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UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D. C.  20549

FORM 10-K

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

      For the fiscal year ended December 31, 2004

OR

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

      For the transition period from _______________ to _______________

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  [X]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes__  No X

The aggregate market value of common stock held by non-affiliates of the registrant as of March 16, 2005.  Not applicable

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Not applicable

Documents incorporated by reference. None

Texas Gas Transmission, LLC meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced disclosure format.

TABLE OF CONTENTS

2004 FORM 10-K

TEXAS GAS TRANSMISSION, LLC

PART I

3

Item 1.  Business.

3

Regulatory and Environmental

4

Competition

4

Employee Relations

5

Item 2.  Properties.

5

Item 3.  Legal Proceedings.

5

PART II

6

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer  Purchases of Equity Securities.

6

Item 7.   Management's Narrative Analysis of the Results of Operations.

6

Our Business

6

Critical Accounting Policies and Estimates

7

Financial Analysis of Operations

8

Effect of Inflation

9

Financial Condition and Liquidity

9

Forward-Looking Statements

10

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

11

Item 8.   Financial Statements and Supplementary Data

12

Note 1:  Corporate Structure

19

Note 2:  Accounting Policies

20

Note 3:  Commitments and Contingencies

25

Note 4:  Financing

28

Note 5:  Employee Benefits

29

Note 6:  Income Tax

35

Note 7:  Financial Instruments

36

Note 8:  Major Customers and Affiliates

38

Note 9:  Selected quarterly financial data (unaudited)

39

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

40

Item 9A.  Controls and Procedures

40

Item 9B.  Other Information

40

PART III

41

Item 14.  Principal Accounting Fees and Services

41

PART IV

42

Item 15.  Exhibits, Financial Statement Schedules.

42

PART I

Item 1.  Business.

Texas Gas Transmission, LLC (Texas Gas) is a wholly-owned subsidiary of Boardwalk Pipelines, LLC, (Boardwalk) (formerly TGT Pipeline LLC). Boardwalk is a wholly-owned subsidiary of Boardwalk Pipelines Holding Corp. (Holding Corp.) (formerly TGT Pipeline Holding Corp.), which is wholly-owned by Loews Corporation (Loews).  Boardwalk acquired all of the outstanding capital stock of Texas Gas Transmission Corporation (Acquisition) on May 16, 2003. Texas Gas Transmission Corporation subsequently converted to a limited liability company and is now known as Texas Gas Transmission, LLC.  

Texas Gas is an interstate natural gas transmission company which owns and operates a natural gas pipeline system originating in the Louisiana Gulf Coast area and in East Texas and running north and east through Louisiana, Arkansas, Mississippi, Tennessee, Kentucky, Indiana and into Ohio, with smaller diameter lines extending into Illinois.  Texas Gas’ direct market area encompasses eight states in the South and Midwest and includes the Memphis, Tennessee; Louisville, Kentucky; Cincinnati, Ohio; and Evansville and Indianapolis, Indiana metropolitan areas.  Texas Gas also has indirect market access to the Northeast through interconnections with unaffiliated pipelines.

At December 31, 2004, our pipeline transmission system, having a mainline delivery capacity of approximately 2.8 billion cubic feet (Bcf) of gas per day, was composed of approximately 5,900 miles of mainline, storage, and branch transmission pipelines and 31 compressor stations having a National Electrical Manufacturers Association (NEMA)-rated capacity totaling approximately 516,000 horsepower.

We own and operate natural gas storage reservoirs in nine underground storage fields located in Indiana and Kentucky.  The certificated storage capacity of our fields is approximately 178 Bcf of gas, of which approximately 55 Bcf is working gas.  We own a majority of our storage gas which we use to meet operational balancing needs on our system, to meet the requirements of firm and interruptible storage customers, and to meet the requirements of our "No-Notice" (NNS) transportation service, which allows our customers to temporarily draw from our storage gas during the winter season to be repaid during the following summer season.  A small amount of storage gas is also used to provide "Summer No-Notice" (SNS) transportation service, designed primarily to meet the needs of summer-season electrical power generation facilities.  SNS customers may temporarily draw from our storage gas in the summer, to be repaid in-kind during the same summer season.  A large portion of the gas delivered by us to our market area is used for space heating, resulting in substantially higher daily requirements during winter months.

