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gas prices

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    May help explain lower gas storage levels keeping prices up in the US.

    El Paso (EP) 8.25 +0.34: El Paso, the embattled natural gas pipeline company, has settled litigation and claims relating to the sale, or delivery, of natural gas and/or electricity to, or in, the Western United States. The Master Settlement Agreement includes numerous California government agencies, two California utilities, five California municipalities and six private plaintiffs.

    A few of the key items in the settlement include: $78.6 mln cash payment to an escrow account (which equates to the $102 mln previously announced amount less credits); the issuance of 26.4 mln shares of EP on behalf of the settling parties; make a payment of $45 mln over a 20 year period; a reduction of prices for contracts with California Department of Water Resources totaling approximately $125 mln; and the payment of $250 mln in cash within 180 days of the settlement.

    This settlement comes after EP manipulated the price of natural gas, causing California and West Coast utility customers to pay higher electric and natural gas bills. In 2001, prices soared on the West Coast, as supplies shrunk and demand pushed prices to what were record levels. It was later revealed that EP was responsible for the shortage of supply and subsequent increase.

    The settlement has to be viewed as a positive as the Company moves further into its turnaround. Timing of the settlement is most auspicious, as there have been several reports and rumors out that another firm, or group of firms, have been manipulating the natural gas market again. Prices have steadily increased over the last few years, and several reports have noted that storage levels have recently been measured at 5 year lows. There was positive news released today about the total amount of natural gas in storage, but conspiracy theorists are still left wondering how gas prices have risen so high again.

    Look for a Stock Brief tomorrow on just why the natural gas market is getting so much press lately.--Brian Bolan,
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