining consents or approvals or other clearances that are material to the consummation of the transactions contemplated hereby, and each agrees to take all appropriate action and to do all things necessary, proper or advisable under applicable Laws and Governmental Orders to make effective the transactions contemplated by this Agreement; provided , however , that nothing in this Agreement will require any party hereto to hold separate or make any divestiture not expressly contemplated herein of any asset or otherwise agree to any restriction on its operations or other burdensome condition which would in any such case be material to its assets, liabilities or business in order to obtain any consent or approval or other clearance required by this Agreement.

Section 7.3 Expenses.

Except as otherwise provided herein and regardless of whether the transactions contemplated hereby are consummated, each party shall pay its own expenses incident to this Agreement and all action taken in preparation for carrying this Agreement into effect.

Section 7.4 Notices.

Any notice, request, instruction, correspondence or other document to be given hereunder by any party hereto to another party hereto (herein collectively called “ Notice ”) shall be in writing and delivered in person, by courier service requiring acknowledgment of receipt of delivery or by fax, as follows:

If to Assignor, addressed to:

Rockies Express Holdings, LLC

4200 W. 115th Street, Suite 350

Leawood, KS 66211

Attention: William R. Moler

Tel: (913) 928-6008

Fax: (913) 928-6009

with copies (which shall not constitute notice) to:

Tallgrass Development, LP

4200 W. 115th Street, Suite 350

Leawood, KS 66211

Attention: General Counsel's Office

Tel: (913) 928-6038

Fax: (913) 928-6039

Baker Botts L.L.P.

98 San Jacinto Blvd., Suite 1500

Austin, Texas 78701

Attention: Mike Bengtson

Tel: (512) 322-2661

Fax: (512) 322-8349

If to Assignee, addressed to:

TEP REX Holdings, LLC

c/o Tallgrass Energy Partners, LP

4200 W. 115th Street, Suite 350

Leawood, KS 66211

Attention: General Counsel

Tel: (913) 928-6038

Fax: (913) 928-6039

with copies (which shall not constitute notice) to:

Tallgrass Energy Partners, LP

4200 W. 115th Street, Suite 350

Leawood, KS 66211

Attention: Conflicts Committee Chair

Tel: (913) 928-6038

Fax: (913) 928-6039

Bracewell LLP

711 Louisiana, Suite 2300

Houston, Texas 77002

Attention: Gary W. Orloff

Tel: (713) 221-1306

Fax: (713) 221-2166

Notice given by personal delivery or courier service shall be effective upon actual receipt. Notice given by fax shall be confirmed by appropriate answer back and shall be effective upon actual receipt if received during the recipient’s normal business hours, or at the beginning of the recipient’s next Business Day after receipt if not received during the recipient’s normal business hours. Any party may change any address to which Notice is to be given to it by giving Notice as provided above of such change of address.

Section 7.5 Governing Law.


(a)	This Agreement shall be subject to and governed by the laws of the State of Delaware. Each party hereby submits to the exclusive jurisdiction of the state and federal courts in the State of Kansas and to venue in the state courts in Johnson County, Kansas and in the federal courts of Wyandotte County, Kansas.


(b)	Each of the parties to this Agreement irrevocably waives any and all right to trial by jury in any legal proceeding between the parties arising out of or relating to this Agreement or the transactions contemplated by this Agreement.


(c)	Each party to this Agreement waives, to the fullest extent permitted by applicable Law, any right it may have to receive damages from any other party based on any theory of liability for any special, indirect, consequential (including lost profits), exemplary or punitive damages.

Section 7.6 Public Statements.

The parties hereto shall consult with each other and no party shall issue any public announcement or statement with respect to this Agreement or the transactions contemplated hereby without the consent of the other party, unless the party desiring to make such announcement or statement, after seeking such consent from the other parties, obtains advice from legal counsel that a public announcement or statement is required by applicable Law or stock exchange regulations.

Section 7.7 Entire Agreement; Amendments and Waivers.

(a)

This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. Each party to this Agreement agrees that no other party to this Agreement (including its agents and Representatives) has made any representation, warranty, covenant or agreement to or with such party relating to this Agreement or the transactions contemplated hereby, other than those expressly set forth herein.

(b)

No amendment, supplement, modification or waiver of this Agreement shall be binding unless executed in writing by each party to be bound thereby and, in the case of Assignee, approved by the Conflicts Committee on behalf of Assignee. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (regardless of whether similar), nor shall any such waiver constitute a continuing waiver unless otherwise expressly provided.

Section 7.8 Conflicting Provisions.

This Agreement sets forth the parties’ rights, responsibilities and liabilities with respect to the transactions contemplated by this Agreement. In this Agreement, specific provisions prevail over general provisions.

Section 7.9 Binding Effect and Assignment.

Section 7.10 Severability.

If any provision of the Agreement is rendered or declared illegal or unenforceable by reason of any existing or subsequently enacted legislation or by decree of a court of last resort, Assignor and Assignee shall promptly meet and negotiate substitute provisions for those rendered or declared illegal or unenforceable, but all of the remaining provisions of this Agreement shall remain in full force and effect.

Section 7.11 Interpretation.

It is expressly agreed by the parties that this Agreement shall not be construed against any party, and no consideration shall be given or presumption made, on the basis of who drafted this Agreement or any provision hereof or who supplied the form of this Agreement. Each party agrees that this Agreement has been purposefully drawn and correctly reflects its understanding of the transactions contemplated by this Agreement and, therefore, waives the

application of any law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document.

Section 7.12 Headings; Exhibits; Disclosure Schedules.

The headings of the several Articles and Sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The Disclosure Schedules and the Exhibits referred to herein are attached hereto and incorporated herein by this reference, and unless the context expressly requires otherwise, the Disclosure Schedules and such Exhibits are incorporated in the definition of “ Agreement .”

Section 7.13 Multiple Counterparts.

This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

* * * * *

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

ASSIGNOR:

ROCKIES EXPRESS HOLDINGS, LLC

By: /s/ David G. Dehaemers, Jr.

David G. Dehaemers, Jr.

Chief Executive Officer

ASSIGNEE:

TEP REX HOLDINGS, LLC

By: /s/ David G. Dehaemers, Jr.

David G. Dehaemers, Jr.

Chief Executive Officer

Executed by Tallgrass Development, LP,

solely for purposes of its obligations and rights under

Article III , Article VI and Article VII of this Agreement.

DEVELOPMENT:

TALLGRASS DEVELOPMENT, LP

By: Tallgrass Energy Holdings, LLC,

its general partner

By: /s/ David G. Dehaemers, Jr.

David G. Dehaemers, Jr.

Chief Executive Officer

Signature Page to Assignment and Assumption Agreement

Exhibit A

Assignor and Development Knowledge Persons


•	David G. Dehaemers, Jr.


•	William R. Moler


•	Gary J. Brauchle


•	Richard L. Bullock


•	Christopher R. Jones

Exhibit 10.4

SECOND AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

ROCKIES EXPRESS PIPELINE LLC

dated to be effective as of

January 1, 2010

among

Kinder Morgan W2E Pipeline LLC,

P&S Project I, LLC

and

COPREX LLC

TABLE OF CONTENTS



	Page
Article 1 DEFINITIONS AND INTERPRETATION	2
Section 1.1 Defined Terms	2
Section 1.2 Interpretation	15
Section 1.3 Undertakings Relating to the Company	15
Article 2 FORMATION DOCUMENTS; OTHER COMPANY MATTERS	15
Section 2.1 Formation Documents; Name Filings	16
Section 2.2 Purpose; Powers	16
Section 2.3 Members	16
Section 2.4 Registered Agent and Office	17
Section 2.5 Confidential Information	17
Section 2.6 Public Statements	18
Section 2.7 Regulation by Governmental Entities	18
Section 2.8 Principal Office	18
Article 3 BUSINESS OF THE COMPANY	19
Section 3.1 Development of the Project	19
Section 3.2 Total Development Costs	19
Section 3.3 Withdrawal	20
Article 4 COMPANY CAPITALIZATION AND FINANCIAL PROVISIONS	21
Section 4.1 Initial Capital Contributions	21
Section 4.2 Budgets	22
Section 4.3 Funding of the Company	23
Section 4.4 Capital Accounts	24
Section 4.5 Loans	25
Section 4.6 Allocations for Capital Account Purposes	26
Section 4.7 Allocations for Tax Purposes	27
Section 4.8 Distributions	28
Section 4.9 Insurance	29
Article 5 MANAGEMENT OF THE COMPANY	29
Section 5.1 Generally	29
Section 5.2 Board	29
Section 5.3 Committees	32
Section 5.4 Duties of Directors and Committee Representatives	32
Section 5.5 Members	33
Section 5.6 Deadlocks of Board or Members	35
Section 5.7 Officers	35
Section 5.8 Construction capital Opportunities	36
Section 5.9 Affiliate Contracts	39
Section 5.10 Approval of FERC Certificate for Pipeline; Project Completion Date	40
Article 6 ACCOUNTING AND RECORDS	40
Section 6.1 Fiscal Year and Method of Accounting	40
Section 6.2 Books and Records	40
Section 6.3 Reports and Financial Statements	40
Section 6.4 Taxations	41
Article 7 TRANSFERS OF INTERESTS	42
Section 7.1 Transfer Restrictions for Membership Interests; Right of First Refusal	42
Section 7.2 Other Transfer Restrictions	44



Section 7.3 Continuing Obligations	44
Section 7.4 Intentionally Omitted	45
Section 7.5 Make-whole Payment	45
Article 8 TERM; DISSOLUTION AND TERMINATION; EVENTS OF DEFAULT; RIGHT TO WITHDRAW	45
Section 8.1 Term of Agreement	45
Section 8.2 Events of Default	49
Section 8.3 Right of Withdrawal	50
Article 9 AGREEMENT DISPUTE RESOLUTION	50
Section 9.1 In General	50
Section 9.2 Arbitration	51
Section 9.3 Pendency of Dispute	52
Article 10 INDEMNIFICATION	52
Section 10.1 Indemnification	52
Section 10.2 Procedure for Indemnification with Respect to Third Party Claims	52
Article 11 REPRESENTATIONS AND WARRANTIES	53
Section 11.1 Representations and Warranties of the Members	53
Article 12 MISCELLANEOUS PROVISIONS	54
Section 12.1 Notices	54
Section 12.2 Disclaimer of Agency	56
Section 12.3 Amendment	56
Section 12.4 Interest	56
Section 12.5 Waiver of Consequential Damages	56
Section 12.6 Governing Law	57
Section 12.7 Counterparts	57
Section 12.8 Binding Effect	57
Section 12.9 Partial Invalidity	57
Section 12.10 Captions	57
Section 12.11 Entire Agreement	57
Section 12.12 No Rights in Third Parties	57
Section 12.13 No Title to Company Property	57
Section 12.14 Further Assurances	58
Section 12.15 No Waiver	58
Section 12.16 Consent to Jurisdiction	58

SCHEDULES

Schedule 5.2 Initial Directors and Alternate Directors

Schedule 5.8.1 Parameters for Economic Model

EXHIBITS

Exhibit A Membership Interests

Exhibit B Initial Officers

SECOND AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

ROCKIES EXPRESS PIPELINE LLC

THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of Rockies Express Pipeline LLC (the "Agreement"), is dated to be effective as of January 1, 2010, among Kinder Morgan W2E Pipeline LLC, a Delaware limited liability company ("Kinder Morgan Member"), P&S Project I, LLC, a Delaware limited liability company ("Sempra Member") and COPREX LLC, a Delaware limited liability company ("ConocoPhillips Member" and, together with Kinder Morgan Member and Sempra Member, collectively the "Members"), and is entered into with reference to the following:

RECITALS:

WHEREAS, West2East Pipeline LLC, a Delaware limited liability company ("West2East") was formed on October 21, 2005, by the filing of a certificate of formation with the Secretary of State of the State of Delaware, with Kinder Morgan Member owning a 75% membership interest and Sempra Member owning a 25% membership interest;

WHEREAS, West2East formed a wholly-owned limited liability company by the name of Rockies Express Pipeline LLC ("Original Rockies") in Delaware on October 28, 2005;

WHEREAS, West2East, as the sole member of Original Rockies, entered into the Amended and Restated Limited Liability Company Agreement of Original Rockies dated November 8, 2005 (the "Original Rockies Agreement");

WHEREAS, pursuant to a Purchase and Sale Agreement between Alenco Pipelines Inc., a Delaware corporation, and Original Rockies, Original Rockies purchased all of the outstanding limited liability company interests of the Company on February 23, 2006;

WHEREAS, pursuant to an agreement of merger, (i) Original Rockies was merged with and into the Company on April 11, 2006, with the Company as the surviving entity of the merger, (ii) the name of the Company was changed from Entrega Gas Pipeline LLC to Rockies Express Pipeline LLC and (iii) the Original Rockies Agreement was adopted as the limited liability company agreement of the Company;

WHEREAS, pursuant to an irrevocable commitment, on June 30, 2006, ConocoPhillips Member purchased a 24% membership interest in West2East from West2East and was admitted as a member of West2East and (ii) effective December 1, 2009, ConocoPhillips Member purchased an additional 1% membership interest in West2East from West2East;

WHEREAS, on December 30, 2009 pursuant to an agreement of merger, West2East was merged with and into the Company, with the Company as the surviving entity of the merger;

WHEREAS, effective on the date hereof, this Agreement was adopted as the limited liability company agreement of the Company; and

WHEREAS, the Members desire to enter into this Agreement in order to express their understandings and agreements with respect to the management of affairs, business and operations of the Company as conducted from time to time and certain other matters, all on the terms and conditions set forth herein.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, desiring to be legally bound hereby, agree as follows:

ARTICLE 1

DEFINITIONS AND INTERPRETATION

1.1 Defined Terms. Unless otherwise required by the context in which any capitalized term appears, or unless otherwise specifically defined elsewhere in this Agreement, capitalized terms used in this Agreement shall have the meanings set forth below.

"AAA" means the American Arbitration Association.

"Act of Insolvency" with respect to a Person means any of the following occurrences: (a) the institution by such Person of proceedings of any nature under any laws of any jurisdiction, whether now existing or subsequently enacted or amended, for the relief of debtors wherein such Person is seeking relief as debtor; (b) a general assignment by such Person for the benefit of creditors; (c) the institution by such Person of a case or other proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation laws of any jurisdiction as now existing or hereafter amended or becoming effective; (d) the institution against such Person of a case or other proceeding under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, dissolution or liquidation law of any jurisdiction as now existing or hereafter amended or becoming effective, which proceeding is consented to by such Person or is not dismissed, stayed or discharged within a period of ninety (90) days after filing thereof or if stayed, which stay is thereafter lifted without a contemporaneous discharge or dismissal of such case or proceeding; (e) the appointment of a receiver, custodian, trustee or like officer to take possession of assets of such Person, which receivership remains undischarged for a period of ninety (90) days from the date of its imposition; (f) admission by such Person in writing of its inability to pay its debts as they mature; or (g) attachment, execution or other judicial seizure of all or any substantial part of such Person's assets or of any Membership Interests owned by such Person, or any part thereof, such attachment, execution or seizure remaining undismissed or undischarged for a period of ninety (90) days after the levy thereof.

"Activities" has the meaning set forth in Section 5.8.11.

"Adjusted Capital Account" means the Capital Account maintained for each Member as of the end of each Taxable Period, (a) increased by any amounts that such Member is obligated to restore under the standards set by Treasury Regulation Section 1.704-l(b)(2)(ii)(c) (or is deemed obligated to restore pursuant to the penultimate sentences of Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5)), and (b) decreased by (i) the amount of all losses and deductions that, as of the end of such Taxable Period, are reasonably expected to be allocated to such Member pursuant to Section 4.6 in subsequent Taxable Periods under Sections 704(e)(2) and 706(d) of the Code and Treasury Regulation Section 1.751-1(b)(2)(ii), and (ii) the amount of all distributions (other than distributions the making of which will require minimum gain charge back pursuant to Section 4.6.2.3 or Section 4.6.2.4 at a future time) that, as of the end of such Taxable Period, are reasonably expected to be made to such Member in subsequent Taxable Periods in accordance with the terms of this Agreement or otherwise to the extent they exceed offsetting increases to such Member's Capital Account that are reasonably expected to occur during (or prior to) the Taxable Period in which such distributions are reasonably expected to be made (other than increases that will be the result of a minimum gain chargeback pursuant to Section 4.6.1 or 4.6.2). The foregoing definition of Adjusted Capital Account is intended to comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.

"Adjusted Property" means (a) any property, the Carrying Value of which has been adjusted pursuant to Section 4.4.4 and (b) any other property the Carrying Value of which as then adjusted is based, in whole or in part, upon the Carrying Value of an item of Adjusted Property at an earlier time.

"Affiliate" means, when used with reference to specified Person, any other Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by or is under common Control with the Person specified; provided that the Company shall not be considered an Affiliate of any Member.

"Affiliate Contracts" has the meaning set forth in Section 5.9.

"Affirmative Construction Vote" has the meaning set forth in Section 5.8.3.

"Agreed Rate" shall mean the lesser of (a) the rate publicly announced by JPMorgan Chase, New York, New York (or any successor bank) from time to time as its prime rate, plus two percent (2%) and (b) the maximum rate permitted by applicable law.

"Agreed Value" of any Contributed Property means the Fair Market Value of such Contributed Property at the time of contribution as determined by the Board using such reasonable method of valuation as the Board may adopt. The Board shall, in its discretion, use such method as it deems reasonable and appropriate to allocate the aggregate Agreed Value of Contributed Properties in a single or integrated transaction among such properties on a basis proportional to their Fair Market Value.

"Agreement" has the meaning set forth in the preamble, hereto, and includes all exhibits with schedules attached hereto.

"Agreement Dispute" has the meaning set forth in Section 9.1.

"Alternate Director" has the meaning set forth in Section 5.2.1.

"Annual Budget" has the meaning set forth in Section 4.2.1.

"Available Cash" means all unrestricted cash and cash equivalents of the Company less any portion thereof set aside by the affirmative vote of the Board to maintain reasonably adequate reserves for the Company's operations or for any other purpose determined by the Board.

"Board" has the meaning set forth in Section 5.1.

"Book-Tax Disparity" means with respect to any item of Contributed Property or Adjusted Property, as of the date of any determination, the difference between the Carrying Value of such Contributed Property or Adjusted Property and the adjusted basis thereof for federal income tax purposes as of such date. A Member's share of the Company's Book-Tax Disparities in all of its Contributed Property and Adjusted Property will be reflected by the difference between such Member's Capital Account balance as maintained pursuant to Section 4.4 and the hypothetical balance of such Member's Capital Account computed as if it had been maintained strictly in accordance with federal income tax accounting principles.

"Business Day" means any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York, Houston, Texas or San Diego, California are required or authorized by law or regulation to close.

"Capital Account" means the capital account maintained for each Member pursuant to Section 4.4 herein.

"Capital Account Balance" means at any time in the case of any Member the balance in that Member's Capital Account at that time.

"Capital Contribution" has the meaning set forth in Section 4.4.1.

"Capital Expenditures" means expenditures or investments capitalized in accordance with Required Accounting Practice, including additions to plant, property and equipment, goodwill, other intangibles and other long term investments.

"Carrying Value" of an item of property on its acquisition by the Company means (a) with respect to Contributed Property, the Agreed Value of such property, and (b) with respect to any other Company property, the amount that would be the adjusted basis of such property for federal income tax purposes on such acquisition if the adjusted basis of each other item of property of the Company at that time were equal to the Carrying Value of such other item of property. The Carrying Value of any property shall be adjusted from time to time in accordance with Section 4.4 and other applicable provisions hereof.

"Cash Call" has the meaning set forth in Section 4.3.1.

"Certificate Segment" means any of the Certificate 1 Segment, the Certificate 2 Segment or the Certificate 3 Segment.

"Certificate 1 Segment" means all construction and other activities necessary to place In Service transportation service from Cheyenne Hub, Colorado to an interconnect with Panhandle Eastern Pipe Line Company in Audrain County, Missouri.

"Certificate 2 Segment" means all construction and other activities necessary to place In Service transportation service from the terminus of the Certificate 1 Segment to the Lebanon Hub, Ohio.

"Certificate 3 Segment" means all construction and other activities necessary to place In Service transportation service from the terminus of the Certificate 2 Segment to Clarington, Ohio.

"Chairman" has the meaning set forth in Section 5.2.3.

"Change in Control" means:

(a) with respect to Kinder Morgan Member, the occurrence of any event by which Kinder Morgan Member ceases to be Controlled by its Parent;

(b) with respect to Sempra Member, the occurrence of any event by which Sempra Member ceases to be Controlled by its Parent;

(c) with respect to ConocoPhillips Member, the occurrence of any event by which ConocoPhillips Member ceases to be Controlled by its Parent; and

(d) with respect to any other Member, the occurrence of any event or series of related events that result in such Member ceasing to be Controlled by the Person that was such Member's Parent immediately prior to such event or series of related events.

"Code" means the U.S. Internal Revenue Code of 1986, as amended from time to time.

"Committee Representative" has the meaning set forth in Section 5.4.1.

"Committees" has the meaning set forth in Section 5.3.

"Company" means Rockies Express Pipeline LLC, a Delaware limited liability company formerly known as Entrega Gas Pipeline LLC.

"Company Business" means the ownership and operation of the Project and the Pipeline, and all of the business related to the development, design, procurement, land acquisition, construction, financing, ownership, operation, disposal of, maintenance of, the marketing of capacity on and the transacting of business involving, the Pipeline, and may also include the acquisition and construction of the Entrega Project or the acquisition of firm transportation capacity thereon, as well as facilities to access gas supplies from Opal or other points determined by the Board for transmission to markets in the eastern United States on the Pipeline, and to pursue any Construction Capital Opportunities in accordance with Section 5.8 and any other activities related or incidental thereto or in anticipation thereof.

"Confidential Information" has the meaning set forth in Section 2.5.

"ConocoPhillips Member" means COPREX LLC, a Delaware limited liability company.

"ConocoPhillips Shipper" means ConocoPhillips Company.

"Consent" means (a) the prior written consent of the indicated party (including the Board, as applicable) to the action requested, (b) the affirmative vote of the required Members to the extent an action is approved hereunder at a meeting of the Members, (c) the affirmative vote of the Board to the extent an action is approved hereunder or (d) the affirmative vote of the applicable Committee to the extent an action is approved pursuant to a meeting of the Committee Representatives of such Committee as set forth herein.