In 2004, we transported gas to customers in Louisiana, Arkansas, Mississippi, Tennessee, Kentucky, Indiana, Illinois and Ohio and indirectly to customers in the Northeast.  We transported gas for 101 distribution companies and municipalities for resale to residential, commercial and industrial end users.  We also provided transportation services to 13 industrial customers located along our system.  At December 31, 2004, we had transportation contracts with approximately 500 shippers.  Transportation shippers include distribution companies, municipalities, intrastate pipelines, direct industrial users, electrical generators, marketers and producers.   Each of the following customers accounted for over 10% of our total operating revenue:

Our firm transportation and storage agreements are generally long-term agreements with various expiration dates and account for the major portion of our business.  Additionally, we offer interruptible transportation, short-term firm transportation and storage services under agreements that are generally short-term.

The following table summarizes our total system transportation volumes for the periods shown (expressed in trillion British thermal units [TBtu]):

Regulatory and Environmental

Texas Gas is subject to regulation by the Federal Energy Regulatory Commission (FERC) under the Natural Gas Act (NGA) of 1938 and under the Natural Gas Policy Act (NGPA) of 1978, and as such, its rates and charges for the transportation of natural gas in interstate commerce, the extension, enlargement or abandonment of jurisdictional facilities, and its accounting, among other things, are subject to regulation.  Texas Gas holds certificates of public convenience and necessity issued by the FERC authorizing ownership and operation of all pipelines, facilities and properties considered jurisdictional for which certificates are required under the NGA.

Texas Gas is also subject to the Natural Gas Pipeline Safety Act of 1968, as amended by Title I of the Pipeline Safety Act of 1979, which regulates safety requirements in the design, construction, operation and maintenance of interstate natural gas pipelines.

Texas Gas’ rates are established primarily through the FERC ratemaking process.  Key determinants in the ratemaking process are:

(1)

costs of providing service, including depreciation rates;

(2)

allowed rate of return, including the equity component of Texas Gas’ capital structure; and

(3)

volume throughput assumptions.  

The allowed rate of return must be approved by the FERC in each rate case.  Rate design and the allocation of costs between the demand and commodity rates also impact profitability.

We are subject to extensive federal, state and local environmental laws and regulations which affect our construction and operation of our pipeline facilities.  For a complete discussion of this issue, see Note 3 of Notes to Financial Statements contained in Item 8 herein.

Effective November 1, 1993, Texas Gas restructured its business to implement the provisions of FERC Order 636, which, among other things, required pipelines to unbundle their merchant role from their transportation services.  FERC Order 636 also provided that pipelines should be allowed the opportunity to recover a portion of prudently incurred transition costs which, for Texas Gas, were primarily related to gas supply realignment (GSR) costs and unrecovered purchased gas costs.

In September 1995, Texas Gas received FERC approval of a settlement agreement, which resolved all issues regarding Texas Gas’ recovery of GSR costs.  Texas Gas paid approximately $76 million related to GSR costs and subsequently collected approximately $68 million, plus interest, from its customers.  

GSR collections pursuant to the settlement ended in 2004.  On November 19, 2004, Texas Gas filed a final GSR reconciliation report with the FERC and revised tariff sheets to remove the GSR recovery mechanism from its rates.   On December 10, 2004, the FERC issued a letter order accepting the report.  As a result, Texas Gas recognized $3.3 million of revenue and a $1.8 million expense adjustment related to the settlement during the fourth quarter of 2004.  Texas Gas will also be required to refund approximately $0.4 million to customers during the first half of 2005.

Competition

We compete primarily with other interstate pipelines in the transportation of natural gas, and natural gas competes with other forms of energy available to our customers, including electricity, coal, and fuel oils.  The principal elements of competition among pipelines are rates, terms of service, access to supply basins, and flexibility and reliability of service.  In addition, the FERC’s continuing efforts to increase competition in the natural gas industry are having the effect of increasing the natural gas transportation options of our traditional customer base.  As a result, segmentation and capacity release have created an active secondary market which is increasingly competitive with us.

