The summary of credit requirements comes from the North Baja Pipeline, LLC Tariff Section 12 on creditworthiness. NBP shall not be required to perform or to continue to provide service on behalf of any Shipper who has become insolvent or who, at NBP's request, fails within a reasonable period to demonstrate creditworthiness. NBP creditworthiness standards are specific to each service type and are described below. Credit limits will be established based on the level of requested service and Shipper creditworthiness.

Firm Transportation Service:

Creditworthiness for firm service may be evidenced by an unenhanced rating for senior unsecured debt of at least BBB- or Baa3 from Standard & Poor's or Moody's, respectively, or an equivalent rating as determined by NBP. Shipper may also choose to provide NBP a guarantee in a form acceptable to NBP from a company that meets these creditworthiness standards. An acceptable form of guarantee may be found on the NBP website at www.northbajapipeline.com/northbaja/services/guarantee.html.

Shippers who do not meet the standard may provide credit support through the following alternative methods:

1. Provide a Standby Letter of Credit (L/C). Shipper may provide an L/C in a form and from a bank acceptable to NBP in an amount that satisfies the collateral requirement for the services desired. (see service types below for specific Collateral Requirement amount) The term of the L/C must be dated at least 60 days past the termination date of Shipper's longest dated contract, or have an automatic renewal of one year, with a ninety (90) day non-renewal notification period. An acceptable form of Letter of Credit may be found at www.northbajapipeline.com/northbaja/services/loc_requirements.html
2. Wire transfer prepayment for services. (see service types below for specific Collateral Requirement amount)

The amount of L/C or prepayment required to secure a firm contract is the following:

• For a Term of less than one year the collateral amount is the sum of all transportation charges (i.e. reservation and delivery charges) that Shipper is liable for during the life of the contract.
• For contracts with a term of one year or longer, the amount must be sufficient to cover three months of reservation charges.
• For contracts executed as part of system expansions, the term must be sufficient to cover the collateral requirement set forth in the open season.

Capacity Release:

Capacity release contracts have the same credit standards and collateral requirements as Firm Transportation Service. Permanent capacity holders of firm transportation service remain liable for credit support, even if capacity is temporarily released. In a temporary capacity release, a creditworthy Releasing Shipper has the option of waiving the NBP's credit standards that otherwise would apply to the Replacement Shipper. NBP, in this case, would not expect the Replacement Shipper to meet NBP creditworthiness requirements.

Interruptible Transportation, Lending, and Parking Services:

Creditworthiness for interruptible transportation ("ITS"), Parking and Lending Service ("PAL") may be established by providing NBP any one of the following:

1. A rating for unenhanced senior unsecured debt of at least BB+ (Standard & Poor's), or Ba1 (Moody's). Shipper may also provide a guarantee acceptable to NBP from a company that meets these same creditworthiness standards. An acceptable form of guarantee may be found on the NBP website at www.northbajapipeline.com/northbaja/services/guarantee.html.
2. Audited financial statements for the two preceding years showing good financial strength.
   Shipper's credit limit for interruptible transportation will be established by NBP based upon the audited financial statements for the Shipper's two (2) most recent fiscal years, all interim reports, and any other relevant information.

Shippers who do not qualify on this basis, or whose credit limit is insufficient to meet contractual obligations, may obtain service through the following alternative methods:

• Standby Letter of Credit. An acceptable form of Letter of Credit may be found at www.northbajapipeline.com/northbaja/services/loc_requirements.html.
• Wire transfer a prepayment for services. This is a fixed amount to satisfy the collateral requirement for all ITS and PAL transportation services (see below for calculation of collateral requirements). However, a Shipper may also receive interruptible service on a month-to-month basis, if they provide a prepayment no later than eight (8) business days prior to the start of the delivery month. The amount of the prepayment will be based on the maximum, cumulative amount during the delivery month.

Collateral requirements for Interruptible Transportation are based on:

• A three-month period of the maximum amount of services that may be provided, or
• For contracts less than three months in length, required collateral will be equal to the maximum amount of service through the life of the contract.

Collateral requirements for Parking and Lending (PAL) Service are based on:

• PAL-1 rate for a three-month period of maximum service
• For contracts less than three months in length, required collateral will be equal to the maximum amount of service through the life of the contract.

Expansion projects:

Credit requirements for pipeline expansion projects will be separately identified within the nondiscriminatory project requirements included as part of any open season for expansion capacity.

For additional information, contact Ken Nichols.