"Construction Capital Opportunity" means a business opportunity to construct facilities in order (a) to improve, expand or increase the capacity of the Pipeline, or any portion thereof, or (b) to provide a new tie-in point of delivery or receipt of natural gas for the Pipeline, including directly connected lateral pipelines or extensions, but excluding (i) pipelines that do not interconnect directly with the Pipeline or its laterals, (ii) lateral pipelines or extensions which interconnect with pipelines or facilities owned by a Member or any of its Affiliates, (iii) minor taps that are fully reimbursable by a Third Party, (iv) any Certificate Segment as originally placed In Service, (v) the Entrega Project and any extensions or expansions thereof to provide delivery or receipt of natural gas for the Pipeline and (vi) extensions and expansions relating to the Overthrust Lease.

"Contributed Property" means (a) each property or other asset, in such form as may be permitted by the Act, but excluding cash or cash equivalents, contributed to the Company and (b) any other property the Carrying Value of which as then adjusted is based, in whole or in part, upon the Carrying Value of an item of Contributed Property at an earlier time. Once the Carrying Value of a Contributed Property is adjusted pursuant to Section 4.4.4, such property shall no longer constitute a Contributed Property, but shall be deemed an Adjusted Property for such purposes.

"Control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a specified Person, whether through the direct or indirect ownership of voting securities, partnership interests or other equity interests, or by contract or otherwise. The term "Control" when used as a verb in the referenced clauses shall have a correlative meaning.

"Credit Standards" means, with respect to any Person or its guarantor, that (a) such Person's or its guarantor's long-term unsecured debt securities are rated at least BBB- by Standard and Poor's Rating Group (or, if such entity changes its rating system, the comparable rating under such changed system) and at least Baa3 by Moody's Investors Services, Inc. (or, if such entity changes its rating system, the comparable rating under such changed system), in each case with stable outlook or, in the case of a potential Transferee under Section 7, if either of such rating agencies is no longer in business or no longer is rating such indebtedness of such Person or its guarantor, a comparable rating of another internationally recognized rating agency selected by the non-Transferring Members; and (b) the sum of such Person's or its guarantor's financial commitments with respect to the Project is less than 15% of such Person's or its guarantor's tangible net worth. For this purpose, the term "tangible net worth" shall mean a Person's net equity less goodwill, patents, unamortized loan costs or restructuring costs and other intangible assets, all determined in accordance with GAAP as of the end of the most recent fiscal quarter for such Person.

"Deadlock" has the meaning set forth in Section 5.6.1.

"Deadlocked Proposal" has the meaning set forth in Section 5.6.1.

"Development Budget" means the budget for Company in connection with the development of the Project as in existence on the date hereof and as such budget may be modified from time to time, as appropriate, by the Board.

"Development Costs" means all Third Party Development Costs and Internal Development Costs.

"Director" has the meaning set forth in Section 5.2.1.

"Disposition" means a sale, assignment or conveyance of one hundred percent (100%) of a Membership Interest held by a Member.

"Economic Criteria" means, with respect to any proposed Construction Capital Opportunity (a) such proposed Construction Capital Opportunity has been requested for use by one or more potential, creditworthy shippers ("Potential Shipper(s)") who have executed binding commitments for firm capacity with a minimum of 80% of the proposed capacity of such proposed Construction Capital Opportunity ("Minimum Firm Capacity") and, in the case of a proposed mainline capacity expansion, the Pipeline or the portion thereof proposed to be expanded does not have adequate firm capacity available for such Potential Shipper(s); (b) the costs associated with the proposed Construction Capital Opportunity will not exceed $500,000,000, and (c) such proposed Construction Capital Opportunity provides a projected unlevered after tax internal rate of return, assuming a tax rate of forty-one percent (41%), of not less than the Hurdle Rate. The projected return on equity shall be based on an economic model with assumptions set forth on Schedule 5.8.1. The Board may adopt alternative hurdle rates or other economic criteria for the Economic Criteria at its discretion.

"Economic Risk of Loss" has the meaning set forth in Treasury Regulation Section 1.752-2(a).

"Effective Time" means the date of this Agreement.

"EMUS" means EnCana Marketing (USA) Inc., a Delaware corporation.

"Entrega" means Entrega Gas Pipeline LLC, a Delaware limited liability company.

"Entrega Project" means the development, design, engineering, procurement, construction, installation, testing, precommissioning and commissioning and operation of a new approximately 327 mile-long interstate natural gas pipeline that will extend from the Meeker Hub near the town of Meeker in the Piceance Basin of Rio Blanco County, Colorado, to a new interconnect near Watsutter in Sweetwater County, Wyoming (segment 1), and continue on to the existing Cheyenne wholesale natural gas market hub near the town of Rockport in Weld County, Colorado, together with associated facilities and equipment (segment 2).

"Event of Default" has the meaning set forth in Section 8.2.1.

"Fair Market Value" of an item of property means the amount of cash a willing buyer would pay a willing seller for that property at that time in an arm's length transaction.

"FERC" means the Federal Energy Regulatory Commission.

"FERC Certificate" means the certificate(s) of public convenience and necessity issued by the FERC pursuant to any application for such certificate, including, in the case of the Entrega Project or any Certificate Segment, the certificate of public convenience and necessity therefor.

"FERC Response Date" means, in the case of any FERC Certificate, thirty (30) days following the date upon which the FERC has issued such FERC Certificate.

"Funding Notice" has the meaning set forth in Section 4.3.1.

"GAAP" means U.S. generally accepted accounting principles.

"Governmental Entity" means any legislature, court, tribunal, arbitrator, authority, agency, commission, division, board, bureau, branch, official or other instrumentality of the U.S., or any domestic state, county, city, tribal or other political subdivision, governmental department or similar governing entity, and including any governmental, quasi-governmental or non-governmental body exercising similar powers of authority.

"Hurdle Rate" means an 8% return on an unlevered after tax basis based on an economic model with assumptions as set forth in Schedule 5.8.1.

"In Service" means, with respect to any Certificate Segment or either of the segments in the Entrega Project as of any date, that such segment is capable of delivering the total capacity (including the MDQ of EMUS specified in the FERC Certificate applicable to that segment) in compliance with that FERC Certificate.

"Indemnified Parties" has the meaning set forth in Section 10.1.1.

"Indemnifying Members" has the meaning set forth in Section 10.1.1.

"Indemnitee" has the meaning set forth in Section 10.2.1.

"Indemnitor" has the meaning set forth in Section 10.2.1.

"Initial Budget" has the meaning set forth in Section 4.2.1.

"Initial Members" has the meaning set forth in Section 2.3.1.

"Interest Transfer" means, with respect to a Member, (a) a Transfer of all of or any portion of such Member's Membership Interest or (b) a Change in Control with respect to such Member.

"Internal Development Costs" means all reasonable and verifiable internal costs of the Kinder Morgan Member and Sempra Member and their respective Affiliates incurred in connection with the development or construction of the Project on or after December 16, 2005 but prior to the Project Completion Date and charged to the Company; provided such costs together with the Pre-Formation Development Costs incurred by (a) Kinder Morgan Member and its Affiliates shall not exceed $41,000,000 and (b) Sempra Member and its Affiliates shall not exceed $3,600,000. Such costs shall include, in the case of personnel costs, an overhead charge equal to eighty percent (80%) of the allocable base salary of the individuals involved for hours they spend working directly on the Project plus reimbursement for direct, out of pocket expenditures of such individuals in connection with the Project, but shall exclude any element of profit. For the sake of clarity, costs invoiced to the Company pursuant to the Operating Agreement or the O&R Agreement, as the case may be, shall not be considered "Internal Development Costs."

"Kinder Morgan Member" has the meaning set forth in the introduction paragraph hereof.

"KMP" means Kinder Morgan Energy Partners, L.P., a Delaware limited partnership.

"Laws" means all laws, statutes, rules, regulations, ordinances, codes, licensing requirements and other pronouncements having the effect of law of any Governmental Entity, in each case including any amendment thereof or successor thereto.

"Lien" means any mortgage, pledge, assessment, security interest, lien, claim, charge, easement, covenant, equitable interest, right of first offer or refusal, restriction on transfer, adverse interest in property or other similar encumbrance of any kind, including any property interest or title of any vendor, lessor, lender or other secured party under any conditional sale contract or title retention contract and, in the case of securities or other equity interests, any put, call or similar right of a third party with respect to such securities or equity interests.

"LLC Act" means the Delaware Limited Liability Company Act, as amended from time to time; provided, however, that if any amendment to the LLC Act, or any succeeding or successor law, is applicable to the Company only if the Company has elected to be governed by the LLC Act as so amended or by such succeeding or successor law, as the case may be, then the term "LLC Act" shall refer to the LLC Act as so amended or to such succeeding or successor law only after the appropriate election by the Board with the Consent of the Members.

"Losses" means any liability, loss, damage, expense, penalty and/or other claim of any kind or nature whatsoever, including reasonable attorneys' fees and costs.

"MDQ" means, as the context requires, the maximum daily quantity of natural gas transportation capacity contracted for by any Person.

"Mediation Rules" has the meaning set forth in Section 5.6.2.

"Member" means each of Kinder Morgan Member, Sempra Member, ConocoPhillips Member or any other member admitted to the Company in accordance with the provisions of this Agreement (but shall not include any Withdrawing Member).

"Member Affiliate Support Instruments" means at any time any credit support agreements then in effect, such as letters of credit or guarantees of letters of credit, entered into (with the prior Consent of the Board) by any Affiliate of any Member for the account of West2East or the Company in connection with the development and construction of the Project in order to support the financial obligations of the Company or West2East to Third Parties, including contractors and suppliers.

"Membership Interest" means the entire legal and equitable ownership interest of a Member in the Company at any particular time.

"Member Loans" has the meaning set forth in Section 4.5.2.

"Member Nonrecourse Deduction" has the meaning set forth in Treasury Regulation Section 1.704-2(i)(2).

"Minimum Firm Capacity" has the meaning set forth in the definition of Economic Criteria.

"Native Americans" means federally recognized tribes of Native Americans.

"Natural Gas Act" means the statute pursuant to which the U.S. federal government, acting through the FERC, regulates the transportation of natural gas in interstate commerce, the sale of natural gas in interstate commerce for resale and natural gas companies engaged in such transportation or sale (15 U.S.C. 717, et seq.).

"Net Agreed Value" means (a) in the case of any Contributed Property, the Agreed Value of such property reduced by any liabilities either assumed by the Company upon such contribution or to which such property is subject when contributed, and (b) in the case of any property distributed to a Member or Transferee by the Company, the Company's Carrying Value of such property (after adjustment pursuant to Section 4.4.4) at the time such property is distributed, reduced by any liabilities either assumed by such Member or Transferee upon such distribution or to which such property is subject at the time of distribution as determined under Section 752 of the Code.

"Net Income" means, for any Taxable Period, the excess, if any, of the Company's items of income and gain for such Taxable Period over the Company's items of loss and deduction for such Taxable Period. The items included in the calculation of Net Income shall be determined in accordance with Section 4.4.2 and shall not include any items specially allocated under Section 4.6.2.

"Net Loss" means, for any Taxable Period, the excess, if any, of the Company's items of loss and deduction for such Taxable Period over the Company's items of income and gain for such Taxable Period. The items included in the calculation of Net Loss shall be determined in accordance with Section 4.4.2 and shall not include any items specially allocated under

Section 4.6.2.

"Nonrecourse Deductions" has the meaning set forth in Treasury Regulation Section 1.704-2(b)(1).

"O&R Agreement" means the Operations and Reimbursement Agreement, effective as of January 1, 2008, by and between the Operator and the Company and includes all exhibits and schedules attached thereto.

"Offer Period" has the meaning set forth in Section 7.1.3.

"Operating Agreement" means the Operating and Reimbursement Agreement dated as of May 31, 2005 between Entrega and the Operator.

"Operating Budget" has the meaning set forth in Section 4.2.1.

"Operational Expenditures" means operational expenditures of the Company (not to include Development Costs for any portion of the Pipeline then completed) made in accordance with the Annual Budget (as amended and in effect from time to time) required to be expensed in accordance with GAAP, including but not limited to operating expenses and general, administrative or overhead expenses of the Company.

"Operator" means Kinder Morgan NatGas Operator LLC, a Delaware limited liability company, or any successor thereto that the Company has engaged to operate and maintain the Pipeline.

"Optionee" has the meaning set forth in Section 7.1.2.

"Original Rockies" has the meaning set forth in the recitals.

"Original Rockies Agreement" has the meaning set forth in the recitals.

"Overthrust Lease" means the lease dated November 16, 2005 between the Company and Questar Overthrust Pipeline Company for the lease of capacity on the Pipeline.

"Parent" means (a) in the case of Kinder Morgan Member, KMP and solely for purposes of Section 7.1.5(b) shall include Kinder Morgan Operating L.P. "A", (b) in the case of Sempra Member, Sempra Energy and solely for purposes of Section 7.1.5(b) shall include Sempra Global, (c) in the case of ConocoPhillips Member, ConocoPhillips Company and solely for purposes of Section 7.1.5(b) shall include ConocoPhillips and (d) in the case of any other Member, the Person that either (i) Controls a Member and that has no other Person that Controls it or (ii) is designated by the Company as the Parent of such Member in connection with its admission to the Company.

"Permits" means all licenses, permits, certificates of authority, authorizations, approvals, registrations, franchises and similar consents granted by a Governmental Entity.

"Person" means any individual, partnership, corporation, association, business trust, limited liability company or other entity.

"Pipeline" means the interstate natural gas transmission pipeline system and related facilities (including compression and metering facilities) commonly known as the Rockies Express Pipeline, originating at a point near Meeker, in Rio Blanco County, Colorado and terminating at a point near Clarington, in Monroe county, Ohio and including the Overthrust Lease and the ROWs and other rights, including FERC Certificates and other Permits, necessary for the construction, maintenance or operation thereof, and any additions thereto or betterments, expansions, extensions, renewals or replacements thereof, including the Entrega Project.

"Potential Shippers" has the meaning set forth in the definition of Economic Criteria.

"Pre-Formation Development Costs" means, with respect to Kinder Morgan Member,

$2,488,066.01, and with respect to Sempra Member, $433,473, which represent the respective costs incurred by such Members and their Affiliates in connection with the development or construction of the Project on or after August 12, 2005 but prior to December 16, 2005.

"President" means with respect to any Person, the president, or Person having the equivalent authority, of such Person, as the case may be.

"Products" means all of the work products developed by the Members and their respective Affiliates and all work products or the rights obtained from Third Parties (in each case) with respect to the Project and the Pipeline, including, without limitation, those products owned directly or indirectly by a withdrawing Member, maps, engineering studies, draft or final applications for Permits, executed precedent agreements, environmental reports and related data, ROWs (including the ROWs across the lands of Native Americans), cost projections, Third Party contracts for materials or services, or any other similar rights or materials developed or used by the Members in connection with this Agreement, the Project or the Pipeline, but such term shall exclude any market or other information developed by Sempra Shipper or ConocoPhillips Shipper and any proprietary or confidential information related to the evaluation of potential business opportunities developed by a Member or its Affiliates.

"Project" means the acquisition, development, construction and ownership of the Pipeline.

"Project Completion Date" means November 12, 2009.

"Qualified MLP" means, as to any Member, a publicly traded limited partnership whose sole general partner is, or is a commonly Controlled Affiliate of, that Member.

"Recapture Income" means any gain recognized by the Company for federal income tax purposes (computed without regard to any adjustment required by Section 734 or 743 of the Code) upon the disposition of any property or asset of the Company, which gain is characterized as ordinary income because it represents the recapture of deductions previously taken with respect to such property or asset.

"Recipient" has the meaning set forth in Section 2.5.

"Regulatory Allocations" has the meaning given that term in Section 4.6.2.5.

"Remaining Members" has the meaning set forth in Section 3.3.2.1.3.

"Required Accounting Practice" means, as to any Person or its financial statements at any time: (1) the accounting rules and regulations, if any, which the Governmental Entities under the jurisdiction of which that Person is operating prescribe at that time; and (2) to the extent those rules and regulations do not otherwise provide, GAAP at that time prevailing for entities engaged in businesses similar to that of that Person.

"Required Consent" means the Consent of the Members collectively holding 85% or more of all of the Membership Interests at the time such action is being taken.

"Residual Gain" or "Residual Loss" means any item of gain or loss, as the case may be, of the Company recognized for federal income tax purposes (computed without regard to any adjustment required by Section 734 or 743 of the Code) resulting from a sale, exchange or other disposition of property of the Company to the extent such item of gain or loss is not allocated pursuant to Section 4.7.2.1 or 4.7.2.2, to eliminate Book-Tax Disparities.

"Rockies Credit Agreement" means the Credit Agreement, dated as of April 28, 2006, among the Company, the banks and other financial institutions listed on the signature pages thereof as lenders (and each other person that becomes a lender as provided therein), JPMorgan Chase Bank, N.A., a national banking association, individually as a lender and as the administrative agent for the lenders, Wachovia Bank, National Association, and Citibank, N.A., as the co-syndication agents and Lehman Brothers Bank, FSB, and The Royal Bank of Scotland, plc as the co-documentation agents, as amended by First Amendment to Credit Agreement, dated as of October 16, 2008, among the Company, the banks and other financial institutions listed on the signature pages thereof as lenders (and each other person that becomes a lender as provided therein) and JPMorgan Chase Bank, N.A., a national banking association, individually as a lender and as the administrative agent for the lenders.

"Rockies Credit Agreement Default" means, with respect to a Member, an Event of Default (as such term is defined in the Rockies Credit Agreement) that has occurred and is continuing by reason of any action of, failure to act by, or other event, circumstance or condition pertaining to, such Member or any of its Affiliates.

"ROW" means rights of way and other land rights necessary to construct and operate the Project.

"SEC" means the Securities and Exchange Commission.

"Secretary of the Board" has the meaning set forth in Section 5.2.3.

"Sempra" means Sempra Pipelines & Storage Corp., a Delaware corporation.

"Sempra Energy" means Sempra Energy, a California corporation.

"Sempra Global" means Sempra Global, a California corporation.

"Sempra Member" means has the meaning set forth in the introductory paragraph.

"Sempra Shipper" means Sempra Rockies Marketing, LLC, a Delaware limited liability company.

"Sharing Ratios" means, as of the date hereof, fifty percent (50%) for Kinder Morgan Member, twenty-five percent (25%) for Sempra Member and twenty five percent (25%) for ConocoPhillips Member, or any different percentages for such Members or any additional Members as certified in a writing (which shall constitute a permissible amendment to this Agreement) delivered to each Member by the Board that reflects any adjustment to the Sharing Ratios in connection with the admission or withdrawal of any Member, by Transfer or otherwise (in each case), or Transfer of Membership Interests between Members, in accordance with the terms of this Agreement, which adjustment, if not resulting from a Transfer of a Membership Interest, shall increase or decrease the Sharing Ratios of the Members in a manner proportional to their then-existing Sharing Ratios.

"Subchapter K" means subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of applicable state law.

"Subject Membership Interest" has the meaning set forth in Section 7.1.2.

"Tax Matters Partner" has the meaning set forth in Section 6.4.4.

"Taxable Period" means (a) a taxable year of the Company, (b) the portion of a Taxable Period that ends with an event in respect of which there is an adjustment to Carrying Values under Section 4.4.4 and (c) the portion of a Taxable Period that begins after an event that clause (b) hereof describes with the result that each taxable year may contain two or more Taxable Periods. A period that is, as a result of the preceding sentence, a Taxable Period, and that is divided into two periods by reason of clause (b) above shall not after such division be a Taxable Period.

"Third Party" means any Person other than a Member, its Affiliates and the Company.

"Third Party Development Costs" means all Third Party costs provided for in any Annual Budget or Initial Budget incurred in connection with the development or construction of the Project on or after the December 16, 2005 but prior to the Project Completion Date.

"Total Development Costs" means the Development Costs and the Pre-Formation Development Costs.

"Transfer" means any sale, assignment, conveyance, encumbrance, mortgage or pledge, or other transfer of any kind, whether occurring voluntarily or by operation of law.

"Transfer Notice" has the meaning set forth in Section 7.1.2.

"Transferee" has the meaning set forth in Section 7.1.2.

"Transferor" has the meaning set forth in Section 7.1.2.

"Treasury Regulations" means the regulations issued by the U.S. Treasury Department pursuant to the Code.

"Unrealized Gain" attributable to any item of Company property means, as of any date of determination, the excess, if any, of (a) the Fair Market Value of such property as of such date over (b) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.4.4 as of such date).

"Unrealized Loss" attributable to any item of Company property means, as of any date of determination, the excess, if any, of (a) the Carrying Value of such property as of such date (prior to any adjustment to be made pursuant to Section 4.4.4 as of such date) over (b) the Fair Market Value of such property as of such date.

"U.S." means the United States of America.

"West2East" has the meaning set forth in the recitals.

"Withdrawal Date" has the meaning set forth in Section 3.3.1.

"Withdrawing Member" has the meaning set forth in Section 3.3.2.1.1.

1.2 Interpretation. Reference to a given Section, Subsection, Exhibit or Schedule is a reference to a Section, Subsection, Exhibit or Schedule of this Agreement, unless otherwise specified. The terms "hereof," "herein," "hereto," "hereunder" and "herewith" refer to this Agreement as a whole. Except where otherwise expressly provided or unless the context otherwise necessarily requires: (a) reference to a given agreement, instrument, statute or regulation is a reference to that agreement, instrument, statute or regulation as modified, amended, supplemented and restated from time to time, and, as to a statute or regulation, any successor statute or regulation, (b) accounting terms have the meanings given to them by GAAP applied on a consistent basis by the accounting entity to which they refer, (c) references to "dollars" or "$" shall mean the lawful currency of the U.S., (d) reference to a Person includes its successors and permitted assigns, (e) references to any term in this Agreement when used in the singular shall have the same meanings when used in the plural and vice versa, (f) the masculine shall include the feminine and neuter, and vice versa, and (g) "includes" or "including" means "including, for example and without limitation."

1.3 Undertakings Relating to the Company. Whenever any provision hereof requires (a) the Company to take or omit to take a specified action, (b) the Board to approve any matter concerning the Company or to take or omit to take a specified action, or (c) the Committee Representative to take or omit to take a specified action, then such provision shall be interpreted to mean that the Members shall cause (i) the Company to take or omit to take such action, (ii) their respective Directors to cause the Board to approve such matter or take or omit to take such action or (iii) their respective Committee Representative to approve such matter or take or omit to take such action, as applicable.