When restructured tariffs became effective under FERC Order 636 in 1993, all suppliers of natural gas were able to compete for any gas markets capable of being served by the pipelines using nondiscriminatory transportation services provided by the pipelines.  As the FERC-Order-636-regulated environment has matured, many pipelines have faced reduced levels of subscribed capacity as contractual terms expire and customers opt for alternative sources of transmission and related services.  This issue is known as “capacity turnback” (turnback) in the industry.  We are continuing to work diligently to pursue new markets to replace those turning back capacity and to remarket any unsold capacity.  During 2004, we remarketed the majority of the capacity that was turned back and expect to either renegotiate or otherwise remarket the capacity subject to turnback in 2005.  We anticipate that we will continue to be able to remarket most capacity subject to turnback in the future, although competition may cause the remarketed capacity to be sold at lower rates and/or for shorter terms.

Employee Relations

We had 683 employees as of December 31, 2004.  A satisfactory relationship existed between management and labor during the period.  The International Chemical Workers Union Council of the United Food and Commercial Workers International Union, Local 187C, represents 114 of our 372 field employees.  Our collective bargaining agreement with Local 187C will expire on April 30, 2007.

Texas Gas has a non-contributory, defined benefit pension plan and various other plans, which provide regular active employees with group life, hospital and medical benefits as well as disability benefits and savings benefits.  For further discussion of our employee benefits, see Note 5 of Notes to Financial Statements contained in Item 8 herein.

Item 2.  Properties.

Our pipeline system is owned in fee, with certain immaterial portions, such as the offshore areas, being held jointly with third parties.  However, a substantial portion of our system is constructed and maintained pursuant to rights-of-way, easements, permits, and licenses or consents on and across property owned by others.  Our compressor stations, with appurtenant facilities, are located on lands owned by us in fee.  We own our main office building and other facilities located in Owensboro, Kentucky.  Storage facilities are either owned or under contract with long-term leases.  None of our property is encumbered and all property is in use.

Item 3.  Legal Proceedings.

We have only routine litigation in the normal course of business which is not expected to have a material impact on financial position or results of operations.  For a discussion of certain of our current legal proceedings, see Note 3 of Notes to Financial Statements contained in Item 8 herein.

PART II

Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters and Issuer  Purchases of Equity Securities.

Texas Gas Transmission, LLC is wholly-owned by Boardwalk, which is an indirect wholly-owned subsidiary of Loews.   As such, there is no public trading market for the common equity of Texas Gas.

Item 7.   Management's Narrative Analysis of the Results of Operations.

The following discussions and analysis of results of operations, financial condition and liquidity should be read in conjunction with the financial statements and notes thereto included within Item 8.

Our Business

Texas Gas is an interstate natural gas transmission company comprised of 5,900 miles of mainline, storage and branch transmission pipelines.  Texas Gas uses 31 compressor stations located throughout the system with a NEMA-rated capacity totaling approximately 516,000 horsepower capable of delivering 2.8 Bcf of gas per day on the mainline.  The map below reflects the location of our system:

Approximately 80% of our revenue comes from customers reserving space on our transmission systems for transportation of gas at their demand.  Approximately 90% of our capacity is currently reserved by our customers, with an average contract life of over three years.  For the year 2004, Texas Gas successfully extended contracts representing roughly 571,000 MMBtu per day and we were able to remarket approximately 51,000 MMBtu per day of our winter capacity.   Texas Gas has contractual agreements representing 961,382 MMBtu per day of winter capacity expiring in 2005.  Texas Gas believes most of these contracts will be renewed or remarketed.      

In addition to our transmission assets, Texas Gas operates nine storage fields located at the northern end of our system in western Kentucky and southern Indiana.  Our storage fields have certified capacity of 178 Bcf of gas, of which 55 Bcf is considered working gas.  Texas Gas owns a majority of our storage gas which we use, in part to meet operational balancing needs on our system, in part to meet the requirements of our storage customers and in part to meet the requirements of our NNS transportation customers.