ARTICLE 2

FORMATION DOCUMENTS; OTHER COMPANY MATTERS

2.1 Formation Documents; Name; Filings.

2.1.1 Formation Documents. The Company was originally incorporated by the filing of the Certificate of Incorporation of Entrega Gas Pipeline Inc. with the Secretary of State of the State of Delaware on February 9, 2004. The Company was converted from a corporation to a limited liability company by the name of Entrega Gas Pipeline LLC by the filing of a Certificate of Conversion and Certificate of Formation on November 7, 2005 with the Secretary of State of the State of Delaware. The name of the Company was changed to Rockies Express Pipeline LLC on April 11, 2006, pursuant to a Certificate of Merger filed with the Secretary of State of the State of Delaware, pursuant to which Original Rockies merged with and into the Company, with the Company as the surviving entity. Additionally, West2East was merged with and into the Company, with the Company as the surviving entity of the merger, on December 30, 2009, pursuant to (i) a Certificate of Merger filed with the Secretary of State of the State of Delaware and (ii) an Agreement of Merger between the Company and West2East dated December 30, 2009.

2.1.2 Name. The name of the Company shall be Rockies Express Pipeline LLC.

2.1.3 Filings. The Board shall cause to be executed, filed and published all such certificates, notices, statements or other instruments, and amendments thereto under the laws of the State of Delaware and other applicable jurisdictions as the Board may from time to time deem necessary or advisable for the operation of the Company.

2.2 Purpose; Powers.

2.2.1 Purpose. The sole purpose of the Company is to (directly or indirectly through its ownership of other Persons) engage in the Company Business.

2.2.2 Powers. The Company has the power to do any and all acts necessary, appropriate, proper, advisable, incidental or convenient to or in furtherance of the purposes of the Company set forth in Section 2.2.1, including all the powers and privileges the LLC Act or any other applicable Law grants a limited liability company.

2.3 Members.

2.3.1 Initial Members. The Members as of the Effective Time (the "Initial Members") are Sempra Member, ConocoPhillips Member and Kinder Morgan Member, and their respective Membership Interests and Sharing Ratios as of the Effective Time are set forth on Exhibit A.

2.3.2 New Members. Any admission of a new Member for new value provided to the Company in exchange for the issuance of additional Membership Interests requires the Required Consent of the Members, which Consent may be withheld in the reasonable discretion of any such Member. A Person may only be admitted as new Member pursuant to this Section 2.3.2:

(a) in accordance with the terms of this Agreement; and

(i) (b) if such Person executes and delivers counterparts of this Agreement to the Company and the other Members;

Upon the admission of any new Member pursuant to this Section 2.3.2 the Membership Interests of all Members will be reduced in accordance with their Sharing Ratios prior to giving effect to such admission.

2.4 Registered Agent and Office. The name of the registered agent for service of process on the Company within the State of Delaware, and the address of such registered agent and the address of the registered office of the Company within the State of Delaware shall be c/o The Corporation Trust Company, 1209 Orange St, Wilmington, DE 19801.

2.5 Confidential Information. Any proprietary or confidential information concerning the Company Business (including internal business information of a Member or its Affiliate disclosed in connection with the Company Business) that is provided by or obtained from the Company or any Member or their respective Affiliates ("Confidential Information"), that comes into the possession of any Member or their respective Affiliates (each, a "Recipient"), shall be held in confidence by the Recipient for a period of two (2) years following the date of disclosure. During such period, the Recipient shall not disclose the Confidential Information to Third Parties, except with the prior permission of the Company; provided in the case where the Recipient is a subsidiary or an Affiliate Controlled by a Member, such Member shall cause such Recipient to be bound by the provisions of this Section 2.5; provided, further, that each Member acknowledges its obligations pursuant to this Section 2.5 with respect to Confidential Information the Recipient of which is its Parent or a subsidiary or Controlled Affiliate of its Parent and agrees to take appropriate steps to ensure the confidentiality of Confidential Information such Member discloses or allows to be disclosed to such a Recipient. Information received by the Sempra Shipper and the ConocoPhillips Shipper or any shipper affiliated with a Member pursuant to their respective transportation agreements and related documents with the Company shall not be considered

Confidential Information within the meaning of this Section 2.5. The Recipient shall not use the Confidential Information for any purpose other than in connection with the Company Business. The foregoing general restrictions on disclosure of Confidential Information shall not apply to Confidential Information that (a) was previously known to the Recipient; (b) is obtained by the Recipient on a non-confidential basis from a Third Party, provided that the Third Party, to the knowledge of the Recipient, is not or was not bound by a confidentiality obligation with respect to such Confidential Information; (c) is in or becomes part of the public domain through no fault of the Recipient; (d) the Recipient is legally compelled to disclose by a Governmental Entity or others; (e) is necessary to disclose in order to enforce this Agreement; (f) is disclosed to an Affiliate; (g) is disclosed to a Person (including an employee of a Member or its Affiliate) that provides services to the Company or has been retained to provide services in connection with the Company Business; or (h) is disclosed in connection with a Transfer of a direct or indirect interest in the Company, a financing in connection with a Transfer of a direct or indirect interest in the Company or any financing or refinancing secured by the assets of the Company, the Company or any Member; provided that in each of the circumstances described in clauses (f) through (h), the Person to whom the information was disclosed has agreed to hold such Confidential Information confidential in accordance with this Section 2.5. If it appears that the Recipient may become legally compelled to disclose any Confidential Information, the Recipient promptly shall consult with the disclosing party as to the reasons for such compelled disclosure, and shall afford the disclosing party a reasonable opportunity to obtain a protective order as to the Confidential Information, and further shall use reasonable efforts to obtain reliable assurance that the Confidential Information actually disclosed will be treated confidentially. Each of the Company and the Members acknowledges that the provisions of this Agreement, as revised from time to time, shall be considered Confidential Information without regard to the two (2)-year time period set forth above. The foregoing general restrictions on disclosure of Confidential Information shall not apply to Confidential Information that a Parent or any other Affiliate of any Member, including its Qualified MLP, must disclose in registration statements or reports filed with the SEC or to comply with the rules of any national securities exchange on which the securities of such Person are traded.

2.6 Public Statements. Except as permitted with respect to disclosures of Confidential Information pursuant to Section 2.5 or as may be required by any applicable Law or to comply with the rules of any national securities exchange on which the securities of such Person are traded, no Member or Affiliate thereof shall make any public announcements or public statements concerning the Company Business without first obtaining the written consent of each other Member's Director(s), which consent shall not unreasonably be withheld. Each Member shall provide the other Members with draft copies of the text of all applicable statements or testimony that will be made public, including to Governmental Entities and the press, at a reasonable period of time prior to the release or presentation of such statements or testimony, and to coordinate with each other Member to make statements and present testimony that is consistent with the public relations strategy developed by the Board.

2.7 Regulation by Governmental Entities. The Members intend that the Company and the entire Project will be within the jurisdiction of the FERC. Unless otherwise expressly agreed by any affected Member or as reasonably required to achieve the purpose of the Company after consultation with each Member, neither the Company nor any other Member shall engage in any transaction or activity that would (a) cause the Company, any other Member or any of their respective Affiliates to become subject to the jurisdiction of any state public utility commission or public service commission; or (b) cause any other Member or any of their respective Affiliates to become subject to the jurisdiction of FERC pursuant to the Natural Gas Act. Notwithstanding any other provision in this Agreement to the contrary, each Member and its Affiliates may take whatever actions it deems necessary to avoid any such regulation.

2.8 Principal Office. The principal office of the Company shall be at 500 Dallas, Suite 1000, Houston, Texas, 77002 or at such other place as the Company may designate from time to time. The Company may have such other offices as the Members may designate from time to time.

ARTICLE 3

BUSINESS OF THE COMPANY

3.1 Development of the Project.

3.1.1 General The Company shall carry out the Company Business in accordance with the provisions of this Agreement.

3.1.2 Information and Progress Reports. At the request of any Member, but no less often than quarterly, the Board shall cause to be prepared and submitted to each Member at any time and from time to time a written status report for the Project, covering development activities performed to date, the status of the Project and the major development and construction activities planned for the Project during the upcoming calendar quarter.

3.1.3 Project Agreements.

3.1.3.1 Intentionally Omitted.

3.1.3.2 O&R Agreement. The Company has entered into the O&R Agreement with the Operator.

3.1.4 Project Documents. All Permits, applications, contracts and other assets obtained or entered into that will ultimately become Project assets shall be entered into by or otherwise be in the name of the Company.

3.2 Total Development Costs.

3.2.1 Development Costs. The Company will pay or provide for the timely payment of all Development Costs incurred in accordance with the Annual Budget which has been approved by the Board. Unless otherwise approved by the Board, the Company shall use the proceeds of Capital Contributions pursuant to Section 4.3.1 to fund the payment of, or reimbursement of the Company for, all Development Costs.

3.2.2 Accounting for Certain Costs. If the Affiliates of a Member provide goods or services to the Company the costs of which are Development Costs, such Member (a) shall cause one of its Affiliates to keep complete, separate records and accounts of all such costs and (b) report to the Board all such costs paid and payable within fifteen (15) days after the end of each month, or other periodic basis as established by the Board, including such detail and otherwise in such form and in accordance with such procedures as are designated from time to time by the Board.

3.2.3 Responsibility for Development Costs; Reimbursement of Development Costs: Audits.

3.2.3.1 Responsibility for Development Costs. Responsibility for the funding of the payment of Development Costs shall be shared by the Members pro rata, on the basis of their respective Sharing Ratios.

3.2.3.2 Intentionally Omitted.

3.2.3.3 Reimbursement of Development Costs. If the Company obtains financing for the Project, the Company shall use all reasonable efforts to structure the financing arrangements for the Project to obtain from the proceeds thereof on the financial closing date reimbursement of all Total Development Costs actually paid or incurred by or on behalf of the Company or the Members as of such date. Any recovery of such amounts on the financial closing date shall be distributed to the Members pursuant to Section 4.8.1 from funds available therefor under the financing arrangements in proportion to their previous Capital Contributions for such purpose.

3.2.3.4 Audit Rights. All records and accounts of each Member and its Affiliates relating to Total Development Costs incurred or paid by such Member or its Affiliates and for which payment, credit or reimbursement is desired under this Agreement, shall be available for inspection and audit by the other Members, at such Member(s) own expense, upon reasonable advance notice during normal business hours.

3.3 Withdrawal

3.3.1 Withdrawal from the Company. A Member may withdraw from the Company only with the prior approval of the Board, which withdrawal will require the unanimous affirmative vote of Directors representing the non-withdrawing Members and will be effective as of the date specified by the Board in connection with that

approval. In this Agreement, "Withdrawal Date" means the effective date of a permitted withdrawal. Any attempted withdrawal from the Company other than as expressly provided for herein will constitute a violation of this Agreement.

3.3.2 Effect of Withdrawal.

3.3.2.1 Effect on Withdrawing Member.

3.3.2.1.1 Liability for Costs. If a Member withdraws from the Company in accordance with this Agreement, the withdrawing Member (the "Withdrawing Member") shall remain obligated to make cash payments to the Company equal to its Sharing Ratio (as of immediately prior to its Withdrawal Date) of the Development Costs that have been paid or are due or have been irrevocably committed by the Company, prior to the Withdrawal Date of such Withdrawing Member; provided that in connection with liabilities associated with contracts for which payment is not yet due, and for which performance has not been completed by the counterparty, the Withdrawing Member shall be obligated to make cash payments to the Company in accordance with its Sharing Ratio (as of immediately prior to its Withdrawal Date) for such future liabilities only if such contract is thereafter terminated, and only to the extent of the termination costs under such contract which would have been payable by such Withdrawing Member if the contract had been terminated on its Withdrawal Date. Payments by a Withdrawing Member under this Section 3.3 shall be treated as Capital Contributions notwithstanding such Withdrawing Member's withdrawal from the Company.

3.3.2.1.2 Intentionally Omitted.

3.3.2.1.3 Remaining Rights; Withdrawing Member's Membership Interest. A Withdrawing Member shall have no further rights or obligations with respect to the Company after the Withdrawal Date, including to the Project's Products, except that: (a) the Withdrawing Member will remain obligated to the Company in respect of all liabilities it may have under this Agreement which accrue prior to its withdrawal; and (b) the Withdrawing Member shall continue to be subject to and obligated to comply or adhere to the provisions of Article 9 and 12 and the provisions of Section 2.5 and 2.6. In addition, the Withdrawing Member must, promptly after its withdrawal, either destroy (and provide a certificate of destruction with respect to) or return to the Company all Confidential Information in the possession or subject to the control of such Withdrawing Member. Notwithstanding the preceding sentence, but subject to Section 2.5, a Withdrawing Member may retain for a period not to exceed seven (7) years from its Withdrawal Date, but not disclose to any other Person, Confidential Information for the limited purposes of preparing tax returns of that Withdrawing Member or of any consolidated group of which it is a member and defending audits, investigations and other proceedings relating thereto; provided, that the Withdrawing Member must advise the Company in writing promptly after its withdrawal from the Company as to the specific Confidential Information it is retaining under this sentence. If the Withdrawing Member withdraws from the Company and all other Members (the "Remaining Members") do not dissolve the Company, the Withdrawing Member shall assign and transfer for no additional consideration: (a) all of its Membership Interest in the Company to the Remaining Member(s) pro rata based on such Remaining Members Membership Interests; and (b) to the extent of any interest therein by such Withdrawing Member or its Affiliates, sole ownership of all of its and its Affiliates' Products and assets related to the Project, the Pipeline or the Company Business to the Company, such assignments and transfers to be effective upon the Withdrawal Date; and thereafter such Withdrawing Member shall cease to be a Member.

3.3.2.2 Effect on Non-Withdrawing Members. The Remaining Members shall be obligated to make Capital Contributions in accordance with their respective Sharing Ratios (as adjusted to reflect the withdrawal of the Withdrawing Member) to the Company for Development Costs.

ARTICLE 4

COMPANY CAPITALIZATION AND FINANCIAL PROVISIONS

4.1 Initial Capital Contributions.

4.1.1 Intentionally Omitted.

4.1.2 Initial Capital Contributions by Additional Members.

4.1.2.1 The first Member admitted to the Company after the Effective Time shall as of the effective date of its admission contribute to the Company, as a Capital Contribution, the amount of cash necessary so that its Capital Account Balance will bear the same ratio to the aggregate Capital Account Balances of all Members as its Sharing Ratio bears to one hundred percent (100%).

4.1.2.2 Each subsequent Member admitted to the Company prior to the Project Completion Date shall as of the effective date of its admission contribute to the Company, as a Capital Contribution, the amount of cash necessary so that its Capital Account Balance will bear the same ratio to the aggregate Capital Account Balances of all Members whose Sharing Ratios are, pursuant to Section 2.3.2, not being reduced by its admission as its Sharing Ratio bears to the aggregate Sharing Ratios of those other Members.

4.2 Budgets.

4.2.1 Adoption. The portions of the Development Budget and the Operating Budget which provide for expenditures during the period extending to and including December 31, 2010 will serve as the initial Annual Budget of the Company (the "Initial Budget") which is deemed to have been approved by the Board. On or before November 1st of each year, the Board shall adopt a written budget for the upcoming calendar year, based upon the budget that is proposed by the Operator or as that budget may be modified and approved by the Company pursuant to the O&R Agreement (the "Operating Budget"), and Section 4.2.3 below, which written budget shall set forth in reasonable detail the anticipated consolidated quarterly statements of operations and financial statements of the Company, including reasonably detailed schedules in respect of Development Costs, Operational Expenditures, Capital Expenditures (including Capital Expenditures constituting part of the Development Costs) and any other contemplated expenditures and the financing thereof (including financing by Capital Contributions and financing through the incurrence of indebtedness by the Company), if any (such budgets as in effect from time to time, collectively the "Annual Budget"). These statements shall be broken down by month in the case of facilities under construction. After the Board has approved an Annual Budget, the Company shall promptly prepare and provide to the Members a monthly breakdown of such Annual Budget.

4.2.2 Intentionally Omitted.

4.2.3 Approval of Disputed Operating Budget Proposed by Kinder Morgan Affiliated Operator. Following the Project Completion Date, for any period during which an Affiliate of the Kinder Morgan Member is the Operator, if the Company and the Operator cannot agree on the terms of the upcoming annual Operating Budget proposed by the Operator by November 1st of the year such Operating Budget is proposed, such Operating Budget shall be submitted to the President of the Kinder Morgan Gas Pipeline Group, the President of Transportation at ConocoPhillips and the President of Sempra, which Persons shall thereupon use their reasonable efforts to agree upon an Operating Budget. If the Presidents of Kinder Morgan Gas Pipeline Group, ConocoPhillips Transportation and Sempra do not reach agreement on such Operating Budget by January 1st of the next year, the Members shall utilize the provisions in the arbitration procedures described in Section 3.1(b) and Article 11 of the O&R Agreement.

4.2.4 Amendments. If, in the course of a year or shorter period covered by a particular Annual Budget, any Member or Director determines that material amendments to or deviations from the Annual Budget are necessary or appropriate, such Member or Director shall request the Board's approval of such amendment.

4.3 Funding of the Company.

4.3.1 Member Equity Contributions. Capital Contributions to fund expenditures (i) contemplated by the Annual Budget or (ii) as otherwise approved by the Board shall be made by the Members in accordance with the procedures set forth in this Section 4.3. Prior to the beginning of each calendar quarter, the Board shall cause to be prepared, and shall approve, a written plan setting forth the projected cash flows and balances of the Company and the likely timing and amount of each periodic Capital Contribution to be made by each Member during each month in such calendar quarter (each, a "Cash Call"). Each Cash Call made pursuant to such plan shall be evidenced

by a written notice given to each Member at least ten (10) Business Days (or such shorter period as agreed by the Members) prior to the date the Cash Call is due (a "Funding Notice"). Each Funding Notice shall set forth: (a) the total amount and purpose of the Cash Call and the portion of that amount being requested from each Member; and (b) the date on which payments of that Cash Call will be due and the method of payment, which date and method will be the same for all Members. Funding Notices may be given only by the Board or other Person specifically designated to do so by the Board. The Board may also issue a Funding Notice to the Members for Cash Calls to fund costs reasonably determined by the Board to be necessary to (a) address an emergency situation threatening life or property of the Company or (b) reimburse Member's Affiliates in accordance with Section 4.3.2. If one or more Members make Capital Contributions pursuant to Section 4.1.2.2, then, until such time as all the Capital Account Balances of all Members are proportional to their respective Sharing Ratios, the amount of each Member's Cash Call will be calculated in such a manner as to cause the Capital Account Balance of that Member to be in proportion to its Sharing Ratio, which calculation, in the case of a Member that has made its initial Capital Contribution pursuant to Section 4.1.2.2, may result in a share of that Cash Call that exceeds its Sharing Ratio, and, in the case of an Initial Member, may result in a share of that Cash Call that is less than its Sharing Ratio; otherwise, each Member will be obligated to pay the percentage of each Cash Call which equals its Sharing Ratio. Each Capital Contribution the Company receives from a Member under this Section 4.3.1 will be credited to that Member's Capital Account as of the date the Funding Notice relating thereto specifies as the date of payment thereof. If the Member pays that Capital Contribution after that date, in whole or in part, it also must pay, directly to the other Members in proportion to their relative Sharing Ratios, interest at the Agreed Rate on the overdue amount from and after such date to the date of payment. The interest a Member pays under this Section 4.3.1 will not be credited to its Capital Account. Unless the Board determines otherwise, all Cash Calls under this Section 4.3.1 must be paid in cash by wire transfer in immediately available funds in accordance with the transfer instructions the Board will provide to each Member from time to time.

4.3.2 Treatment of Draws under Member Affiliate Support Instruments. Unless otherwise agreed between the Members or otherwise determined by the Board, if and whenever any beneficiary of any outstanding Member Affiliate Support Instrument draws or otherwise receives funds under such instrument, the Company will as soon as practicable thereafter either provide the Company with, or pay to the Member's Affiliate that advanced those funds to such beneficiaries for the account of the Company, the funds necessary to reimburse such Affiliate for the amount of funds it has advanced.

4.3.3 Limitations on Obligations. Notwithstanding any other provision of this Agreement, including Section 4.3.1, or applicable Law, no Member shall have any obligation to make any Capital Contribution to the Company under this Agreement or otherwise (a) on liquidation of the Company, (b) by reason of a deficit Capital Account Balance, or (c) where an Act of Insolvency has occurred with respect to the Company.

4.3.4 Intentionally Omitted.

4.4 Capital Accounts. The Company shall maintain for each Member a separate capital account ("Capital Account") as provided herein. Such provisions are intended to be in accordance with the rules of Treasury Regulation Section 1.704-1(b)(2)(iv) and to be interpreted in accordance therewith and are also intended to result in distributions during winding up of the Company being in proportion to Sharing Ratios and shall be implemented to achieve that result.

4.4.1 Each Member's Capital Account Balance shall be: (a) increased by (i) the amount of cash or cash equivalents contributed by that Member to the Company pursuant to this Agreement, (ii) the Net Agreed Value of property contributed by that Member to the Company pursuant to this Agreement (contributions contemplated by clauses (i) and (ii) shall be referred to as "Capital Contributions"), and (iii) allocations to that Member of income and gain pursuant to Section 4.6; and (b) decreased by (i) the amount of cash or cash equivalents distributed to that Member by the Company pursuant to this Agreement, (ii) the Net Agreed Value of property distributed to that Member by the Company pursuant to this Agreement and (iii) allocations of losses and deductions pursuant to Section 4.6.

4.4.2 The items of income, gain, loss or deduction that are to be allocated pursuant to Section 4.6 and are to be reflected in the Members' Capital Accounts pursuant to Section 4.4.1, are the items of the Company that

are recognized for federal income tax purposes (taking into account, without limitation, any method of depreciation, cost recovery or amortization used for that purpose), provided that:

4.4.2.1 All fees and other expenses incurred by the Company to promote the sale of (or to sell) any interest that can neither be deducted nor amortized under Section 709 of the Code, if any, shall be treated as an item of deduction at the time such fees and other expenses are incurred.

4.4.2.2 Except as otherwise provided in Treasury Regulation Section 1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and deduction shall be made without regard to any election under Section 754 of the Code which may be made by the Company and, as to those items described in Section 705(a)(l)(B) or 705(a)(2)(B) of the Code, without regard to the fact that such items are not includable in gross income or are neither currently deductible nor capitalized for federal income tax purposes. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Section 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment in the Capital Accounts shall be treated as an item of gain or loss.

4.4.2.3 Any income, gain or loss attributable to the taxable disposition of any Company property shall be determined as if the adjusted basis of such property as of such date of disposition were equal in amount to the Company's Carrying Value with respect to such property as of such date.

4.4.2.4 In accordance with the requirements of Section 704(b) of the Code, any deductions for depreciation, cost recovery or amortization attributable to any property of the Company shall be determined (A) as if the adjusted basis of such property were equal to the Carrying Value thereof immediately prior to such adjustment and (B) using a rate of depreciation, cost recovery or amortization derived from the same method and useful life (or, if applicable, the remaining useful life) as is applied for federal income tax purposes; provided, however, that if the asset has a zero adjusted basis for federal income tax purposes, depreciation, cost recovery or amortization deductions shall be determined using any reasonable method that the Board may adopt. Notwithstanding the foregoing portion of this Section, deductions for depreciation, cost recovery or amortization will be determined with respect to any portion of the Carrying Value with respect to which Treasury Regulation Section 1.704-3(d) remedial allocations are to be made (including reverse Section 704(c) allocations that are to be made as Treasury Regulation Section 1.704-3(d) remedial allocations) in accordance with a method that Treasury Regulation Section 1.704-3(d) permits as determined by the Board. Any deduction for depreciation, cost recovery or amortization in respect of property of the Company that is determined under this Section will be treated as an item of deduction for the period in which it occurs and will reduce the Carrying Value of that property as of the end of the Taxable Period in which that deduction is recognized and before any adjustment thereto pursuant to Section 4.4.4 hereof.

4.4.2.5 Any increase or decrease in the Carrying Value of an item of property pursuant to Section 4.4.4 shall be treated as an item of income or deduction, respectively, that is recognized by the Company immediately prior to such adjustment.

4.4.3 A Transferee shall succeed to a pro rata portion of the Capital Account of the Transferor relating to the Membership Interest so Transferred.

4.4.4 Immediately prior to the issuance of additional Membership Interests for cash or Contributed Property (but not on a contribution for which provision is made herein), (a) any distribution to a Member of any Company property in redemption or retirement of a Membership Interest or (b) an event that Treasury Regulation Section 1.704-l(b)(2)(iv)(f) or any successor thereto identifies as an event after which partnership property may be revalued, the Carrying Value of each Company property shall be increased or decreased by any Unrealized Gain or Unrealized Loss, respectively, attributable to that item of Company property at the time.

4.5 Loans.

4.5.1 General Rule. Except as provided in Section 4.5, no Member shall be required or permitted to lend any money to or for the benefit of the Company.

4.5.2 Member Loans. If the Board determines that the Company's funds are insufficient to meet its costs, expenses, obligations or liabilities, the Board may, in its sole discretion, permit any Member, and, if so permitted by the Board, any Member may (but shall not be required), to lend all or a portion of the amount of needed funds to the Company ("Member Loans"). Member Loans shall bear interest at market rates as determined by the lending Member and the Board and be repayable, unless otherwise determined by the lending Member and the Board, at the earliest possible time before any distributions are made to the Members.

4.6 Allocations for Capital Account Purposes. The Company's items of income, gain, loss and deduction (computed in accordance with Section 4.4.2) for each Taxable Period shall be allocated among the Members as provided herein below.

4.6.1 Net Income and Net Losses. After giving effect to the special allocations set forth in Section 4.6.2, Net Income and Net Losses for each Taxable Period and all items of income, gain, loss and deduction taken into account in computing Net Income and Net Losses for such Taxable Period shall be allocated to the Members in accordance with their Sharing Ratios.

4.6.2 Special Allocations. Prior to making allocations pursuant to Section 4.6.1, special allocations shall be made of items of income and deduction (determined pursuant to Section 4.4.2) for each Taxable Period as follows:

4.6.2.1 Chargeback of Nonrecourse Deductions. Each Member shall be allocated items of income and gain for each Taxable Period (and, if necessary, subsequent Taxable Periods) in the manner and amounts provided in the Treasury Regulations that are issued from time to time under Section 704(b) of the Code to charge back Nonrecourse Deductions that were allocated thereto pursuant to Section 4.6.2.3.

4.6.2.2 Chargeback of Member Nonrecourse Deductions. Each Member shall be allocated items of income and gain for each Taxable Period (and, if necessary, subsequent Taxable Periods) in the manner and amounts provided in the Treasury Regulations that are issued from time to time under Section 704(b) of the Code to charge back Member Nonrecourse Deductions that were allocated thereto pursuant to Section 4.6.2.4.

4.6.2.3 Nonrecourse Deductions. Nonrecourse Deductions for any Taxable Period shall be allocated to the Members in accordance with their Sharing Ratios. If the Board determines that the Company's Nonrecourse Deductions must be allocated in a different ratio to satisfy the safe harbor requirements of the Treasury Regulations promulgated under Section 704(b) of the Code, as to the allocation of such deductions, the Board shall, upon notice to the Members, revise the foregoing ratios so as to the satisfy such requirements.

4.6.2.4 Member Nonrecourse Deductions. Member Nonrecourse Deductions for any Taxable Period shall be allocated to the Member that bears the Economic Risk of Loss for the Member Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulation Section 1.704-2(i). If more than one Member bears the Economic Risk of Loss with respect to a Member Nonrecourse Debt, the Member Nonrecourse Deductions attributable thereto shall be allocated between or among such Members in accordance with the ratios in which they share such Economic Risk of Loss.

4.6.2.5 Qualified Income Offset. After allocations have been made pursuant to the preceding provisions of this Section 4.6.2 and balances of Adjusted Capital Accounts have been adjusted in respect thereof, items of income and gain shall be allocated to each Member in an amount and manner sufficient to eliminate, to the extent required by the Treasury Regulations promulgated under Section 704(b) of the Code, any deficit balance in its Adjusted Capital Account; provided that allocations to more than one Member shall be prorated, if necessary, in proportion to the total amount that is so to be allocated to each such Member. The allocations pursuant to this Section 4.6.2.5 are "Regulatory Allocations."

4.6.2.6 Regulatory Allocations. After allocations have been made pursuant to the preceding provisions of this Section 4.6.2 for a Taxable Period, items of income, gain, loss and deduction for such

Taxable Period shall be allocated among the Members so that, to the extent possible, the aggregate effect on Capital Account Balances of the Members of the allocations that are made pursuant to this Section 4.6.2.6 and of the Regulatory Allocations is the same as would have been achieved if the Regulatory Allocations and this Section 4.6.2.6 were not a part of this Agreement; provided, however, that no allocation shall be made pursuant to this Section 4.6.2.6 that would cause a Member to have a negative Adjusted Capital Account Balance.

4.7 Allocations for Tax Purposes.

4.7.1 Except as otherwise provided herein, for federal income tax purposes, each item of income, gain, loss and deduction shall be allocated among the Members in the same manner as its correlative item of income, gain, loss or deduction is allocated pursuant to Section 4.6 hereof.

4.7.2 In an attempt to eliminate Book-Tax Disparities attributable to a Contributed Property or Adjusted Property, items of income, gain, loss, depreciation, amortization and cost recovery deductions shall be allocated for federal income tax purposes among the Members as follows:

4.7.2.1 In the case of a Contributed Property, such items attributable thereto shall be allocated among the Members in the manner provided under Section 704(c) of the Code that takes into account the variation between the Agreed Value of such property and its adjusted basis at the time of contribution; and any item of Residual Gain or Residual Loss shall be allocated among the Members in the same manner as its correlative item of gain or loss is allocated pursuant to Section 4.6.

4.7.2.2 In the case of an Adjusted Property, such items shall (1) first, be allocated among the Members in a manner consistent with the principles of Section 704(c) of the Code to take into account the Unrealized Gain or Unrealized Loss attributable to such property at each time that the Carrying Value of such Adjusted Property was so adjusted, and (2) second, in the event such property was originally a Contributed Property, be allocated among the Members in a manner consistent with Section 4.7.2.1; and any item of Residual Gain or Residual Loss attributable to an Adjusted Property shall be allocated among the Members in the same manner as its correlative item of gain or loss is allocated pursuant to Section 4.6.

4.7.2.3 The Board shall apply the principles of Treasury Regulation Section 1.704-3(d) to eliminate Book-Tax Disparities.

4.7.3 For the proper administration of the Company, the Board shall (i) adopt such conventions as it deems appropriate in determining the amount of depreciation, amortization and cost recovery deductions that are recognized for federal income tax purposes; (ii) make special allocations for federal income tax purposes of income (including, without limitation, gross income) or deductions; and (iii) amend the provisions of this Agreement as appropriate to reflect the proposal or promulgation of Treasury Regulations under Section 704(b) or Section 704(c) of the Code; provided that such conventions, allocations or amendments do not adversely affect the right of any Member to distributions at any time and such changes are consistent with the applicable principles of the Code.

4.7.4 Any gain allocated to the Members upon the sale or other taxable disposition of any Company asset shall, to the extent possible, after taking into account other required allocations of gain pursuant to this Section 4.7, be characterized as Recapture Income in the same proportions and the same extent as such Members (or their predecessors in interest) have been allocated any deductions directly or indirectly giving rise to the treatment of such gains as Recapture Income.

4.7.5 All items of income, gain, loss, deduction and credit recognized by the Company for federal income tax purposes and allocated to the Members in accordance with the provisions hereof shall be determined without regard to any election under Section 754 of the Code which may be made by the Company; provided, however, that such allocations, once made, shall be adjusted as necessary or appropriate to take into account those adjustments permitted or required by Sections 734 and 743 of the Code.

4.7.6 Nonrecourse liabilities of the Company that are allocable pursuant to Treasury Regulation Section 1.752-3(a)(3) shall be allocated among the Members in accordance with their Sharing Ratios.

4.8 Distributions.

4.8.1 Distributions to Reimburse Total Development Costs. In accordance with the last sentence of Section 3.2.3.3, the Company shall distribute to the Members the proceeds available thereunder in proportion to their previous Capital Contributions in respect of Total Development Costs.

4.8.2 Other Distributions. Except as otherwise provided in Article 8 with respect to liquidation distributions, the Company shall distribute to the Members, in accordance with their Sharing Ratios applicable to to the period or portion thereof for which such distributions are being made, all Available Cash, no later than five (5) Business Days following the end of each calendar quarter.

4.9 Insurance.

4.9.1 Members Insurance. Each Member shall provide its own Directors and Officers Insurance policies in the amounts and for the coverages determined by each Member in its sole judgment.

4.9.2 Project Insurance. The O&R Agreement provides that the Operator of the Project shall secure insurance coverage in the amounts and for the coverages as set forth in the O&R Agreement, the cost of which shall be an operating expense of the Project.

ARTICLE 5

MANAGEMENT OF THE COMPANY

5.1 Generally. The management of the Company is fully vested in the Members, acting exclusively in their membership capacities. Except for the matters reserved for the approval or Consent of the Members as provided herein, to facilitate the orderly and efficient management of the Company, the Members shall act collectively as a "committee of the whole," which is hereby named the "Board." The Company will not have "managers," as that term is used in the LLC Act, it being understood that the Directors do not constitute "managers." Approval by the Members means (i) with respect to the matters set forth in Section 5.5.1, the Required Consent of the Members or (ii) with respect to all other matters that require approval or Consent of the Members, the affirmative vote of Members holding 75% or more of the Membership Interests. Decisions or actions taken by the Board in accordance with the provisions of this Agreement shall constitute decisions or actions by the Company and shall be binding on each Member, Director and employee of the Company. Except as otherwise agreed by the Members in writing, no Member shall have any unilateral right or authority to take any action on behalf of the Company or to bind or commit the Company with respect to Third Parties or otherwise. Except as otherwise expressly provided in this Agreement, each Member hereby (a) specifically delegates to the Board its rights and powers to manage and control the business and affairs of the Company in accordance with the provisions of Section 18-407 of the LLC Act, and (b) revokes its right to bind the Company, as contemplated by the provisions of Section 18-402 of the LLC Act.

5.2 Board.

5.2.1 Composition. Each Member shall designate one (1) Director to the Board, provided that each Member holding a Membership Interest representing 50% or more of the total Membership Interests shall designate one (1) Director for each 25% Membership Interest held by it. The Board shall initially be composed of four (4) Directors (each, a "Director"), two (2) of whom shall be appointed by Kinder Morgan Member, one (1) of whom shall be appointed by Sempra Member and one (1) of whom shall be appointed by ConocoPhillips Member. Each Member shall notify the other Members, from time to time, of the identity of (A) the representative(s) of such Member who will represent such Member at such Board meetings as Director(s), and (B) for each Director designated by such Member, one representative of the Member who will represent it at any meeting that a Member's Director(s) are unable to attend (an "Alternate Director(s)"). The term "Director" shall also refer to any Alternate Director that is actually performing the duties of the applicable Director in lieu of that Director. The initial Directors and initial Alternate Directors are set forth

on Schedule 5.2. Each Member may designate different Directors or Alternate Directors for any meeting of the Board by notifying the other Member at least two (2) Business Days prior to the scheduled date for such meeting; provided, however, that if giving such advance notice is not feasible, then such new Director or Alternate Director shall present written evidence of his or her authority no later than immediately prior to the commencement of such meeting. Upon appointment by a Member, each Director shall hold office until death, disability, resignation or removal at any time at the pleasure of the Member that appointed him or her. If a vacancy occurs on the Board, the Member that appointed such Director shall give notice of such vacancy to the other Members, and as soon as practicable after the occurrence of such vacancy shall appoint a successor so that the Board remains fully constituted at all times. Schedule 5.2 shall be revised and updated from time to time to reflect any changes to the Directors and Alternate Directors in accordance with this Section 5.2.1. Notwithstanding Section 12.3, any such revisions to Schedule 5.2 shall be an amendment to this Agreement without any further actions required by the Members.

5.2.2 Authority. Each Director shall have the full authority to act on behalf of the Member that designated such Director; the action of a Director at a meeting (or through a written consent) of the Board shall bind the Member that designated such Director; and the other Members shall be entitled to rely upon such action without further inquiry or investigation as to the actual authority (or lack thereof) of such Director. In addition, the act of an Alternate Director shall be deemed the act of the Director for which such Alternate Director is acting, without the need to produce evidence of the absence or unavailability of such Director. The voting power of a Member's Directors shall be based on the respective Member's Membership Interest.

5.2.3 Chairman and Secretary. One of the Directors will be designated as chairman of the board (the "Chairman"), in accordance with this Section 5.2.3. The Chairman's sole role is to chair the meetings of the Board. The Chairman shall be a Director designated by the Kinder Morgan Member. The Board shall also designate a secretary of the Board, who need not be a Director (the "Secretary of the Board"). The Secretary of the Board shall maintain written minutes of each of its meetings, which shall be submitted for approval no later than the next regularly-scheduled meeting. The Board may adopt whatever rules and procedures relating to its activities as it may deem appropriate, provided that such rules and procedures shall not be inconsistent with or violate the provisions of this Agreement or applicable Laws.

5.2.4 Meetings and Approval Requirements.

5.2.4.1 Regular Meetings. Unless otherwise determined by the Board, the Board shall meet at least every calendar quarter on a date and at a time and place established by the Board. Special meetings of the Board shall be held at the written request of any Director. Each Member shall use its reasonable efforts to cause the Directors elected by it to be present at each meeting of the Board.

5.2.4.2 Telephonic Meetings. Any meeting of the Board may be held by conference telephone call or through similar communications equipment by means of which all Persons participating in the meeting are able to hear each other. Participation in a telephonic or video graphic meeting held pursuant to this section shall constitute presence in person at such meeting.

5.2.4.3 Notices. Notices of regularly scheduled meetings of the Board shall not be required unless the time or place of a particular regular meeting is other than as set forth in the schedule of meetings previously approved by the Board. Without affecting the validity of a meeting in any way, prior to the date of a regularly scheduled meeting, the Chairman or, in the Chairman's absence, a Director shall cause the agenda of such meeting to be prepared and delivered to the Directors which sets forth the items known to the Chairman or such Director that are to be discussed for consideration at such meeting. Notices of special meetings shall be required and shall state the place, date and hour of the meeting and shall include an agenda which sets forth the purpose or purposes for which the meeting is called. Special meetings shall be held at the address specified in the notice of such meeting or at such other place as shall be agreed by the Directors. Notice of a special meeting shall be given in writing to each Director not less than two (2) Business Days nor more than fifteen (15) days before the date of the meeting. Directors may waive in writing the requirements for notice before, at or after the special meeting involved.

5.2.4.4 Quorum. At each meeting of the Board, the presence in person or by electronic means, as the case may be, of at least two (2) Directors that collectively represent at least 75% of the Membership Interests shall be necessary to constitute and maintain a quorum for the transaction of business by the Board. If any meeting of the Board fails to be convened for lack of a quorum, a subsequent meeting of the Board with respect to the same agenda may, notwithstanding the provisions of Section 5.2.4.3, be convened as early as five (5) Business Days after notice of such meeting is delivered to the Directors, which notice may be given on the same day of the meeting that failed to be convened for lack of a quorum. Notwithstanding, the quorum requirement set forth above, if any two meetings of the Board having the same agenda fail to be convened for lack of a quorum, at any subsequent meeting of the Board with respect to the same agenda, which meeting may be called in the manner provided in the immediately preceding sentence, a quorum shall be deemed to exist if at least two (2) Directors that collectively represent at least 50% of the Membership Interests are present in person or by electronic means.

5.2.4.5 Approval Requirements. The Board may act either through the presence of Directors voting at a meeting or by written consent without a meeting as described in Section 5.2.4.6 below.

5.2.4.5.1 Intentionally Omitted.

5.2.4.5.2 Intentionally Omitted.

5.2.4.5.3 Approval Requirements. Except as set forth in Section 5.8.3 or as otherwise provided for herein, the affirmative vote of Directors representing 75% or more of the Membership Interests (in the case of approval of an Affiliate Contract as described in Section 5.9, the affirmative vote of Directors representing 75% or more of the Membership Interests of the disinterested Members), present in person or by electronic means, as the case may be, and voting at a meeting of the Board where a quorum is present, shall be necessary for any action of the Board.

5.2.4.6 Written Consents. Any action required or permitted to be taken at a meeting of the Board may be taken without a meeting and without a vote if a consent or consents in writing, setting forth the action so taken or to be taken, shall be (a) provided by the Director initiating the consent process to all the other Directors prior to or contemporaneously with the initiating Director's solicitation of consents, (b) signed by Directors entitled to vote on that action and which those Directors could have taken at a meeting of the Board at which all Directors entitled to vote on that action were present and voted and (c) delivered to each Member. Each written consent of a Director under this Section 5.2.4.6 must bear the date of that Director's signature, and the date of the last signature needed to take action under this Section 5.2.4.6 will be the date of that action. Such consents shall be filed with the minutes of the proceedings of the Board.

5.2.4.7 Intentionally Omitted.

5.3 Committees. The Board may establish committees (the "Committees") from time to time and delegate to such Committees such authority and powers of the Board as determined by the Board in its sole discretion.

5.4 Duties of Directors and Committee Representatives.

5.4.1 Disclaimers of Duties. Notwithstanding anything herein to the contrary, each Director and appointee to any committee established pursuant to this Agreement (a "Committee Representative") shall represent, and owe duties to, only the Member that designated such Director or Committee Representative (the nature and extent of such duties being an internal corporate or organizational affair of such Member) and not to the Company, any other Member, Director or any Officer or employee of the Company. The Company shall indemnify, protect, defend, release and hold harmless each Director and Committee Representative from and against any claims asserted by or on behalf of any Person (including another Member), other than the Member that designated such Director or Committee Representative, that arise out of, relate to or are otherwise attributable to, directly or indirectly, such Person's service on the Board or a Committee, as applicable.

5.4.2 Voting Rights. Except as is otherwise expressly provided in this Agreement, with respect to any vote, consent or approval at any meeting of the Board, a Committee or otherwise under this Agreement, each Member (and its Directors and Committee Representatives at such Member's discretion) may grant or withhold such vote, consent or approval (a) in its sole and absolute discretion, (b) with or without cause, (c) subject to such conditions as it shall deem appropriate, including any other businesses or projects, whether or not competitive, and (d) without taking into account the interests of, and without incurring liability to, the Company, any other Member, Director or Committee Representative, or any Officer or employee of the Company. The provisions of this Section 5.4.2 shall apply notwithstanding the negligence, gross negligence, willful misconduct, strict liability or other fault or responsibility of a Member or its Directors or Committee Representatives. The Members acknowledge that each of the Members, and each of the Members' Directors may, in making decisions with respect to the Company, take into account the business interests of its respective Member with respect to the Project, or to any other businesses or projects in which any of them may have an interest, whether or not competitive with the Project.

5.4.3 Disclaimer Regarding Use of Certain Terms. Notwithstanding anything in this Agreement to the contrary, by using the terms "Board," and "Directors," it is not the intention of the Members to incorporate provisions from the Delaware general corporation law or any other state corporation law or limited liability company law regarding the rights, obligations and duties (including, without limitation, fiduciary duties) of corporate directors, boards of directors, or "managers" (as that term is used in the LLC Act) and the same are hereby disclaimed.

5.5 Members.

5.5.1 Matters Requiring Member Approval. In addition to any other approval required by applicable Law, this Agreement, or any other written agreement of the Members, and notwithstanding the provisions of Section 5.1, the following matters shall require the Required Consent of the Members:

(a) any merger or combination of the Company with another Person, or any reclassification, recapitalization, dissolution, liquidation or winding up of the Company;

(b) any addition to or amendment or repeal of the Certificate;

(d) any buyback by the Company of Membership Interests that will result in an increase or decrease in any Member's Membership Interest other than in accordance with the Members' Sharing Ratios on a pro rata basis;

(e) any election by the Company to exclude itself from the application of Subchapter K;

(f) the admission of any new Member pursuant to Section 2.3.2;

(g) any statutory or other conversion of the Company into another type of legal entity; or

(h) any entry by the Company into any business not related to the Company Business; or

(i) selling all or substantially all of the Company's assets, whether in one transaction or a series of related transactions; or

(j) taking any action, or acquiescing in the taking of any action, by or on behalf of the Company to seek relief under, or advantage of, an applicable debtor relief law, liquidation, receivership, trust,

conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization or similar law affecting the rights or remedies of creditors generally.

5.5.2 Member Meeting and Approval Procedures.

5.5.2.1 Meetings. A meeting of the Members for the purpose of acting upon any matter upon which the Members are entitled to vote may be called by the Board at any time, and such a meeting shall be called by the Board not more than thirty (30) days after receipt of a written request therefor signed by any of the Members. Meetings of the Members shall be held at such location as from time to time shall be reasonably determined by the Board. The Board shall give written notice of any such meeting to all Members, and such meeting shall be held not less than two (2) days nor more than thirty (30) days after the Board sends such notice. Each Member shall be entitled to attend and participate in any such meeting, and to vote its Membership Interest in person or by the written consent of each Member and the affirmative requisite vote as set forth herein, including Sections 5.1 and 5.5.1 shall be required for any action of the Members.

5.5.2.2 Telephonic Meetings. Any meeting of the Members may be held by conference telephone call or through similar communications equipment by means of which all Persons participating in the meeting are able to hear each other. Participation in a telephonic or video graphic meeting held pursuant to this section shall constitute presence in person at such meeting.