Recent requests for additional storage capacity have exceeded the physical capabilities of Texas Gas’ system, thereby prompting us to expand our storage facilities.  On February 11, 2005, Texas Gas received FERC approval to begin expanding our western Kentucky storage complex for service to two customers beginning November 1, 2005.  The project will allow the withdrawal of an additional 82,000 MMBtu per day at a cost of $21.7 million, which will be funded by internally generated cash flows. Texas Gas was evaluating another storage expansion with an in-service date of November 1, 2006.  However, based upon the bids received during a binding open season that concluded on December 17, 2004, Texas Gas has withdrawn that project.

Although Texas Gas does not purchase gas supply for resale, it is important that we provide our customers access to adequate, diverse gas supply options to maintain our competitive position.   We continually assess the nature of our supply areas and explore alternatives, as well as enhancement opportunities of existing facilities.  In 2004, Texas Gas attached additional supply options for our customers, including:  

·

Completed a 400,000 MMBtu per day interconnect with Sea Robin which began flowing gas on May 1, 2004;  

·

Reached an agreement to expand our Lowry interconnect by 75,000 MMBtu per day;

·

Reached an agreement for a new interconnect at Woodlawn in Louisiana that will allow us to receive up to 105,000 MMBtu per day from the Lake Charles liquefied natural gas (LNG) terminal; and

·

As a result of the acquisition of Gulf South Pipeline Company, LP by Boardwalk, we are able to  explore opportunities to work with Gulf South to further enhance our supply accessibility for our customers.

Critical Accounting Policies and Estimates

The accompanying financial statements of Texas Gas were prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).  As a result of the change in control of Texas Gas, the financial statements presented for the period after the Acquisition reflect a new basis of accounting.  Accordingly, the Statements of Financial Position and the Statements of Operations and Cash Flows have been separated by a bold vertical line into a pre-Acquisition period and a post-Acquisition period.     

The accounting policies discussed below are considered by management to be critical to an understanding of Texas Gas’ Statements of Financial Position and Operations as their application places the most significant demands on management’s judgment. Due to the inherent uncertainties involved with this type of judgment, actual results could differ significantly from estimates and may have a material adverse impact on our results of operations or equity.

Regulation.  We are regulated by the FERC and subject to the provisions of SFAS No. 71, “Accounting for the Effects of Certain Types of Regulation”.  Accordingly, we have recorded assets and liabilities on its Statements of Financial Position resulting from the effects of the ratemaking process, which would not be recorded under GAAP for non-regulated entities.  Regulatory assets represent costs incurred that have been deferred because future recovery in customer rates is probable.  Regulatory liabilities generally represent probable future reductions in revenue or refunds to customers.  Our continued ability to meet the criteria for application of SFAS No. 71 may be affected in the future by competitive forces and restructuring in the natural gas industry.  In the event that SFAS No. 71 no longer applied to all, or a separable portion, of our operations, the related regulator y assets and liabilities would be written off unless an appropriate regulatory recovery mechanism is provided.  None of our regulatory assets as of December 31, 2004 and 2003 were earning a return.

The FERC regulatory processes and procedures govern the tariff rates that we are permitted to charge to customers for interstate transportation and storage of natural gas.  Certain revenues we collect may be subject to possible refunds upon final orders in pending rate cases with the FERC.  Accordingly, we record estimates of rate refund reserves considering our and third-party’s regulatory proceedings, advice of counsel and estimated total exposure, as discounted and risk weighted, as well as collection and other risks.  At December 31, 2004, we had no pending rate case proceedings and no associated rate refunds.  Texas Gas is required to file a rate case with the FERC with rates to be effective no later than November 1, 2005.   We can provide no assurances as to the financial outcome of our planned 2005 rate case relative to our current rate structure.

 Key determinants in the ratemaking process are:

(1)

costs of providing service, including depreciation rates;

(2)

allowed rate of return, including the equity component of Texas Gas’ capital structure; and

(3)

volume throughput assumptions.  