5.5.2.3 Quorum; Notice; Waivers; Proxies. The presence in person, by electronic means or by proxy of Members holding collectively 75% of the Membership Interest shall constitute a quorum at all meetings of the Members. No notice of the time, place or purpose of any meeting of Members need be given to any Member entitled to such notice who, in writing, executes and files with the records of the meeting, either before or after the time thereof, a waiver of such notice. Any Member who attends a meeting in person, by electronic means or is represented by proxy, except for a Member attending a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business on the ground that the meeting is not lawfully called or convened, shall be deemed to have waived notice of such meeting. If any meeting of the Members fails to be convened for lack of a quorum, a subsequent meeting with respect to the same matters may, notwithstanding the provisions of Section 5.5.2.1, be convened as early as five (5) Business Days after notice of such meeting is delivered to the Members by any Member, which notice may be given on the same day of the meeting that failed to be convened for lack of a quorum. Notwithstanding the quorum requirement set forth above, if any two (2) meetings of the Members with respect to the matters in question fail to be convened for a lack of quorum, which meetings may be called in the manner provided in the immediately preceding sentence,· a quorum shall be deemed to exist if at least two (2) Members that collectively represent at least 50% of the membership Interests are present in person, by electronic means or by proxy. Each Member may authorize any Person to act for it by proxy with respect to any matter in which such Member is entitled to participate, including waiving notice of any meeting and voting or participating in a meeting. Every proxy must be signed by such Member or its attorney-in-fact. No proxy shall be valid after the expiration of twelve (12) months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Member executing it.

5.5.2.4 Written Consent to Action. Notwithstanding the provisions of Sections 5.5.2.1, 5.5.2.2 and 5.5.2.3, on any matter that is to be voted on by the Members, the Members may take such action without a meeting, without prior notice and without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by the Members that could have taken the action at a meeting of Members. An original or copy of any such consent shall be inserted in the record of the proceedings of the Members.

5.6 Deadlocks of Board or Members.

5.6.1 Deadlock Resolution. If a proposal is properly submitted to the vote of the Board, a Committee or the Members (with respect to a proposal that is to be voted on directly by the Members) in accordance with this Agreement, and if there is no majority of the voting interests and the acceptance or rejection of such proposal by a majority interest remains unresolved for longer than twenty (20) days and following at least two (2) deadlocked votes on such proposal (the failure to accept or reject such proposal for longer than twenty (20) days and following at least two (2) deadlocked votes herein referred to as a "Deadlock"), then any Member may, at its sole option, submit the

proposal (the "Deadlocked Proposal") to the President of each of the Members which Persons shall thereupon use their reasonable efforts to resolve such Deadlock.

5.6.2 Mediation. If such Deadlocked Proposal is not resolved by discussion between such senior executives pursuant to Section 5.6.1 within ten (10) days after the expiration of the period set forth in such section, the Members shall endeavor to resolve the Deadlocked Proposal by mediation under the Commercial Mediation Rules and procedures of the AAA (the "Mediation Rules"). The Members shall endeavor promptly thereafter to agree upon a mediator, which mediator, unless otherwise agreed by the Members, is knowledgeable in the natural gas pipeline industry. If the Members fail to agree on such mediator within fifteen (15) days after expiration of the ten (10) day period referred to above in this Section 5.6.2, a mediator with the qualifications described above shall be appointed by the AAA in New York, New York in accordance with the Mediation Rules. The Members shall meet with the mediator within twenty (20) days after the date the mediator is selected. At least one (1) representative of each Member with the authority to settle such Deadlocked Proposal shall be present at such meeting.

5.6.3 Pendency of Deadlock. The existence of a Deadlock or the pendency of the dispute settlement or resolution procedures shall not in and of themselves relieve or excuse any Member from its ongoing duties and obligations under this Agreement.

5.7 Officers. The Board may appoint from time to time officers of the Company ("Officers"), with such duties and authorities as the Board shall determine to be necessary or appropriate. Each Officer shall have a duty to the Company to take all actions related to their duties and authorities as Officer in accordance with the best interests of the Company as directed by the Board. Any Person holding an Officer position may be removed, with or without cause, only by the Board. Vacancies in any Officer position may be filled only by the Board. The initial Officers are listed on Exhibit B.

5.8 Construction Capital Opportunities. The following provisions shall constitute the exclusive procedure by which Construction Capital Opportunities may be approved and constructed by the Company, a Member or an Affiliate of a Member:

5.8.1 Proposal. If one (1) or more of the Members having a Sharing Ratio of 25% or more becomes aware of a Construction Capital Opportunity that such Member believes will meet the Economic Criteria assuming that Potential Shippers would commit to the Minimum Firm Capacity, then such Member shall submit it to the Company by notifying the other Members of the nature of such proposed Construction Capital Opportunity, including such details as are then available, and providing a detailed explanation of the reasons why such Construction Capital Opportunity is being submitted.

5.8.2 Feasibility Study. As soon as reasonably practicable and in no event later than thirty (30) Business Days after the giving of the notice described in Section 5.8.1, the Board shall cause a feasibility study to be conducted for the proposed Construction Capital Opportunity, including determining whether the proposed Construction Capital Opportunity meets the Economic Criteria assuming that Potential Shippers would commit to the Minimum Firm Capacity; provided that, the Operator shall conduct such feasibility study for the Board for any proposed expansion or extension of the Project. Upon completion of such study, the findings shall be prepared and delivered to each Member, which shall include a detailed description of such Construction Capital Opportunity, the estimated cost thereof and the proposed financing, if any, therefor.

5.8.3 Open Season. If the study described in Section 5.8.2 indicates that the proposed Construction Capital Opportunity meets the Economic Criteria, assuming that Potential Shippers would commit to the Minimum Firm Capacity, then within a reasonable timeframe but no later than thirty (30) Business Days after such study has been received by each Member, the Board shall cause the Operator to conduct such open season. If the open season for such proposed Construction Capital Opportunity results in binding commitments from Potential Shippers of at least the Minimum Firm Capacity in the aggregate, then the Board shall vote on whether to proceed with the development of the Construction Capital Opportunity. If the Board approves proceeding with the development of the proposed Construction Capital Opportunity after receiving the results of the open season by the affirmative vote of Directors appointed by Members collectively holding 85% or more of all of the Membership Interests (an "Affirmative

Construction Vote"), the Company shall cause the Operator to proceed, consistent with the Annual Budget then approved by the Board and in effect, with the development of the Construction Capital Opportunity, including: (i) the preparation of an application for a FERC Certificate therefor, if required, (ii) the acquisition of necessary regulatory approvals and (iii) subject to the satisfaction of the conditions set forth in Section 5.8.6(a), (b) and (c), the financing for such Construction Capital Opportunity and the selection of contractors on the basis of cost and qualification. If the vote of the Board to proceed with the development of such Construction Capital Opportunity is not by an Affirmative Construction Vote, then such Construction Capital Opportunity shall be deemed rejected by the Board. A vote to proceed with the development of a Construction Capital Opportunity shall be without prejudice to any subsequent votes required under this Section 5.8 with respect to such Construction Capital Opportunity.

5.8.4 FERC Application. In instances where an application for a FERC Certificate is required for the Construction Capital Opportunity to be developed and the Board has approved the commitment to construct the Construction Capital Opportunity in accordance with Section 5.8.3 above, then the Board shall cause an application for a FERC Certificate to be prepared and shall submit it to the Members for their review and comment. Within twenty (20) days following the submission of an application for a FERC Certificate to the Members, the Board shall file such FERC Certificate application (as the same may have been revised in connection with the Members' comments, if any) with the FERC.

5.8.5 Approval of FERC Certificate. If a FERC Certificate application for the Construction Capital Opportunity is filed, then, ten (10) days prior to the FERC Response Date, the Board shall vote on whether the Company will (a) accept the FERC Certificate pertaining thereto in its then-current form, (b) reject the FERC Certificate pertaining thereto, (c) seek a rehearing with respect to the FERC Certificate or (d) take some other course of action.

5.8.6 Conditions to Construction. Except in connection with costs associated with the study described under Section 5.8.2, the open season conducted pursuant to Section 5.8.3, the preparation of an application for a FERC Certificate pursuant to Section 5.8.4, the filing of the FERC Certificate pursuant to Section 5.8.4, or with the approval of the Board, the Company shall not incur any material costs or obligations with respect to a Construction Capital Opportunity until (a) the necessary Permits for the Construction Capital Opportunity have been obtained, (b) all conditions precedent (other than any conditions requiring that the Members approve construction of the Construction Capital Opportunity or requiring the Construction Capital Opportunity to be constructed) under any precedent agreements with respect to any applicable gas transportation service agreements for the Construction Capital Opportunity have been satisfied, (c) the estimated cost of the Construction Capital Opportunity has been determined by the Board, and (d) the Board has approved the commitment to construct the Construction Capital Opportunity as provided in Section 5.8.3. For purposes hereof "material costs" shall not include the costs of environmental studies required for a complete application for a FERC Certificate.

5.8.7 Intentionally Omitted.

5.8.8 Intentionally Omitted.

5.8.9 Construction of Construction Capital Opportunity. If the Company is committed to construct the Construction Capital Opportunity pursuant to an Affirmative Construction Vote, then (i) the Board shall negotiate and approve a construction agreement with the contractors selected by the Board; (ii) upon such approval, the Company shall enter into the construction agreements with the contractors; and (iii) Kinder Morgan Member or its Affiliate pursuant to a construction management agreement entered into with the Company shall oversee the performance under the construction contracts, coordinate with the contractors in connection with the construction, administer the construction contracts and regularly report to the Board on the progress of the construction.

5.8.10 Dilution. If (a) a vote is required pursuant to Section 5.8.3 and such Construction Capital Opportunity is not thereby approved in accordance therewith but the Director(s) of one of the Members voted to approve such Construction Capital Opportunity or (b) the Director(s) of a Member vote to reject, seek a rehearing or appeal of a FERC Certificate with respect to a Construction Capital Opportunity and the other Member's Director(s) voted to accept such FERC Certificate, then, if the Director(s) of the Member who either voted to approve such Construction Capital Opportunity or voted to accept the FERC Certificate, as applicable, elect in writing within ten (10) Business

Days after such vote to construct such Construction Capital Opportunity, the Member whose Director(s) voted in the negative shall be affected as follows: (i) such Member shall not be required to make any Cash Calls to the Company pursuant to Article 4 in connection with the construction of the Construction Capital Opportunity in question, and (ii) if such Member does not make a Cash Call in connection with the Construction Capital Opportunity in question, such Member's Sharing Ratio shall, upon the contribution by the other Member of the Capital Contribution required in connection with the construction of the Construction Capital Opportunity in question, be reduced by multiplying it by a fraction, (A) the numerator of which is the Capital Account Balance of such Member as of the last day of the calendar quarter preceding the vote conducted pursuant to Section 5.8.3 at which such Member's Director(s) voted in the negative, and (B) the denominator of which is the sum of (I) such numerator and (II) the total expected cost of the Construction Capital Opportunity in question including all factors deemed relevant by the Board. Any such change in Sharing Ratios shall be treated as an event after which the assets of the Company shall be revalued pursuant to Section 4.4.2. As soon as the actual aggregate amount of such Cash Calls has been determined by the Board, such Member's Sharing Ratio shall be readjusted, using the method described in this Section 5.8.10, but using such actual amount of such Cash Calls instead of such estimate. Thereafter, distributions that would otherwise be made pursuant to the terms hereof shall be adjusted so as to correct the effect of any distribution that was made in proportion to the Sharing Ratios that were so corrected. Notwithstanding the foregoing, the mandatory dilution provisions of this Section 5.8.10 shall only apply to Construction Capital Opportunities (i) which constitute mainline capacity expansions or improvements which, pursuant to Section 5.8.11 may not be pursued outside of the Company, or (ii) which, if not constructed and owned by the Company would cause the owner thereof to be exposed to the principal regulatory jurisdiction of a state agency rather than to that of the FERC under the Natural Gas Act. If the mandatory dilution provisions of this Section 5.8.10 apply to a Construction Capital Opportunity, then the Member who voted to undertake such Construction Capital Opportunity shall have the unilateral right to cause the Company to undertake the Construction Capital Opportunity; provided that, if the Company does not in fact undertake, or abandons at any time prior to commercial operation, such Construction Capital Opportunity, then (x) the Member whose Director(s) voted against undertaking the Construction Capital Opportunity shall not be diluted notwithstanding the preceding provisions of this Section 5.8.10 (and the effect of any revaluation shall be reversed), and (y) the Member who voted to undertake the Construction Capital Opportunity shall be solely responsible to the Company for all development costs thereof, shall be allocated such costs for tax purposes, and shall have its Capital Account Balance adjusted to eliminate therefrom the effect of contributions and of allocations that were made thereto as a result of such Construction Capital Opportunity.

5.8.11 Pursuit Outside of the Company. One (1) or more Members or its Affiliates may pursue for its own account a Construction Capital Opportunity that either (a) does not meet the Economic Criteria or (b) that is rejected by a vote of the Board to reject a FERC Certificate pursuant to Section 5.8.5, for the Member's (or its Affiliate's) own account, rather than through the Company (and the Company and other Member shall have no interest therein); provided that any Construction Capital Opportunity which improves, expands or increases the capacity of the Pipeline, or any portion thereof, shall not be pursued outside of the Company; and provided, further, that if a Director rejects a Construction Capital Opportunity that meets the Economic Criteria and another Member wishes that the Company proceed, the Member that appointed such rejecting Director shall not thereafter pursue that Construction Capital Opportunity outside the Company. Subject to Section 5.8 with regard to Construction Capital Opportunities, a Member's Affiliates may engage in, and possess interests in, other businesses, activities, ventures, enterprises and investments of any and every type and description (collectively, "Activities"), independently or with others, including Activities that are competitive with the Company, other Members and their respective Affiliates, with no duty or obligation (express, implied, fiduciary or otherwise) (i) to refrain from engaging in such Activities, (ii) to offer the right to participate in such Activities to the Company, any other Member or any Affiliate of another Member, or (iii) to account to, or to share the results or profits of such Activities with, the Company, any other Member or any Affiliate of another Member. Any doctrines of non-competition, "company opportunity" or similar doctrines are hereby expressly disclaimed. Without limiting the generality of the foregoing, the Members recognize and agree that each Member's Affiliates may engage in various Activities that are the same or similar to Activities in which the Company and Affiliates of other Members are engaged. Notwithstanding the foregoing, nothing in this Agreement shall act to affect, terminate, restrict or limit the provisions of any other agreement between a Member and the Company or any other Member.

5.9 Affiliate Contracts. The Members hereby ratify, confirm and approve the Company entering into the O&R Agreement. The Members acknowledge that the Company may from time to time enter into contracts with a

Member or an Affiliate of a Member, including the O&R Agreement (the "Affiliate Contracts"). With respect to any such Affiliate Contract:

(a) the Company shall enter into any such contract (other than the O&R Agreement, which is hereby expressly approved pursuant to this Section 5.9) only with the approval of the Board, and the negotiation of any such Affiliate Contract shall be conducted on behalf of the Company by or under the direction of the Directors other than those designated by the Member affiliated with the other party to such contract; and

(b) any matters involving such Affiliate Contract shall be conducted by or under the direction of the Board, provided that any Director of a Member that is a party to, or has an Affiliate that is a party to, such Affiliate Contract shall not participate in a vote at a meeting of the Board regarding decisions to: (1) approve and authorize the Company to enter into such Affiliate Contract; (2) remove key personnel under such contract; (3) exercise any audit or review rights thereunder; (4) dispute contested invoices; (5) assert a default by other party thereunder, and exercise remedies thereunder; (6) consent to assignment by the other party to such Affiliate Contract; (7) exercise the rights of the Company in the event of prohibited conduct under the terms of such Affiliate Contract and (8) negotiate and agree to any change in, or any consent or waiver under, such Affiliate Contract.

5.10 Approval of FERC Certificate for Pipeline; Project Completion Date. The Company accepted the FERC certificate for each Certificate Segment and the Project Completion Date has occurred.

ARTICLE 6

ACCOUNTING AND RECORDS

6.1 Fiscal Year and Method of Accounting.

6.1.1 Fiscal Year. Unless otherwise determined by the Board, the fiscal year of the Company shall be the calendar year.

6.1.2 Method of Accounting. Unless otherwise determined by the Board, the books of account and reports of the Company shall be maintained or prepared, as the case may be, in accordance with Required Accounting Practice; provided, however, that for purposes of making distributions hereunder and maintaining Capital Account Balances, the provisions hereof shall apply. Each Member acknowledges that the Capital Account balances of the Members for the purposes described in the preceding sentence are not computed in accordance with Required Accounting Practice or GAAP.

6.2 Books and Records.

6.2.1 Books of Account and Records. Proper and complete records and books of account of the Company, including all such transactions and other matters as are usually entered into records and books of account maintained by Persons engaged in businesses of like character or as are required under applicable law, shall be maintained by the Company. The Company also shall keep at its registered office or principal place of business all records relating to the Company required by the LLC Act and any other applicable laws to be kept at such office.

6.2.2 Inspection. All records and books of account described in Section 6.2.1 above shall be open to inspection and copying by either Member or its accredited representatives at any reasonable time during normal business hours and at such Member's expense.

6.3 Reports and Financial Statements.

6.3.1 Quarterly Financial Statements. Within thirty (30) days after the close of each of the first, second, third and fourth fiscal quarters of the Company of each fiscal year, commencing with the first quarter of calendar year 2010, the Company shall cause to be furnished to each Member quarterly unaudited consolidated financial statements for the Company prepared in accordance with GAAP (but without footnotes and subject to fiscal yearend audit adjustments and in a format reasonably acceptable to each of the Members), including (a) a balance sheet showing

the Company's financial position as of the end of such fiscal quarter, (b) supporting profit and loss statements, and (c) statements of operations, capital, retained earnings and cash flows for such fiscal quarter, and setting forth a comparison of the actual results for such quarter and the fiscal year to date with actual amounts for the corresponding calendar quarter in the preceding fiscal year, and for the preceding fiscal year to date.

6.3.2 Annual Financial Statements. Within sixty (60) days after the end of each fiscal year of the Company commencing with fiscal year 2010, the Company shall cause to be furnished to each Member consolidated financial statements with respect to such fiscal year for the Company, consisting of (a) a balance sheet showing the Company's financial position as of the end of such fiscal year, (b) supporting profit and loss statements, and (c) statements of operations, capital, retained earnings and cash flows for such fiscal year, and setting forth a comparison of the actual results for such fiscal year with actual amounts for the preceding fiscal year. The annual financial statements shall be prepared in accordance with GAAP, and shall be audited in accordance with generally accepted auditing standards and certified by a registered independent firm of certified public accountants approved by the Board. That firm's audit report and attestation as to the Company's internal control of financial reporting shall accompany the annual financial statements.

6.3.3 Intentionally Omitted.

6.3.4 Other Information. With reasonable promptness, the Company shall deliver to each Member such other information and financial data concerning the Company any such Member may reasonably request.

6.4 Taxation.

6.4.1 Partnership Tax Status. The Members agree to make such elections as may be appropriate so that the Company shall be treated as a partnership for federal, state and local income tax purposes and to refrain from taking any action that could adversely affect such classification. The Members further agree, and authorize and require the Company and the Tax Matters Partner to take such actions (including the making of, or refraining from making, any relevant elections) to perfect such status. The Members further intend that the provisions of Sections 6221-6234 of the Code shall apply to the Company and intend that, if the circumstances so require, an election under Section 6231(a)(1)(B)(ii) of the Code shall be made. The Members hereby agree not to elect for the Company to be excluded from the application of Subchapter K.

6.4.2 Tax Elections and Reporting.

6.4.2.1 Generally. The Company shall make the following elections and take the following positions under U.S. income tax laws and regulations and any similar state statutes:

(a) Adopt the calendar year as the annual accounting period;

(b) Adopt the accrual method of accounting.

(d) to amortize organizational expenses under Section 709(b) of the Code and start-up expenses under Section 195 of the Code ratably over the shortest period that applicable law allows; and

(e) to adopt a method of depreciation that allows for the most accelerated method of depreciating assets.

6.4.2.2 Code Section 754 Election. The Board shall, upon the written request of any Member, cause the Company to file an election under Code Section 754 and the Treasury Regulations thereunder to adjust the basis of the Company's assets under Code Section 734(b) or 743(b) and a corresponding election under the applicable sections of state and local law.

6.4.3 Company Tax Returns. A firm of certified public accountants selected by the Board shall, if the Board so determines, be retained to prepare or review the necessary federal income tax returns and information returns for the Company. Any such tax returns not prepared and/or reviewed by the firm of certified public accountants, and all other tax returns, shall be prepared in a manner directed by the Board. Each Member shall provide such information, if any, as may be needed by the Company for purposes of preparing such tax and information returns, provided that such information is readily available from regularly maintained accounting records. The Company shall deliver to each Member a copy of the Company's federal and state income tax and information returns for each fiscal year, together with any additional tax-related information in the possession of the Company that such Member may reasonably and timely request in order to prepare properly its own income tax returns.

6.4.4 Tax Audits. The Kinder Morgan Member shall be the "tax matters partner," as that term is defined in Code Section 6231(a)(7) (the "Tax Matters Partner") with all of the rights, duties and powers provided for in sections 6221 through 6232, inclusive, of the Code. The Tax Matters Partner, as an authorized representative of the Company, shall direct the defense of any claims made by the Internal Revenue Service or other taxing authority to the extent that such claims relate to the adjustment of Company items at the Company level. The Tax Matters Partner shall promptly deliver to each Member a copy of all notices and communications with respect to income or similar taxes received from the Internal Revenue Service or other taxing authority relating to the Company which might materially adversely affect such Members, and shall keep such Members advised of all significant developments in such matters coming to the attention of the Tax Matters Partner. All expenses of the Tax Matters Partner and its Affiliates (including reasonable internal time charges and reasonable disbursements) and other fees and expenses in connection with such defense shall be borne by the Company. The Tax Matters Partner shall not agree to any extension of the statute of limitations for making assessments on behalf of any other Member or bind any other Member to a settlement agreement without, in each case, first obtaining the written consent of that Member.

ARTICLE 7

TRANSFERS OF INTERESTS

7.1 Transfer Restrictions for Membership Interests; Right of First Refusal.

7.1.1 Transfer Restrictions. Except as otherwise provided in Section 7.1.5, no Interest Transfer shall be made by, or with respect to, any Member unless:

(a) (i) in the case of a Transfer of a Membership Interest, such Interest Transfer constitutes a Disposition by the Member and does not involve (A) any consideration other that United States dollars and (B) any assets other than the Subject Membership Interest, and (ii) such Member has complied with the provisions of Sections 7.1.2, 7.1.3 and 7.2; or

(b) such Member has obtained the consent of the other Members, which consent may be withheld in each such other Member's sole discretion.