Contingencies.  We record liabilities for estimated loss contingencies when we believe a loss is probable and the amount of the loss can be reasonably estimated. Revisions to contingent liabilities are reflected in income in the period in which different facts or information become known or circumstances change that affect previous assumptions with respect to the likelihood or amount of loss.  Liabilities for contingent losses are based upon management’s assumptions and estimates, and advice of legal counsel or third parties regarding the probable outcomes of the matter.  Should the outcome differ from the assumptions and estimates, revisions to the liabilities for contingent losses would be required.

Purchase Price Allocation and Impairment of Goodwill.  Our purchase price allocation reflects the underlying assumption that the historical net book value of regulatory related assets and liabilities are considered to be the fair value of those respective assets and liabilities.  Accordingly, the excess purchase price over the fair value of the assets and liabilities was allocated to goodwill.  SFAS No. 142 “Goodwill and Other Intangible Assets” requires the evaluation of goodwill for impairment at least annually or more frequently if events and circumstances indicate that the asset might be impaired.  An impairment test performed in accordance with SFAS No. 142 requires that a reporting unit’s fair value be estimated.  We used a discounted cash flow model to estimate the fair value of our operating segment, and that estimated fair value was compared to its carrying amount, in cluding goodwill.  The estimated fair value was in excess of the carrying amount at December 31, 2004 and therefore resulted in no impairment.  Accordingly, there have been no impairments recorded in 2004.

Judgments and assumptions are inherent in management’s estimate of undiscounted future cash flows used to determine recoverability of an asset and the estimate of an asset’s fair value used to calculate the amount of impairment to recognize.  The use of alternate judgments and/or assumptions could result in the recognition of different levels of impairment charges in the financial statements.

Employee Benefits.  We have a defined-benefit pension plan for substantially all employees and a health care plan which accords postretirement medical benefits to retired employees who were employed full time, hired prior to January 1, 1996 and have met certain other requirements.  Several statistical and other factors, which attempt to anticipate future events, are used in calculating the expense and liability related to the plans.  These factors include assumptions about the discount rate, expected return on plan assets and rate of future compensation increases, within certain guidelines.  In addition, our actuarial consultants also use subjective factors such as withdrawal and mortality rates to estimate the projected benefit obligation.  The actuarial assumptions used may differ materially from actual results due to changing market and economic conditions, higher or lower withdrawal rates or lo nger or shorter life spans of participants.  These differences may result in a significant impact on the amount of expense recorded in future periods.

Financial Analysis of Operations

This analysis discusses financial results of operations for the years 2004 and 2003.  We have based our narrative analysis of our results of operations for the twelve-month periods then ended on the combined results of operations. As more fully discussed in the notes to financial statements, the Texas Gas purchase price allocation creates a new basis of accounting post-acquisition, necessitating the use of a bold vertical line in the Statements of Operations.  For the purpose of our financial analysis of operations, we have combined the pre-acquisition and post-acquisition results for 2003.  This pro forma total combines two different bases of accounting, which qualifies as a non-GAAP measure.  However, due to the fact that our purchase price allocation considers that historical book value is equal to fair value, there are not significant differences between the two presentations.  Depreciation expense and inter est expense are impacted by the new purchase price allocation, and related financing, and we will indicate that specifically as we discuss operating variances.  As the excess of fair value paid over net book value was allocated to goodwill, which is non-amortizable, there is no impact on results of operations from that allocation item.  

2004 Compared to 2003:

Operating revenues increased $5.2 million, or 2.0 percent, in 2004 compared to 2003 primarily attributable to the following:

·

 $3.9 million increase in storage services due to new contracts and

·

 $3.3 million from a regulatory settlement in 2004.

These increases were partially offset by

·

 lower transportation by others revenue due to the expiration of transportation contracts on third-party pipelines and

·

 lower Summer No-Notice services which were negatively impacted by the high price of gas which caused power plants to find alternative sources of fuel, shut down or not run.