7.1.2 Transfer Notice. Any Member wishing to make, or which is the subject of, an Interest Transfer (a "Transferor") that satisfies the condition of clause (i) of Section 7.l.l(a) shall notify the non-transferring Members ("Optionees") of the proposed Interest Transfer, specifying in such notice (the "Transfer Notice"): (a) the Membership Interest that, directly or indirectly, is the subject of such Interest Transfer (the "Subject Membership Interest"); (b) the nature of the Interest Transfer; (c) the proposed transferee with respect to such Interest Transfer (the "Transferee") and (d) the price and payment and other terms of the proposed Interest Transfer.

7.1.3 Right of First Refusal. Each Transfer Notice subject to this Section shall constitute an irrevocable offer from the Transferor to sell to the Optionees the Subject Membership Interest on the same terms and conditions as stated in the Transfer Notice. Within thirty (30) days following receipt of a Transfer Notice (the "Offer Period"), except as otherwise specified below, each Optionee may purchase up to its proportionate share of the Subject Membership Interest, based on the ratio which the percentage Membership Interest held by such Optionee bears to the total percentage Membership Interests held by all Optionees. During the Offer Period, each Optionee may elect to accept such offer in whole or in part by delivering to the Transferor written notice of its irrevocable election to accept such

offer. If any Optionee elects to purchase less than its proportionate share of the Subject Membership Interest, the remaining Optionees shall be given the opportunity to allocate the remaining Subject Membership Interest among themselves, and in the absence of an agreement, the remaining Optionees may purchase their respective proportionate share of the remaining Subject Membership Interest based on the ratio which the percentage Membership Interest held by such remaining Optionee bears to the total percentage Membership Interests held by all remaining Optionees. If the Optionees elect to purchase all of the Subject Membership Interest, the closing of the purchase and sale of any Subject Membership Interest pursuant to this Section will occur on the 10th Business Day following expiration of the Offer Period or within such other reasonable time period as the Members participating in such sale may agree. At such closing, the Optionees will deliver the consideration payable to the Transferor, against delivery of the Subject Membership Interest by the Transferor, free and clear of any Liens. If an Optionee does not accept such offer prior to expiration of the Offer Period, the offer to such Optionee will be deemed to have been rejected. In the event that the Optionees have not elected to purchase all of the Subject Membership Interest prior to expiration of the Offer Period or the Optionees have notified the Transferor that all Optionees consent to such Interest Transfer, the Transferor will be entitled to Transfer such Subject Membership Interest to Transferee on the terms set forth in the original Transfer Notice, at any time within one hundred twenty (120) days after the expiration of the Offer Period, provided that such Transfer does not otherwise violate any of the provisions of this Agreement. If such Transfer is not consummated within such one hundred twenty (120) day period, any Transfer that otherwise would have been permitted under this Section 7.1.3 shall once again be subject to the provisions of Article 7.

7.1.4 Intentionally Omitted.

7.1.5 Exceptions to Transfer Restrictions. Compliance with the provisions of Section 7.1.1, 7.1.2 and Section 7.1.3 shall not be required when:

(a) (i) a Member (A) holding less than 25% of all of the Membership Interests makes a Disposition to an Affiliate of its Parent, or (B) holding 25% or more of all of the Membership Interests makes an Interest Transfer to an Affiliate of its Parent, in each case so long as it has given at least ten (10) Business Days' prior written notice to the other Member(s) identifying and providing relevant information about such Affiliate and (ii) such Disposition or Interest Transfer, as the case may be, otherwise complies with the terms of this Agreement; or

(b) an Interest Transfer is the result of a Change in Control caused by a consolidation or merger to which a Parent is a party, or the sale of all or substantially all of a Parent's assets to another Person, and the Transferor provides written notice to the non transferring Member(s) within ten (10) Business Days after the Transfer identifying and providing relevant information about such Transferee.

7.2 Other Transfer Restrictions. Notwithstanding any other provision hereof to the contrary, no Interest Transfer will be made unless:

(a) such Interest Transfer will be accomplished in a non-public offering exempt from registration and qualification requirements of all applicable securities laws and regulations, provided that such restriction shall not apply to any Interest Transfers made pursuant to Section 7.1.5(b);

(b) such Interest Transfer will not result in or cause (i) any new obligations on the Company or (ii) any material defaults under, any material breaches of any material obligations contained in, or any material failures of material conditions on the Company contained in any agreements to which the Company is a party;

(c) the Transferor holds the non-transferring Members harmless from all costs, expenses or liabilities (including reasonable attorneys' fees and disbursements) incurred by the non-transferring Members in connection with the Interest Transfer; and

(d) the Transferee shall have entered into a legally binding agreement to be bound by this Agreement from and after the date such Transferee becomes a Member, in form and substance reasonably satisfactory to the non-transferring Members, provided that such restriction shall not apply to any Interest Transfers made pursuant to Section 7.1.5(b).

7.3 Continuing Obligations. No Transfer of an Interest will effect the release of the Transferring Member from any liabilities or obligations it owes under this Agreement to the Company or any other Member. Any Member that effects a Disposition in accordance with this Article 7 will:

(1) cease to be a Member on the effectiveness of that Disposition; and

(2) remain a party subject to Sections 2.5 and 2.6 and Articles 9 and 12 as if it were a Withdrawing Member.

7.4 Intentionally Omitted.

7.5 Make-whole Payment. A Member may effect or be the subject of an Interest Transfer that would result in a termination of the Company for purposes of Section 708 of the Code only if the Interest Transfer is compelled by law or regulation in circumstances that cannot be reasonably avoided, and the transferring Member meets the requirements of this Section 7.5 and otherwise complies with the applicable provisions of this Article 7. Prior to that Interest Transfer, the transferring Member or its Parent or its designee must offer to pay to each other Member prior to the Interest Transfer in cash the amount (the "Make-whole Amount") necessary to hold that other Member harmless against any deferral of state or federal income tax depreciation or other increase in liability for such tax (including any change in the present value of such liability) that such termination would cause. For purposes of calculating the Make-whole Amount, such other Members will be treated as if they are corporations for federal and state income tax purposes. In the case of any Interest Transfer to which this Section 7.5 applies, the Make-whole Amount for each Member entitled to be paid that amount will be computed on a net present value basis using:

(a) the Agreed Rate in effect on the date of payment and

(b) the highest marginal applicable state and federal corporate income tax rates for the year of payment.

Using those same highest marginal rates, the amount that is determined pursuant to the preceding sentence will be grossed up such that the increased amount reduced by the state and federal income tax that are deemed paid by reason of the receipt thereof is equal to the amount that is determined pursuant to the preceding sentence. If the applicable state income tax is deductible for federal income tax purposes, effect will be given to that deduction in calculating the Make-whole Amounts. Each Member may accept this payment or, at its sole option, receive full indemnity on such after-tax basis from the Transferring Member for all state and federal income tax impacts relating to that Member directly resulting from the Section 708 termination.

ARTICLE 8

TERM; DISSOLUTION AND TERMINATION; EVENTS OF DEFAULT; RIGHT

TO WITHDRAW

8.1 Term of Agreement.

8.1.1 Term. The term of the Company shall be perpetual unless the Company is earlier dissolved in accordance with the provisions contained in this Agreement. Notwithstanding the term, this Agreement shall continue in full force and effect until the earliest to occur of (a) termination by the Required Consent of the Members, (b) entry of a judicial dissolution under the LLC Act, or any other event that causes a dissolution of the Company because the LLC Act mandates dissolution upon occurrence of such other event, notwithstanding any agreement among Members to the contrary, or (d) the final dissolution and completion of winding up of the Company; provided that this Agreement shall continue in force thereafter solely with respect to (i) claims, demands, events or occurrences that occurred before such termination, including the indemnification provided in Article 10, (ii) the provisions of Articles 9 (relating to resolution of Agreement Disputes) and 12, and (iii) the provisions of Sections 2.5 and 2.6. In the event of the withdrawal by all the Members from the Project pursuant to Article 3, then each of the Members shall Consent to proceed promptly

and in good faith with the winding up of the business and distributing the assets of the Company or take such other actions required to effectuate the termination of the Company, as agreed by the Members.

8.1.2 No Termination of the Company. Except as expressly provided in this Agreement, no Member shall seek to withdraw from the Company or seek to dissolve, terminate or liquidate the Company, and no Member shall petition a court for its withdrawal or the partition, dissolution, termination or liquidation of the Company or its property. Each of the Members hereby irrevocably waives any and all rights that it may have to maintain an action to partition Company property, respectively, or to compel any sale or transfer thereof.

8.1.3 Events of Dissolution. The Company shall be dissolved upon the first to occur of the following:

8.1.3.1 the Required Consent of the Members to dissolve the Company, but only on the effective date of dissolution specified by such Members at the time of such approval;

8.1.3.2 entry of a decree of judicial dissolution under the LLC Act; or

8.1.3.3 any other event that causes a dissolution of the Company because the LLC Act mandates dissolution upon the occurrence of such other event, notwithstanding any agreement among the Members to the contrary.

8.1.4 Procedures Upon Dissolution. The Company will not dissolve as a result of the Withdrawal of any Member, or the occurrence of any other event that terminates the continued membership in the Company of any Member, and, if any such event occurs, that occurrence will not entitle the Members to dissolve the Company. After the Company dissolves, it will not terminate until the Liquidator has wound up its affairs under this Section 8.1. As promptly as practicable after the Company dissolves, and again after the Liquidator has completed the liquidation of the Company, the Liquidator will cause a recognized firm of independent certified public accountants it selects to prepare an accounting of the Company's assets, liabilities and operations through the last day of (a) the calendar month in which the Company dissolves and (b) the calendar month in which the Liquidator completes that liquidation.

8.1.4.1 Liquidator. If the Company dissolves, the Board (or a liquidator the Board appoints) will dispose of the assets of the Company, discharge its liabilities and otherwise wind up its affairs in accordance with this Section 8.1. This Agreement refers to the Person actually conducting that liquidation in accordance with the preceding sentence, whether the Board or a liquidator the Management Committee appoints under this Section 8.1.4.1 or a court appoints under Section 8.1.4.2, as the "Liquidator."

The Board will determine the time, manner and terms of any sale or sales of Company property, having due regard for the activity and condition of the relevant markets and general financial and economic conditions; provided, however, that the Board may distribute the Company's assets in kind to the Members if it deems such a distribution to be practicable. The Liquidator, if other than the Board, will be entitled to receive such compensation for its services as the Board approves.

The Liquidator may resign at any time by giving 15 days' prior written notice to all the Members. The Board may remove the Liquidator, if other than the Board, with or without cause, by a written notice of removal the Board signs and delivers to the Liquidator. If a vacancy in the position of Liquidator occurs for any reason, the Board will appoint a successor and substitute Liquidator within 30 days of that occurrence. Any successor and substitute Liquidator appointed under this Section 8.1.4.1 or Section 8.1.4.2 will have and succeed to all the rights, powers and duties of the original Liquidator. The right to appoint a successor and substitute Liquidator in the manner this Section 8.1 provides will be recurring and continuing for so long as the functions and services of the Liquidator are authorized to continue under the provisions hereof, and every reference herein to the Liquidator will refer also to any such successor and substitute Liquidator appointed in the manner this Section 8.1 provides.

The Liquidator will have and may exercise, without further authorization or consent of any of the Parties or their legal representatives or successors in interest, all the powers this Agreement and applicable law

confer on the Board and the Board to the extent necessary or desirable in the good faith judgment of the Liquidator to perform its duties and functions.

8.1.4.2 Court Appointment of Liquidator. If the Board is to appoint the original Liquidator under Section 8.1.4.1, but fails to do so within 90 days after the Company dissolves, or, following the filling of the position of Liquidator under Section 8.1.4.1, a vacancy exists in that position for 30 or more consecutive days, any interested Person will have the right to apply to the Delaware Court of Chancery under Section 18-803(a) of the LLC Act for appointment of the Liquidator or successor Liquidator, and that judge, acting as an individual and not in his judicial capacity, will be fully authorized and empowered to appoint and designate a successor and substitute Liquidator having all the powers, duties, rights and authority this Agreement provides to the Liquidator.

8.1.4.3 Liquidation. In the course of winding up of the Company, the Liquidator may, at the direction of the Board, dispose of the Company's assets by public or private sale or by distribution to the Members under Section 8.1.4.4. The Liquidator will treat all amounts the Company owes to Members otherwise than in respect of their distribution rights under Section 8.1.4.4 and all costs of the liquidation under this Section 8.1 as Company liabilities it will discharge in the course of winding up the Company's affairs.

The Liquidator will cause the Company to (1) pay or make reasonable provision for the payment of all claims and obligations, including all contingent, conditional or unmatured contractual claims, known to the Company, and (2) make such provision as will be reasonably likely to be sufficient to provide compensation for (A) any claim against the Company which is the subject of each pending action, suit or proceeding to which the Company is a party and (B) claims that have not been made known to the Company or have not arisen, but that, on the basis of facts known to the Company, are likely to arise or become known to the Company within 10 years after the date of dissolution. If the Company has sufficient assets, the Liquidator will cause it to (1) pay all such claims and obligations in full and (2) make any such provision for payment in full. If the Company does not have sufficient assets for those purposes, the Liquidator will cause the Company to pay or provide for the payment of all those claims and obligations according to their priority and, among claims of equal priority, ratably to the extent of the Company's assets available therefor.

The Liquidator will maintain any reserve it has established with respect to contingent, conditional or unmatured claims against the Company until the last to occur of the resolution of all asserted claims to which it relates or the 10th anniversary of the date of the Company's dissolution, following which anniversary the Liquidator will distribute the assets remaining in the reserve, if any, as liquidation proceeds under Section 8.1.4.4.

8.1.4.4 Distribution of Assets.

(a) After the Liquidator has completed paying or making provision for the payment of the Company's liabilities in accordance with Section 8.1.4.3, the Company will, subject to the provisions of this Section 8.1.4.4, apportion and distribute its remaining assets to the Members as follows:

(i) the Liquidator may sell all or any of those assets and, to the extent it does so, it will compute the gain or loss resulting from each such sale and allocate that gain or loss to the Capital Accounts of the Members in accordance with this Agreement;

(ii) the Board will determine the Fair Market Value of all those assets the Liquidator does not sell, and the Capital Account Balances of the Members will be adjusted as provided herein as though the Unrealized Gain or Unrealized Loss in those assets were recognized and the assets of the Company will then be distributed, first, (A) to the Members in proportion to and to the extent of the Capital Account Balance of each Member and, second, (B) to the Members in proportion to their Sharing Ratios.

(b) The distributions of cash or property to the Members in accordance with this Section 8.1.4.4 will constitute:

(i) a complete return to each Member of its Capital Contributions;

(ii) a complete distribution to the Members of all their respective Membership Interests and all the Company's property; and

(iii) a compromise to which all the Members have consented under Section 18-502(b) of the LLC Act.

(c) No dissolution or termination of the Company will relieve any Member from any obligation it has to the Company on the date of that dissolution or termination to the extent that the obligation has accrued and is no longer conditional, including any obligation to return funds to the Company or make a Capital Contribution. Unless the Board determines otherwise, each Member must discharge on or before that date any such obligation to return funds or make Capital Contributions and, to the extent it does so, will not have any claim against any other Member for the amount it so returns or pays.

8.1.4.5 Deficit Capital Accounts. No Member will be required to pay to the Company, any other Member or any other Person any deficit balance that may exist from time to time in the Capital Account of that Member or any other Member.

8.1.4.6 Termination. When the Liquidator completes the application and distribution of the Company's assets, the Company will terminate and the Liquidator will take such actions and execute and file such documents, including a certificate of cancellation under Section 18-203 of the Delaware Act, as it deems necessary or appropriate to effect that termination.

8.2 Events of Default.

8.2.1 Events of Default. The occurrence of any of the following events shall constitute an event of default (an "Event of Default") hereunder on the part of the Member with respect to which such Event of Default occurs:

(a) a material breach or default in the performance of any material agreement, obligation, covenant or undertaking under this Agreement, and the failure of the defaulting Member to cure such breach or default within forty-five (45) days after receipt of written notice thereof from the other Member; (or, in the case of an Event of Default arising from the failure of the defaulting Member to pay any amount of money when required pursuant to the terms hereof or thereof, within three (3) Business Days after receipt of written notice thereof from the other Member); provided, however, that if (x) such breach or default cannot be cured within such forty-five (45)-day period, (y) such breach or default is susceptible of cure, and (z) the defaulting Member is proceeding with diligence and in good faith to cure such breach or default, then such forty-five (45)-day period shall be extended to such date, not to exceed a total of ninety (90) days from the date the defaulting Member receives notice of the breach or default from the other Member, as is necessary to cure such breach or default; or

(b) an Act of Insolvency with respect to a Member; or

8.2.2 Remedy Upon Event of Default. For so long as an Event of Default has occurred and is continuing with respect to a Member, the rights, but not obligations, of such Member hereunder including the right to vote and receive distributions from the Company pursuant to Article 4, shall be suspended, provided however that if the Member against which an Event of Default is asserted disputes in good faith the occurrence of the Event of Default pursuant to Article 9, then the suspension of such Member's rights shall not occur until the determination of the occurrence of the Event of Default pursuant to Article 9 and, if such determination of the Event of Default is made, such defaulting Member shall return to the Company any distributions received from the Company during the period when the Event of Default occurred and was continuing.

8.2.3 Remedy Not Exclusive. The rights of the non-defaulting Member set forth above in this Section 8.2 shall be in addition to such other rights and remedies that may exist at law, in equity or under contract on account of such Event of Default. Without limiting the generality of the foregoing, the Members acknowledge that an award of damages for failure to comply with Sections 2.5 or 2.6, or Articles 7, 8 and 9 would not be an adequate remedy for the Members attempting to enforce such provisions, and accordingly the Members expressly authorize any such Members to bring an action against the other Member to compel the specific performance by such other Member of their obligations to comply with such provisions.

8.3 Right of Withdrawal. Except as expressly provided in Section 3.3, no Member has the power or right to voluntarily withdraw, resign or retire from the Company.

ARTICLE 9

AGREEMENT DISPUTE RESOLUTION

9.1 In General. Any questions, disputes or differences in any way relating to or arising out of the existence, validity, interpretation, application, breach or asserted breach of any provision of this Agreement (an "Agreement Dispute"), shall be resolved exclusively as set forth in this Article 9. If an Affiliate of a Member is involved in a dispute which is related to an Agreement Dispute because such Affiliate is a party to an Affiliate Contract or otherwise, the Members agree to resolve such dispute as part of the resolution of the Agreement Dispute pursuant to this Article 9.

9.1.1 Senior Executive Discussions. The Presidents of the Members shall use their reasonable efforts to resolve any Agreement Dispute. If such Agreement Dispute is not resolved by discussion between or among such senior executives within thirty (30) days after referral to such senior executives by one Member to the other Member(s) in writing, the Members shall refer the matter to mediation pursuant to Section 9.1.2 below.

9.1.2 Mediation. If such Agreement Dispute is not resolved by discussion between such senior executives pursuant to Section 9.1.1 within thirty (30) days after the expiration of the period set forth in such section, the Members shall endeavor to resolve the Agreement Dispute by mediation under the Mediation Rules. The Members shall endeavor promptly thereafter to agree upon a mediator, which mediator, unless otherwise agreed by the Members, is knowledgeable in the natural gas industry. If the Members fail to agree on such mediator within twenty-one (21) days after expiration of the thirty (30) day period referred to above in this Section 9.1.2, a mediator with the qualifications described above shall be appointed by the AAA in New York, New York in accordance with the Mediation Rules. The Members shall meet with the mediator within fifteen (15) days after the date the mediator is selected. At least one (1) representative of each Member with the authority to settle such Agreement Dispute shall be present at such meeting.

9.2 Arbitration. If the Agreement Dispute has not been resolved by written agreement within forty-five (45) days after the first substantive meeting with the mediator pursuant to Section 9.1.2, the Members shall proceed to arbitration in accordance with this Section 9.2.

9.2.1 Rules and Venue. Any such arbitration shall, except as otherwise provided in this Article 9, be conducted in accordance with the Commercial Arbitration Rules; provided that depositions may be taken and discovery may be made in accordance with the Federal Rules of Civil Procedure. The arbitration shall be conducted in New York, New York.

9.2.2 Arbitral Tribunal. The arbitration shall be conducted before a panel of arbitrators consisting of (a) one (1) arbitrator appointed by each disputing Member, each of whom shall be an attorney having practiced in the area of commercial law for at least ten (10) years and (b) the minimum number of arbitrators, if any, necessary to complete a panel containing an odd-numbered total of arbitrators, who shall be mutually appointed by the Member-appointed arbitrators and who shall be either attorneys having practiced in the area of commercial law for at least ten (10) years or former trial judges of a federal or state court, and the mutually appointed arbitrators shall choose one from their number who shall serve as the chairman of the arbitration. The Member-appointed arbitrators shall be appointed within fifteen (15) days of the commencement of arbitration, and the other arbitrators and chairman shall be appointed within ten (10) days after the appointment of the final Member-appointed arbitrator. If any Member fails to appoint an arbitrator within such fifteen (15)-day period, or if all Member appointed arbitrators have been appointed but cannot

agree on the appointment of the other arbitrators, the Members that have appointed an arbitrator shall cause the AAA in New York, New York to make such appointment. The arbitration hearing shall be commenced no later than seventy-five (75) days after the selection of the chairman.

9.2.3 Interpretation of Provisions. The interpretation and application of this Article 9 shall be governed by the terms of this Article 9, the other provisions of this Agreement, and the laws of the State of Delaware, without regard to any conflict of law rules that might lead to the application of the laws of any other jurisdiction. The arbitrators shall decide all other disputes based on the terms of this Agreement, as applicable, pursuant to the laws of the State of Delaware, without regard to any conflict of law rules that might lead to the application of the laws of any other jurisdiction.

9.2.4 Proceedings, Awards and Judgments. Any decision or award of the arbitrators hereunder shall be the decision or award of a simple majority of the arbitrators and shall be final and binding, and shall not be subject to any form of appeal. Judgments upon awards or orders for enforcement may be entered by all courts to which an award is presented, and execution may be had in accordance with the law of execution generally applied in the jurisdiction or jurisdictions where enforcement is sought. The arbitrators shall be directed and authorized to apportion fees and expenses of the parties in connection with the proceeding, and the fees and expenses of the arbitration proceeding, in an equitable fashion taking into account the outcome of the proceeding.

9.3 Pendency of Dispute. The existence of an Agreement Dispute, or the pendency of the Agreement Dispute settlement or resolution procedures set forth above, shall not in and of themselves relieve or excuse any party from its ongoing duties and obligations under this Agreement.

ARTICLE 10

INDEMNIFICATION

10.1 Indemnification.

10.1.1 Indemnification by Member. Each Member (in such capacity, the "Indemnifying Member") shall, to the maximum extent permitted by law, defend, protect, indemnify and hold harmless each other Member and such other Member's officers, directors, employees, agents, shareholders, partners and successors and assigns and each Affiliate thereof (collectively, in such capacity, the "Indemnified Parties") from and against any Losses suffered or incurred by any of the Indemnified Parties arising out of (a) the inaccuracy of any representation or warranty by such Indemnifying Member contained in this Agreement or (b) the breach or default by such Indemnifying Member of any of its covenants or agreements contained in this Agreement.

10.2 Procedure for Indemnification with Respect to Third Party Claims.

10.2.1 Notice of Claim. If any legal proceedings shall be instituted or any claim or demand shall be asserted by any Third Party in respect of which indemnification may be sought by any party or parties from any other party or parties under the provisions of this Article 10, the party or parties seeking indemnification (collectively, the "Indemnitee") shall, within forty-five (45) days of the receipt thereof, cause written notice of the legal proceedings or the assertion of any claim or demand of which it has knowledge that is covered by the indemnity under this Article 10 to be forwarded to the party or parties from which indemnification is sought (collectively, the "Indemnitor") specifying the nature of and specific basis for such legal proceedings, claim or demand and the amount or the estimated amount thereof to the extent then feasible, which estimate shall not be binding upon the Indemnitee, in its effort to collect the final amount arising out of such legal proceedings, claim or demand; provided, that the failure of an Indemnitee to give timely notice shall not affect rights to indemnification under this Article 10 except to the extent that the Indemnitor has been materially prejudiced by such failure.

10.2.2 Conduct of Claim. The Indemnitor shall have the right, at its option and at its own expense, to be represented by counsel of its choice and to participate in, or to take exclusive control of, the defense, negotiation and/or settlement of any proceeding, claim or demand which relates to any amounts indemnifiable or potentially indemnifiable under this Article 10; provided, however, that the Indemnitee may participate in any such proceeding

with counsel of its choice, which shall be at its own expense, unless (a) the Indemnitor chooses counsel not reasonably acceptable to the Indemnitee, or (b) the Indemnitor does not pursue with reasonable diligence such defense, negotiation or settlement. The Indemnitee shall have a right to notice of any settlement, and the Indemnitor shall not execute or otherwise agree to any consent decree which provides for other than monetary payment by the Indemnitor without the Indemnitee's prior written consent, which consent shall not be unreasonably withheld. Notwithstanding the foregoing, the Indemnitee shall have the right to pay or settle any such claim, provided that in such event it shall waive any right to indemnity therefor by the Indemnitor. If the Indemnitor elects not to defend or settle such proceeding, claim or demand and the Indemnitee defends, settles or otherwise deals with any such proceeding, claim or demand, which settlement may be without the consent of the Indemnitor, the Indemnitee shall provide fifteen (15) days' advance written notice of any property settlement to the Indemnitor and will act reasonably and in accordance with its good faith business judgment. The parties shall cooperate fully with each other in connection with the defense, negotiation or settlement of any such legal proceeding, claim or demand.

10.2.3 Payment of Claim. After final judgment or award shall have been rendered by a court, arbitration board or administrative agency of competent jurisdiction and the expiration of the time in which to appeal therefrom, or a settlement shall have been consummated, or the Indemnitee and the Indemnitor shall have arrived at a mutually binding agreement with respect to each separate matter indemnified by the Indemnitor, the Indemnitee shall forward to the Indemnitor notice of any sums due and owing by the Indemnitor with respect to such matter and the Indemnitor shall pay all of the sums so owing to the Indemnitee by wire transfer in immediately available funds to an account specified by Indemnitee within thirty (30) days after the date of such notice.

10.2.4 Access to Information. If any claim is made by a Third Party against an Indemnitee, the Indemnitee shall use commercially reasonable efforts to make available to the Indemnitor those partners, shareholders, directors, officers and employees whose assistance, testimony or presence is necessary to assist the Indemnitor in evaluating and in defending such claims; provided, however, that any such access shall be conducted in such a manner as not to interfere unreasonably with the operations of the business of the Indemnitee but failure to provide necessary witnesses or access to information will excuse Indemnitor's performance.

ARTICLE 11

REPRESENTATIONS AND WARRANTIES

11.1 Representations and Warranties of the Members. Each Member hereby represents and warrants to other Members as of the Effective Time, in the case of the Initial Members, and in the case of any other Member, as of the date on which such Person becomes a Member, as follows:

11.1.1 Organization. Such Member is duly organized and validly existing under the laws of its jurisdiction of formation, and has all requisite corporate or company power and authority to own, lease and operate its properties and assets and to carry on its business as now conducted and as anticipated to be conducted.

11.1.2 Authorization; Valid and Binding Obligation. Such Member has the corporate or company power and authority to enter into and perform its obligations under this Agreement, and to consummate the transactions contemplated hereby and thereby in accordance with the terms, provisions and conditions hereof. All corporate or company action on the part of such Member, and on the part of its directors or managers and shareholders or members or partners, as the case may be, necessary for the authorization, execution, delivery and performance of this Agreement, has been duly and validly taken. This Agreement constitutes such Member's legal, valid and binding obligation, enforceable against such Member in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness and good faith and fair dealing (regardless of whether enforcement is sought in a proceeding or at law or in equity).

11.1.3 No Conflict. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated hereby will not, (a) conflict with, or result in any violation of (i) the constitutive documents of such Member, or (ii) any applicable law or order, or (b) conflict with, or result in any violation of or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation or

acceleration of any obligation or to a loss of a benefit under, or result in the creation of a lien or encumbrance on the property and assets of such Member, under any mortgage, indenture, lease, or other agreement or instrument, permit, concession, franchise, or license to which such Member or any of its Affiliates is a party or by which it is bound, in the case of clause (a)(ii) and (b), the effect of which would be to materially impair or delay the ability of Member to perform its obligations under this Agreement or otherwise have a material adverse effect on the Company or the Project.

11.1.4 Litigation. There is no judicial, administrative or arbitral action, suit or proceeding, public or private, pending against such Member or its Affiliates that questions the validity of this Agreement or the right of such Member to execute, deliver and perform its obligations under this Agreement, or, if adversely determined, that would materially impair or delay the ability of such Member to perform its obligations under this Agreement or otherwise have a material adverse effect on the Company or the Project. There are no material orders, injunctions, judgments, decrees, rulings, writs, assessments or arbitration awards issued by any Governmental Person in effect against such Member that would be reasonably likely to materially impair or delay the ability of such Member to perform its obligations under this Agreement or otherwise have a material adverse effect on the Company or the Project.

11.1.5 Sole Business; Absence of Undisclosed Liabilities. The sole business of such Member is and will be the management of its investment in the Company and the performance of its obligations under this Agreement, and, except for those liabilities attributable to (a) its membership in the Company or (b) any tax for which it is liable because of either its assets and activities or its membership in any consolidated, combined, unitary or other group, it does not and will not have any material liabilities.

ARTICLE 12

MISCELLANEOUS PROVISIONS

12.1 Notices. Any notice, demand, offer, or other instrument required or permitted to be given pursuant to this Agreement shall be in writing signed by the party giving such notice and shall, to the extent reasonably practicable, be sent by telecopy, and if not reasonably practicable to send by telecopy, then by hand delivery, overnight courier or certified mail (return receipt requested), to the other parties at the addresses set forth below:

(a) If to Kinder Morgan Member, to it at:

Kinder Morgan W2E Pipeline LLC

One Allen Center

500 Dallas Street

Suite 1000

Houston, Texas 77002

Fax: (303) 984-3486

Attention: Vice President Business Development

(b) If to Sempra Member, to it at:

P&S Project I, LLC

c/o Sempra Pipelines & Storage

16945 Northchase Drive

Houston, TX 77060

Fax: (281) 875-0705

Attention: President, Sempra Pipelines & Storage Midstream

with a copy to:

Sempra Energy

101 Ash Street

San Diego, CA 92101

Telephone: (619) 696-4345

Fax: (619) 696-4310

Attention: General Counsel

COPREXLLC

C/O ConocoPhillips

2120 Tarkington

600 North Dairy Ashford

Houston, Texas 77079

Attn: Manager, Joint Ventures

with a copy to:

ConocoPhillips

600 North Dairy Ashford

Houston, Texas 77079

Attn: Deputy General Counsel, Downstream

Each party may change the place to which notice shall be sent or delivered or specify one (1) additional address to which copies of notices may be sent, in either case by similar notice sent or delivered in like manner to the other parties. Without limiting any other means by which a party may be able to prove that a notice has been received by the other party, a notice shall be deemed to be duly received: (a) if sent by hand or overnight courier, the date when duly delivered at the address of the recipient; (b) if sent by certified mail, the date of the return receipt; or (c) if sent by telecopy, upon receipt by the sender of an acknowledgment or transmission report generated by the machine from which the telecopy was sent indicating that the telecopy was sent in its entirety to the recipient's telecopy number.

12.2 Disclaimer of Agency. This Agreement does not create any relationship beyond the scope set forth herein, and except as otherwise expressly provided herein, this Agreement shall not constitute any of the Members or the Company the legal representative or agent of any other, nor shall any Member or the Company have the right or authority to assume, create or incur any liability or obligation, express or implied, against, in the name of or on behalf of any other Member or the Company.

12.3 Amendment. Any amendment, modification or supplement of or to this Agreement must be in writing and executed by Members collectively holding 75% or more of all of the Membership Interests at the time of such amendment, modification or supplement; provided that no amendment, modification or supplement having a material adverse effect on the rights of any Member shall be affected without the consent of such Member. The Board shall notify all Members upon final adoption of any amendment, modification or supplement.

12.4 Interest. In the event any Member fails to make any payment when due hereunder to another Member or the Company, such overdue payment shall bear interest from the date due at a rate equal to the Agreed Rate.

12.5 Waiver of Consequential Damages. Notwithstanding any provision in this Agreement to the contrary, no Member, Company Manager, Director or any Affiliate thereof shall be liable to any other Member or the Company or to their respective Affiliates under this Agreement for consequential, incidental, special, indirect or punitive damages of any nature, including lost profits or revenues, the cost of capital or lost business opportunity. The Members intend that the waivers and disclaimers of liability, releases from liability, and limitations and apportionments of liability expressed herein shall apply, whether in contract or in tort, even in the event of the application of strict liability or in the event of the fault or negligence (in whole or in part) of or breach of contract by a Member or its Affiliate released or whose liability is waived, disclaimed, limited, apportioned or fixed, and shall extend to such Member's Affiliates and its and their constituent partners, shareholders, directors, officers, employees, representatives and agents. The Members also intend and agree that such provisions shall continue in full force and effect notwithstanding the termination, suspension, cancellation or rescission of this Agreement or any Affiliate Contract, or the dissolution and termination of the Company.

12.6 Governing Law. This Agreement shall be governed by, construed, interpreted and applied in accordance with the laws of the State of Delaware (excluding any conflict of law rules that would refer the matter to be decided to the laws of another jurisdiction).

12.7 Counterparts. The Members may execute this Agreement in two or more counterparts, which shall, in the aggregate, be signed by all the Members, and each counterpart shall be deemed an original instrument as against any Member who has signed it.

12.8 Binding Effect. This Agreement shall be binding on all successors and assigns of the Members and inure to the benefit of the respective successors and permitted assigns of the Members, except to the extent of any express contrary provision in this Agreement.

12.9 Partial Invalidity. If any term, provision, covenant, or condition of this Agreement is held by a court of competent jurisdiction to be invalid, void, or unenforceable, the remaining provisions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired, or invalidated by reason of such holding.

12.10 Captions. Titles or captions of Sections or Articles contained in this Agreement are inserted only as a matter of convenience and for reference, and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof.

12.11 Entire Agreement. This Agreement and any agreement, document or schedule attached hereto or thereto or referred to herein or therein, constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, of the Members that were authorized by the Members with respect to the Company, and the Company Business. Any oral representations or modifications concerning this instrument shall be of no force or effect unless contained in a subsequent written modification signed by the party to be charged. The Members further agree that all claims and causes of action, if any, whether known or unknown, arising form and related to the Joint Development Agreement, dated November 8, 2005 and/or the Limited Liability Company Agreement of West2East Pipeline LLC, dated December 16, 2005 (both as amended, modified or supplemented thereafter) are preserved and exempt from the terms of this provision.

12.12 No Rights in Third Parties. The provisions of this Agreement are for the exclusive benefit of the Members and their respective successors and permitted assigns and, solely with respect to Article 10, the indemnified Persons described therein. Except for the foregoing, this Agreement is not intended to benefit or create rights in any other Person or Governmental Person, including (a) the Company, (b) any Person or Governmental Person to whom any debts, liabilities or obligations are owed by the Company or any Member, or (c) any liquidator, trustee or creditor acting on behalf of the Company. Notwithstanding Section 5.4.1 and Article 10, no such creditor or any other Person or Governmental Person shall have any rights under this Agreement (or any other Agreement to which the Members are parties), including rights with respect to enforcing the payment of capital contributions, unless specifically set forth herein or therein.

12.13 No Title to Company Property. All property owned by the Company, whether real, personal or mixed, and whether tangible or intangible, shall be deemed to be owned by the Company as an entity, as applicable, and no Member, individually, shall have any interest or title in such property except indirectly through such Member's ownership of a Membership Interest.

12.14 Further Assurances. Each Member shall, and shall use its reasonable efforts to cause its Affiliates to, take such further actions as are reasonably requested by any other Member, including the execution and delivery of documents, as are necessary or expedient to carry out the intent of this Agreement.

12.15 No Waiver. Any failure of a party to enforce any of the provisions of this Agreement or to require compliance with any of its terms at any time during the pendency of this Agreement shall in no way affect the validity of this Agreement, or any part hereof, and shall not be deemed a waiver of the right of such party thereafter to enforce any and each such provision.

12.16 Consent to Jurisdiction. Without limiting the provisions of Article 9 hereof, the Members agree that any legal proceeding by or against any Member or with respect to or arising out of this Agreement may be brought in or removed to the United States District Court for New York or the courts of the State of New York, in the City of New York. By execution and delivery of this Agreement, each Member irrevocably and unconditionally submits to the exclusive jurisdiction of such courts and to the appellate courts therefrom. The Members irrevocably consent to the service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified airmail, postage prepaid, as follows:

For service of process to a Kinder Morgan Member, to such party at the following address:

Kinder Morgan W2E Pipeline LLC One Allen Center

500 Dallas Street

Suite 1000

Houston, Texas 77002

Attention: General Counsel, Gas Pipelines

For service of process to a Sempra Member, to it at the following address:

P &S Project I, LLC

c/o Sempra Energy

101 Ash Street

San Diego, CA 92101

Attention: General Counsel

For service of process to ConocoPhillips Member, to it at the following address:

COPREXLLC

C/O United States Corporation Company

80 State Street

Albany, NY 12207-2543

Any such service of process shall be effective five (5) Business Days after mailing, or, if hand delivered, upon delivery. Nothing herein shall affect the right to serve process in any other manner permitted by applicable law. The Members hereby waive any right to stay or dismiss any action or proceeding under or in connection with this Agreement brought before the foregoing courts on the basis of (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason, or that it or any of its property is immune from the above described legal process, (b) that such action or proceeding is brought in an inconvenient forum, that venue for the action or proceeding is improper or that this Agreement may not be enforced in or by such courts, or (c) any other defense that would hinder or delay the levy, execution or collection of any amount to which any party is entitled pursuant to any final judgment of any court having jurisdiction.

[Remainder of Page Intentionally Left Blank]

IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers or directors, have executed this Agreement as of the Effective Time.

Kinder Morgan W2E Pipeline LLC,

a Delaware limited liability company

By: /s/ Joseph Listengart

Name: Joseph Listengart

Title: Vice President

P&S Project I, LLC,

a Delaware limited liability company

By:

Name:

Title:

COPREX LLC,

a Delaware limited liability company

By:

Name:

Title:

IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers or directors , have executed this Agreement as of the Effective Time.

Kinder Morgan W2E Pipeline LLC,

a Delaware limited liability company

By:

Name:

Title:

P&S Project I, LLC,

a Delaware limited liability company

By: /s/ Ryan O'Neal

Name: Ryan O'Neal

Title: V.P.

COPREX LLC,

a Delaware limited liability company

By:

Name:

Title:

IN WITNESS WHEREOF, the parties hereto, by their respective duly authorized officers or directors, have executed this Agreement as of the Effective Time.

Kinder Morgan W2E Pipeline LLC,

a Delaware limited liability company

By:

Name:

Title:

P&S Project I, LLC,

a Delaware limited liability company

By:

Name:

Title:

COPREX LLC,

a Delaware limited liability company

By: /s/ Michael Carr

Name: Michael Carr

Title: Manager Joint Ventures

SCHEDULE 5.2 to

Limited Liability Company Agreement

Directors and Alternate Directors

Kinder Morgan Member

Directors: Thomas A. Martin

Mark A. Kissel

Alternate Director: Douglas R. Walker

Sempra Member

Director: Ben Reese

Alternate Director: John Pirraglia

ConocoPhillips Member

Director: Michael Carr

Alternate Director: Debbie Adams

SCHEDULE 5.8.1 to

Limited Liability Company Agreement

Parameters for Economic Model



Number of Revenue Years		20
Revenue Reduction After Primary Contract Term		10%
Terminal Value Multiple of20th Year Cash Flow		5
Allocated Overheads		Per Operating Agreement
Escalation Rate for O&M and Sustaining Capital		3.0%
Management Fee (Percent of EBITDA)		1.0%
Working Capital (Percent of Investment)		0.25%
A&G Expenses	As estimated by Operator
O&M	As estimated by Operator
Sustaining Capita	As estimated by Operator
Ad Valorem Tax	As estimated by Operator

Note: Economics will be run assuming 100% of the opportunity capacity is sold on the first day in service.

EXHIBIT A

Membership Interests



Members	% Membership Interest	% Sharing Ratio
Kinder Morgan Member	50	50
Sempra Member	25	25
ConocoPhillips Member	25	25

EXHIBIT B

Initial Officers



Title	Name
President	Mark A. Kissel
Secretary and Vice President	Joseph Listengart
Treasurer	James Saunders
Vice President	Deborah Adams
Vice President	Dwayne Burton
Vice President	Michael J. Carr
Vice President	John Eagleton
Vice President	Stefan Evanoff
Vice President	Robert F. Harrington
Vice President	Randy Holstlaw
Vice President	Jordan Hunter
Vice President	David D. Kinder
Vice President	Johnny McGee
Vice President	Ryan O'Neal
Vice President and Assistant Secretary	Sheila R. Tweed
Vice President	R. Douglas Walker
Vice President	Alice Weekly
Assistant Secretary	T. J. Carroll
Assistant Secretary	Karen Ferazzi
Assistant Secretary	Reuben Rosen

Exhibit 10.5

AMENDMENT NO. 1

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY

AGREEMENT

ROCKIES EXPRESS PIPELINE LLC

This Amendment No. 1 (this " Amendment ") to the Second Amended and Restated Limited Liability Company Agreement of Rockies Express Pipeline LLC, a Delaware limited liability company (the " Company ”), is executed and effective this 13th day of November, 2012, among Kinder Morgan W2E Pipeline LLC, a Delaware limited liability company (" Exiting Member "), P&S Project I, LLC, a Delaware limited liability company (" P&S "), COPREX LLC, a Delaware limited liability company (" COPREX "), and Rockies Express Holdings, LLC, a Delaware limited liability company (" New Member ").

RECITALS

WHEREAS, Exiting Member, P&S and COPREX are parties to that certain Second Amended and Restated Limited Liability Company Agreement of Rockies Express Pipeline LLC dated to be effective as of January 1, 2010 (the " LLC Agreement ");

WHEREAS, on April 28, 2012, ConocoPhillips Company assigned and transferred to Phillips 66 Company all of the membership interests of COPREX;

WHEREAS, on the date hereof, Exiting Member has assigned and transferred to New Member the Membership Interest of the Company held by Exiting Member;

WHEREAS, in accordance with Section 12.3 of the LLC Agreement, the Members desire to enter into this Amendment in order to reflect the admission of New Member as a Member in substitution of Exiting Member and certain related matters;

NOW, THEREFORE, the undersigned, being all of the Members, hereby enter into this Amendment to provide as follows:

AGREEMENT

1. Definitions . Capitalized terms not otherwise defined in this Amendment shall have the meanings as set forth in the LLC Agreement.

2. Admission of New Member . Effective as of the date of this Amendment, New Member is hereby admitted as a Member of the Company in substitution of, and with all of the rights and, subject to Section 7.3 of the LLC Agreement, obligations of, Exiting Member pursuant to the Agreement. New Member hereby agrees to be bound by the terms and provisions of the LLC Agreement from and after the date hereof.

3. Amendments . The LLC Agreement is hereby amended in the following particulars only:

(a) The following definitions are hereby added to Section 1.1 of the LLC Agreement in their appropriate alphabetical position:

"Phillips 66 Member" means COPREX LLC, a Delaware limited liability company.

"Tallgrass Member" means Rockies Express Holdings, LLC, a Delaware limited liability company.

(b) The definition of "KMP" in Section 1.1 of the LLC Agreement is hereby deleted.

(c) The definition of "Operator" in Section 1.1 of the LLC Agreement is hereby deleted and replaced with the following definition:

"Operator" means Tallgrass NatGas Operator, LLC, a Delaware limited liability company, or any successor thereto that the Company has engaged to operate and maintain the Pipeline.

(d) The definition of "Parent" in Section 1.1 of the LLC Agreement is hereby deleted and replaced with the following definition:

"Parent" means (a) in the case of Tallgrass Member, Tallgrass Operations, LLC and solely for purposes of Section 7.1.5(b) shall include Tallgrass Energy Partners, LP, (b) in the case of Sempra Member, Sempra Energy and solely for purposes of Section 7.1.5(b) shall include Sempra Global, (c) in the case of Phillips 66 Member, Phillips 66 Company and solely for purposes of Section 7.1.5(b) shall include Phillips 66, and (d) in the case of any other Member, the Person that either (i) Controls a Member and that has no other Person that Controls it or (ii) is designated by the Company as the Parent of such Member in connection with its admission to the Company.