Operating costs and expenses increased $11.9 million in 2004 compared to 2003 due primarily to the following:

·

$5.7 million decrease in accruals recorded in 2003 primarily related to benefits;

·

$4.0 million higher labor and benefit costs due to an increase in the workforce since the Acquisition;

·

$3.9 million accrual for environmental costs;

·

$2.2 million increase in operation maintenance projects;

·

$1.0 million increase in property and liability insurance costs; and

·

$1.0 million increase in corporate overhead costs.

These expenses were partially offset by:

·

$3.0 million in lower depreciation expense primarily as a result of the application of purchase accounting;

·

$1.8 million decrease in expense due to a regulatory settlement; and

·

$1.5 million decrease in cost of gas transportation expenses due to the expiration of transportation contracts on third party pipelines.

Net income decreased $3.7 million, or 6.0 percent, primarily due to the increase in operating expenses explained above, partially offset by the increase in operating revenues.  Net miscellaneous other deductions were $0.7 million lower in 2004 than 2003 due to lower interest rates on debt which was offset by a decrease in interest income due to lower cash balances and decrease in return on that balance.  Income tax expense (charge-in-lieu-of) is $2.4 million lower in 2004 than 2003 due to the decrease in net income.  

Property, plant and equipment, prior to the Acquisition, included certain amounts in excess of the original cost of regulated facilities, as a result of the Williams 1995 acquisition of Texas Gas.  This excess was being depreciated over 40 years, the estimated remaining useful lives of the assets at the date of Williams’ acquisition of Texas Gas, at approximately $11.0 million per year.  $4.1 million of this depreciation was recorded during the pre-Acquisition period of 2003, but is not reflected in the post-Acquisition property, plant and equipment amounts.  Current FERC policy does not permit Texas Gas to recover through its rates amounts in excess of original cost.

Effect of Inflation   

Texas Gas generally has experienced increased costs in recent years due to the effect of inflation on the cost of labor, benefits, materials and supplies, and property, plant and equipment.  A portion of the increased labor and materials and supplies costs can directly affect income through increased operating and maintenance costs.  The cumulative impact of inflation over a number of years has resulted in increased costs for current replacement of productive facilities.  The majority of Texas Gas’ property, plant and equipment and materials and supplies is subject to rate-making treatment, and under current FERC practices, recovery is limited to historical costs.  While amounts in excess of historical cost are not recoverable under current FERC practices, Texas Gas believes it will be allowed to recover and earn a return based on the increased actual costs incurred when existing facilities are replaced.  C ost-based regulation along with competition and other market factors limit Texas Gas’ ability to price services or products to ensure recovery of inflation’s effect on costs.

Financial Condition and Liquidity

Texas Gas funds its operations and capital requirements with cash flows from operating activities and repayments of funds advanced to Boardwalk.  At December 31, 2004, the advances due Texas Gas by Boardwalk totaled $166.7 million.  The advances are represented by demand notes but are classified as noncurrent since Texas Gas does not anticipate demanding these funds during the next twelve months.  The interest rate on intercompany demand notes is the London Interbank Offered Rate (LIBOR) on the first day of each three-month period plus one percent and is compounded monthly.

We have no guarantees of off-balance sheet debt to third parties and maintain no debt obligations that contain provisions requiring accelerated payment of the related obligations in the event of specified levels of declines in our credit ratings given by Moody’s Investors Service, Standard & Poor’s and Fitch Ratings (rating agencies). At December 31, 2004, Texas Gas’ ratings were as follows:

A security rating is not a recommendation to buy, sell, or hold securities.  The rating is subject to revision or withdrawal at any time and each rating should be evaluated independently of any other rating.

Texas Gas’ capital expenditures, net of retirements and salvage, for 2004 and 2003 were $41.9 million and $34.7 million, respectively.  Capital expenditures for 2005 are expected to approximate $55.0 million.

The table below summarizes the more significant contractual obligations and commitments by period (in millions).

Although no assurances can be given, Texas Gas expects to fund its capital requirements through cash flows from its operating activities and available cash.