(e) The definition of "Rockies Credit Agreement" in Section 1.1 of the LLC Agreement is hereby deleted and replaced with the following definition:

"Rockies Credit Agreement'' means the Credit Agreement, dated as of April 25, 2011, among the Company, the banks and other financial institutions listed on the signature pages thereof as lenders (and each other person that becomes a lender as provided therein), JPMorgan Chase Bank, N.A., a national banking association, individually as a lender and as the administrative agent for the lenders, Citibank, N.A. and Morgan Stanley Bank, N.A., as the co-syndication ·agents, and Bank of America, N.A. and Wells Fargo Bank, N.A., as the codocumentation agents, as amended by First Amendment to Credit Agreement, dated as of September 26, 2012, among the Company, the banks and other financial institutions listed on the signature pages thereof as lenders (and each other person that becomes a lender as provided therein) and JPMorgan Chase Bank, N.A., a national banking association, individually as a lender and as the administrative agent for the lenders, together with any amendments and supplements thereto and replacements thereof.

(f) Section 2.3.1 of the LLC Agreement is hereby amended by adding the following text at the end of such section:

The Members as of the date of the Amendment No. 1 to the LLC Agreement are Sempra Member, Phillips 66 Member and Tallgrass Member, and their respective Membership Interests and Sharing Ratios as of such date are set forth on Exhibit A-1.

(g) The first sentence of Section 2.8 is hereby amended and restated as follows:

The principal office of the Company shall be 6640 West 143rd Street, Suite 200, Overland Park, Kansas 66223 or at such other place as the Company may designate from time to time.

(h) Section 4.2.3 is hereby amended and restated as follows:

Approval of Disputed Operating Budget Proposed by Tallgrass Affiliated Operator. Following the Project Completion Date, for any period during which an Affiliate of the Tallgrass Member is the Operator, if the Company and the Operator cannot agree on the terms of the upcoming annual Operating Budget proposed by the Operator by November 1 ^st of the year such Operating Budget is proposed, such Operating Budget shall be submitted to the President of Tallgrass GP, LLC, the Transportation President of Phillips 66 and the President of Sempra, which Persons shall thereupon use their reasonable efforts to agree upon an Operating Budget. If the Presidents of Tallgrass GP, LLC, Phillips 66 and Sempra do not reach agreement on such Operating Budget by January 1 ^st of the next year, the Members shall utilize the provision in the arbitration procedures described in Section 3.1(b) of the O&R Agreement.

(i) Section 5.7 of the LLC Agreement is hereby amended by adding the following text at the end of such section:

The Officers as of the date of the Amendment No. 1 to the LLC Agreement are· set forth on Exhibit B-1.

(j) The address in Section 12.1(a) of the LLC Agreement is hereby deleted and replaced with the following address:

Rockies Express Holdings, LLC

c/o Tallgrass Energy Partners, LP

6640 West 143rd Street, Suite 200

Overland Park, Kansas 66223

Attention: David G. Dehaemers, Jr.

Fax: (913) 928-6006

with a copy to:

Rockies Express Holdings, LLC

c/o Tallgrass Energy Partners, LP

6640 West 143rd Street, Suite 200

Overland Park, Kansas 66223

Attention: George E. Rider

(k) The address in Section 12.1(c) of the LLC Agreement is hereby deleted and replaced with the following address:

COPREXLLC

c/o Phillips 66

600 N. Dairy Ashford

Houston, Texas 77079

Attn: Manager, Joint Ventures

Fax: (281) 293-6292

with a copy to:

Phillips 66

600 N. Dairy Ashford (PW 8133)

Houston, Texas 77079

Attn: Deputy General Counsel, Commercial, Transportation and Marketing

Fax: (832) 765 - 0111

(l) The first address in Section 12.16 of the LLC Agreement is hereby deleted and replaced with the following address:

Rockies Express Holdings, LLC

c/o Tallgrass Energy Partners, LP

6640 West 143rd Street, Suite 200

Overland Park, Kansas 66223

Attention: George E. Rider

(m) Except for the first sentence of Section 2.3.1, all references in the Agreement to "Kinder Morgan Member" are hereby replaced with "Tallgrass Member" and shall from and after the date hereof refer to Rockies Express Holdings, LLC.

(n) Except for the first sentence of Section 2.3.1, all references in the Agreement to "ConocoPhillips Member" are hereby replaced with "Phillips 66 Member" and shall continue to refer to COPREX LLC, a Delaware limited liability company.

(o) Schedule 5.2 to the LLC Agreement is hereby amended and restated in its entirety as set forth on Schedule 5.2 hereto.

(p) The LLC Agreement is hereby amended to add a new Exhibit A-1, as set forth on Exhibit A-1 hereto, immediately following Exhibit A to the LLC Agreement.

(q) The LLC Agreement is hereby amended to add a new Exhibit B-1, as set forth on Exhibit B-1 hereto, immediately following Exhibit B to the LLC Agreement.

4. Limited Effect; Ratification . Except as amended hereby, the LLC Agreement is hereby ratified and confirmed, and shall continue to be, and shall remain, in full force and effect in accordance with its terms as currently written.

5. Captions . Titles or captions of Sections or Articles contained in this Amendment are inserted only as a matter of convenience and for reference, and in no way define, limit, extend or describe the scope of this Amendment or the intent of any provision hereof.

6. Governing Law . This Amendment shall be governed by, construed, interpreted and applied in accordance with the laws of the State of Delaware (excluding any conflict of law rules that would refer the matter to be decided to the laws of another jurisdiction).

7. Counterparts . The Members may execute this Amendment in two or more counterparts, which shall, in the aggregate, be signed by all the Members, and each counterpart shall be deemed an original instrument as against any Member who has signed it.

* * * * *

IN WITNESS WHEREOF, the Members have executed and delivered this Amendment as of the date first above written.

Kinder Morgan W2E Pipeline LLC ,

a Delaware limited liability company

By: /s/ David Kinder

Name:

Title:

P&S Project I, LLC ,

a Delaware limited liability company

By:

Name:

Title:

COPREX LLC ,

a Delaware limited liability company

By:

Name:

Title:

ROCKIES EXPRESS HOLDINGS, LLC ,

a Delaware limited liability company

By:

Name:

Title:

Signature Page to Amendment No. 1 to Second Amended and Restated

Limited Liability Company Agreement of Rockies Express Pipeline LLC

IN WITNESS WHEREOF, the Members have executed and delivered this Amendment as of the date first above written.

Kinder Morgan W2E Pipeline LLC ,

a Delaware limited liability company

By:

Name:

Title:

P&S Project I, LLC ,

a Delaware limited liability company

By: /s/ John A. Pirraglia

Name: John A. Pirraglia

Title: VP - Operations

COPREX LLC ,

a Delaware limited liability company

By:

Name:

Title:

ROCKIES EXPRESS HOLDINGS, LLC ,

a Delaware limited liability company

By:

Name:

Title:

Signature Page to Amendment No. 1 to Second Amended and Restated

Limited Liability Company Agreement of Rockies Express Pipeline LLC

IN WITNESS WHEREOF, the Members have executed and delivered this Amendment as of the date first above written.

Kinder Morgan W2E Pipeline LLC ,

a Delaware limited liability company

By:

Name:

Title:

P&S Project I, LLC ,

a Delaware limited liability company

By:

Name:

Title:

COPREX LLC ,

a Delaware limited liability company

By: /s/ Carl Brooks

Name: Carl Brooks

Title: Vice President

ROCKIES EXPRESS HOLDINGS, LLC ,

a Delaware limited liability company

By:

Name:

Title:

Signature Page to Amendment No. 1 to Second Amended and Restated

Limited Liability Company Agreement of Rockies Express Pipeline LLC

IN WITNESS WHEREOF, the Members have executed and delivered this Amendment as of the date first above written.

Kinder Morgan W2E Pipeline LLC ,

a Delaware limited liability company

By:

Name:

Title:

P&S Project I, LLC ,

a Delaware limited liability company

By:

Name:

Title:

COPREX LLC ,

a Delaware limited liability company

By:

Name:

Title:

ROCKIES EXPRESS HOLDINGS, LLC ,

a Delaware limited liability company

By: /s/ David G. Dehaemers, Jr.

Name: David G. Dehaemers, Jr.

Title: President and CEO

Signature Page to Amendment No. 1 to Second Amended and Restated

Limited Liability Company Agreement of Rockies Express Pipeline LLC

EXHIBIT B-1

Officers



Moler, William	Chairman of the Board
Walker, Doug	President
Brauchle, Gary	Vice President, Treasurer, and Chief Financial Officer
Rider, George	Vice President and Secretary
Adams, Deborah	Vice President (Phillips)
Brooks, Carl L.	Vice President (Phillips)
Rafter, Mick	Vice President
Evanoff, Stefan	Vice President
Harrington, Robert F.	Vice President
Holstlaw, Randy	Vice President
Johnson, Doug	Vice President
Sears, Richard	Vice President
Carroll, T.J.	Vice President and Assistant Secretary
Griffin, Doug	Vice President, Operational Controller
Baker, Jim	Assistant Secretary (Sempra)
Jones, Christopher	Assistant Secretary

SCHEDULE 5.2

Directors and Alternate Directors

Tallgrass Member

Directors: Gary Brauchle

William R. Moler

Alternate Director: David G. Dehaemers, Jr.

Sempra Member

Director: John A. Pirraglia

Alternate Director: Michael P. Gallagher

Phillips 66 Member

Director: Carl L. Brooks

Alternate Director: Deborah G. Adams

EXHIBIT A-1

Membership Interests



Members	%Membership Interest	% Sharing Ratio
Tallgrass Member	50	50
Sempra Member	25	25
Phillips 66 Member	25	25

Exhibit 10.6

AMENDMENT NO. 2

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

ROCKIES EXPRESS PIPELINE LLC

This Amendment No. 2 (this “ Amendment ”) to the Second Amended and Restated Limited Liability Company Agreement of Rockies Express Pipeline LLC, a Delaware limited liability company (the “ Company ”), executed this 5 ^th day of May, 2016 and effective as of the Effective Time (as defined below), among Rockies Express Holdings, LLC, a Delaware limited liability company (“ REX Holdings ”), Sempra REX Holdings, LLC, a Delaware limited liability company (“ Sempra ”), and P66REX LLC, a Delaware limited liability company (f/k/a COPREX LLC, a Delaware limited liability company, “ P66 Holdco ”). REX Holdings, Sempra and P66 Holdco are sometimes referred to herein collectively as the “ Parties ,” and each, a “ Party .”

RECITALS

WHEREAS, REX Holdings, Sempra and P66 Holdco are the Members of the Company and are parties to that certain Second Amended and Restated Limited Liability Company Agreement of Rockies Express Pipeline LLC, dated to be effective as of January 1, 2010, as amended by that certain Amendment No. 1 to Second Amended and Restated Limited Liability Company Agreement of Rockies Express Pipeline LLC, effective November 13, 2012 (as amended by Amendment No. 1, the “ LLC Agreement ”);

WHEREAS, pursuant to that certain Membership Interest Purchase Agreement, effective as of March 29, 2016 (the “ MIPA ”), Sempra has agreed to sell its 25% membership interest (the “ Subject Interest ”) in the Company to REX Holdings;

WHEREAS, pursuant to that certain Letter Agreement Re: P66REX LLC’s Conditional Revocation of Joinder Agreement and Waiver of Right of First Refusal, dated as of April 27, 2016, between the Parties (the “ Letter Agreement ”), REX Holdings and Sempra have agreed to amend the LLC Agreement;

WHEREAS, pursuant to Section 12.03 of the LLC Agreement, the LLC Agreement may be amended by a written instrument executed by Members collectively holding 75% or more of all of the Membership Interests of the Company; and

WHEREAS, in connection with the execution and delivery of the MIPA and Letter Agreement by the parties thereto, the Parties, as the Members holding greater than 75% of the Membership Interests of the Company, desire to enter into this Amendment to (a) increase the percentage of Membership Interests whose approval, consent or presence is required to take certain actions under the LLC Agreement, and (b) affirm that the Members do not owe fiduciary duties to the other Members or the Company itself.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned, being all of the Members, hereby enter into this Amendment to provide as follows:

AGREEMENT

1. Definitions . Capitalized terms not otherwise defined in this Amendment shall have the meanings as set forth in the LLC Agreement.

2. Amendments .


(a)	The definition of “Required Consent” in Section 1.1 of the LLC Agreement is hereby amended to replace “85%” with “90%.”


(b)	Sections 5.1, 5.2.4.4, 5.2.4.5.3, 5.5.2.3 and 12.3 of the LLC Agreement are hereby amended to replace “75%” with “80%.”


(c)	Section 5.4.1 of the LLC Agreement is hereby amended by adding the following text at the end of such section:

For the avoidance of doubt, each Director and Committee Representative shall not owe any fiduciary duty, express or implied, to any other Director or Committee Representative, Member (other than the Member that designated such Director or Committee Representative, the nature and extent of such duties being an internal corporate or organizational affair of such Member) or the Company. This Agreement is not intended to, and does not, create or impose any fiduciary duty on the Directors and Committee Representatives with respect to the other Directors and Committee Representatives, Members or the Company.


(d)	Section 5.8.3 of the LLC Agreement is hereby amended to replace “85%” with “90%.”


(e)	The Agreement is hereby amended to include the following as new Section 5.5.3:

No Fiduciary Duty . This Agreement is not intended to, and does not, create or impose any fiduciary duty on the Members with respect to the other Members or the Company. Furthermore, each of the Members and the Company waives any and all fiduciary duties that, absent such waiver, may be implied between a Member and any other Member or the Company, by applicable Law including the LLC Act, and in doing so, acknowledges and agrees that the fiduciary duties of each Member to each other Member and the Company exist only to the extent such fiduciary duties may be expressly set forth in this Agreement. The provisions of this Agreement, to the extent that they restrict the fiduciary duties of a Member otherwise existing at law or in equity, are agreed by the Members to replace such other fiduciary duties of such Member.

3. Membership Interests . P66 Holdco acknowledges REX Holdings’ right to assign the MIPA to a direct or indirect wholly owned subsidiary of Tallgrass Energy Partners, LP for the purpose of having such entity take ownership of the Subject Interest, so long as such assignment complies with Section 9.10(a) and the other applicable provisions of the MIPA (the “MIPA Assignment”). The Parties hereby acknowledge that if the MIPA Assignment is consummated in accordance with Section 9.10(a) and other applicable provisions of the MIPA, then immediately after the consummation of the transactions contemplated by the MIPA, REX Holdings will hold 50% of the Membership Interests of the Company, P66 Holdco will hold 25% of the Membership Interests of the Company and the direct or indirect wholly owned subsidiary of Tallgrass Energy Partners, LP will hold 25% of the Membership Interests of the Company.

4. Effective Time . This Amendment shall be effective as of immediately prior to the closing of the transactions set forth in the MIPA (the “ Effective Time ”).

5. Limited Effect; Ratification . Except as amended hereby, the LLC Agreement is hereby ratified and confirmed, and shall continue to be, and shall remain, in full force and effect in accordance with its terms as currently written.

6. Captions . Titles or captions of Sections or Articles contained in this Amendment are inserted only as a matter of convenience and for reference, and in no way define, limit, extend or describe the scope of this Amendment or the intent of any provision hereof.

7. Governing Law . This Amendment shall be governed by, construed, interpreted and applied in accordance with the laws of the State of Delaware without regard to its conflict of law principles that may give rise to the application of the substantive law of another jurisdiction.

8. Counterparts . The Members may execute this Amendment in two or more counterparts, which shall, in the aggregate, be signed by all the Members, and each counterpart shall be deemed an original instrument as against any Member who has signed it.

* * * * *

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives to be effective as of the Effective Time.



	P66REX LLC
	By:	/s/ Diana Santos
	Name:	Diana Santos
	Title:	President

	SEMPRA REX HOLDINGS, LLC
	By:
	Name:
	Title:

	ROCKIES EXPRESS HOLDINGS, LLC
	By:
	Name:
	Title:

Signature Page to Amendment No. 2 to Second Amended and Restated

Limited Liability Company Agreement of Rockies Express Pipeline LLC

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives to be effective as of the Effective Time.



	P66REX LLC
	By:
	Name:
	Title:

	SEMPRA REX HOLDINGS, LLC
	By:	/s/ Michael P. Gallagher
	Name:	Michael P. Gallagher
	Title:	President

	ROCKIES EXPRESS HOLDINGS, LLC
	By:
	Name:
	Title:

Signature Page to Amendment No. 2 to Second Amended and Restated

Limited Liability Company Agreement of Rockies Express Pipeline LLC

IN WITNESS WHEREOF, the Parties have caused this Amendment to be executed by their duly authorized representatives to be effective as of the Effective Time.



	P66REX LLC
	By:
	Name:
	Title:

	SEMPRA REX HOLDINGS, LLC
	By:
	Name:
	Title:

	ROCKIES EXPRESS HOLDINGS, LLC
	By:	/s/ David G. Dehaemers, Jr.
	Name:	David G. Dehaemers, Jr.
	Title:	Chief Executive Officer

Signature Page to Amendment No. 2 to Second Amended and Restated

Limited Liability Company Agreement of Rockies Express Pipeline LLC

Exhibit 12.1

RATIO OF EARNINGS TO FIXED CHARGES

(in thousands, except ratio data)

The table below sets forth the calculation of Ratios of Earnings to Fixed Charges for the periods indicated.



	TEP ⁽¹⁾																TEP Pre-Predecessor
	Six Months Ended June 30, 2016			Year Ended December 31, 2015			Year Ended December 31, 2014			Year Ended December 31, 2013			Period from November 12, 2012 to December 31, 2012				Period from January 1, 2012 to November 12, 2012		Year Ended December 31, 2011
Earnings from continuing operations before fixed charges:
Pre-tax income from continuing operations before earnings from unconsolidated affiliates	$	114,948		$	184,814		$	58,612		$	7,624		$	(2,618	)		$	51,775	$	77,803
Fixed charges	21,931			25,437			11,626			13,360			3,450				69		83
Amortization of capitalized interest	31			66			35			—			—				—		—
Distributed earnings from unconsolidated affiliates	23,321			—			717			—			—				—		—
less: Capitalized interest	(146		)	(811		)	(1,025		)	(242		)	—				—		—
Earnings from continuing operations before fixed charges	$	160,085		$	209,506		$	69,965		$	20,742		$	832			$	51,844	$	77,886
Fixed charges:
Interest expense, net of capitalized interest	15,231			14,226			7,648			11,264			3,040				—		—
Capitalized interest	146			811			1,025			242			—				—		—
Estimate of interest within rental expense (33.3%)	5,031			8,615			1,574			109			14				69		83
Amortization of debt costs	1,523			1,785			1,379			1,745			396				—		—
Total fixed charges	$	21,931		$	25,437		$	11,626		$	13,360		$	3,450			$	69	$	83
Ratio of earnings to fixed charges ⁽²⁾	7.30			8.24			6.02			1.55			—			⁽³⁾	751.36		938.39

⁽¹⁾

TEP closed the acquisition of Trailblazer on April 1, 2014 and the acquisition of a controlling 33.3% membership interest in Pony Express effective September 1, 2014. As the acquisitions of Trailblazer and the initial 33.3% of Pony Express were considered transactions between entities under common control, and changes in reporting entity, financial information presented subsequent to November 13, 2012 and prior to the respective acquisition dates has been recast to include Trailblazer and the initial 33.3% of Pony Express. TEP closed the acquisitions of an additional 33.3% and 31.3% membership interests in Pony Express effective March 1, 2015 and January 1, 2016, respectively, which represent transactions between entities under common control and acquisitions of noncontrolling interests. As a result, financial information for periods prior to March 1, 2015 and January 1, 2016 has not been recast to reflect the additional 33.3% and 31.3% membership interests.

⁽²⁾

For purposes of determining the ratio of earnings to fixed charges, earnings are defined as pretax income or loss from continuing operations before earnings from unconsolidated affiliates, plus fixed charges, plus distributed earnings from unconsolidated affiliates, less capitalized interest. Fixed charges consist of interest expensed, capitalized interest, amortization of deferred loan costs, and an estimate of the interest within rental expense.


⁽³⁾	As a result of the net loss for the period from November 12, 2012 to December 31, 2012, the ratio of earnings to fixed charges was less than 1:1. TEP would have needed to generate additional earnings of $2.6 million to achieve an earnings to fixed charges ratio of 1:1 for the period from November 12, 2012 to December 31, 2012.

Exhibit 31.1

Certification by Chief Executive Officer pursuant to

Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934,

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, David G. Dehaemers, Jr., certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Tallgrass Energy Partners, LP;


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


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


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


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


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


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


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


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


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


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



By:		/s/ David G. Dehaemers, Jr.
		David G. Dehaemers, Jr.
		President and Chief Executive Officer of Tallgrass MLP GP, LLC (the general partner of Tallgrass Energy Partners, LP)

Date: August 3, 2016

Exhibit 31.2

Certification by Chief Financial Officer pursuant to

Rule 13a-14(a) or Rule 15d-14(a) under the Securities Exchange Act of 1934,

as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Gary J. Brauchle, certify that:


1.	I have reviewed this Quarterly Report on Form 10-Q of Tallgrass Energy Partners, LP;


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


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


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


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


b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;


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


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


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


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


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



By:		/s/ Gary J. Brauchle
		Gary J. Brauchle
		Executive Vice President and Chief Financial Officer of Tallgrass MLP GP, LLC (the general partner of Tallgrass Energy Partners, LP)

Date: August 3, 2016

Exhibit 32.1

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Tallgrass Energy Partners, LP (the “Partnership”) on Form 10-Q for the quarter ended June 30, 2016 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David G. Dehaemers, Jr., President and Chief Executive Officer of Tallgrass MLP GP, LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that, to my knowledge:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.



By:		/s/ David G. Dehaemers, Jr.
		David G. Dehaemers, Jr.
		President and Chief Executive Officer of Tallgrass MLP GP, LLC (the general partner of Tallgrass Energy Partners, LP)

Date: August 3, 2016

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

Exhibit 32.2

Certification Pursuant to

18 U.S.C. Section 1350,

as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Tallgrass Energy Partners, LP (the “Partnership”) on Form 10-Q for the quarter ended June 30, 2016 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary J. Brauchle, Executive Vice President and Chief Financial Officer of Tallgrass MLP GP, LLC, the general partner of the Partnership, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (“Section 906”), that, to my knowledge:


1.	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and


2.	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership.



By:		/s/Gary J. Brauchle
		Gary J. Brauchle
		Executive Vice President and Chief Financial Officer of Tallgrass MLP GP, LLC (the general partner of Tallgrass Energy Partners, LP)

Date: August 3, 2016