Forward-Looking Statements

Investors are cautioned that certain statements contained in this Report as well as some statements in periodic press releases and some oral statements made by officials of Texas Gas, are “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995 (the “Act”). Forward-looking statements include, without limitation, any statement that may project, indicate or imply future results, events, performance or achievements, and may contain the words “expect,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “will be,” “will continue,” “will likely result,” and similar expressions. In addition, any statement concerning future financial performance (including future revenues, earnings or growth rates), ongoing business strategies or prospects, and possible actions by Texas Gas, which may b e provided by management are also forward-looking statements as defined by the Act.

Forward-looking statements are based on current expectations and projections about future events and are inherently subject to a variety of risks and uncertainties, many of which are beyond Texas Gas’ control, that could cause actual results to differ materially from those anticipated or projected. These risks and uncertainties include, among others:

·

The gas transmission and storage operations of its subsidiaries are subject to government regulations and rate proceedings that could have an adverse impact on their ability to recover the costs of operating their pipeline facilities.

·

Texas Gas is subject to environmental and safety regulation in all jurisdictions in which they operate, and any changes in such regulations could negatively affect its results of operations.

·

Gas transmission and storage activities involve numerous risks that might result in accidents and other operating risks and costs.

·

Terrorist activities and the potential for military and other actions could adversely affect Texas Gas’ business.

·

Increased competition could have a significant financial impact on Texas Gas.

·

New natural gas supply sources may fail to develop.

·

Texas Gas may not be able to maintain or replace gas transportation service and storage contracts at favorable rates as existing contracts expire.

·

A significant portion of Texas Gas’ revenues are from a small number of customers.

Developments in any of these areas, which are more fully described elsewhere in this Report, could cause Texas Gas’ results to differ materially from results that have been or may be anticipated or projected. Forward-looking statements speak only as of the date of this Report and Texas Gas expressly disclaims any obligation or undertaking to update these statements to reflect any change in Texas Gas’ expectations or beliefs or any change in events, conditions or circumstances on which any forward-looking statement is based.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

Our market risk is limited to our long-term debt.  All interest on long-term debt is fixed in nature.  Total long-term debt at December 31, 2004, had a carrying value of $347.8 million and a fair value of $356.0 million.  The weighted-average interest rate of Texas Gas’ long-term debt is 5.36%.  Texas Gas’ $250.0 million (4.600%) and $100.0 million (7.250%) long-term debt issues mature in 2015 and 2027, respectively.  

Item 8.   Financial Statements and Supplementary Data

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
Texas Gas Transmission, LLC

     We have audited the accompanying Statements of Financial Position of Texas Gas Transmission, LLC (formerly Texas Gas Transmission Corporation) (the “Company”) as of December 31, 2004 and 2003, and the related Statements of Operations, Stockholder’s and Member’s Equity, and Cash Flows for the year ended December 31, 2004 and for the periods January 1, 2003 through May 16, 2003 (pre-acquisition) and May 17, 2003 through December 31, 2003 (post-acquisition).  These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on the financial statements based on our audits.

     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements , assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

     In our opinion, such financial statements present fairly, in all material respects, the financial position of Texas Gas Transmission, LLC as of December 31, 2004 and 2003, and the results of its operations and its cash flows for the year ended December 31, 2004 and for the periods January 1, 2003 through May 16, 2003 (pre-acquisition) and May 17, 2003 through December 31, 2003 (post-acquisition), in conformity with accounting principles generally accepted in the United States of America. 

DELOITTE & TOUCHE LLP

Chicago, Illinois

March 17, 2005

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors

Texas Gas Transmission, LLC

      We have audited the accompanying statements of operations, cash flows, and stockholder’s and member’s equity of Texas Gas Transmission, LLC (formerly Texas Gas Transmission Corporation) for the year ended December 31, 2002. These financial statements are the responsibility of the Company's management.  Our responsibility is to express an opinion on these financial statements based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation.  We believe that our audit provides a reasonable basis for our opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the results of operations and cash flows of Texas Gas Transmission, LLC for the year ended December 31, 2002, in conformity with U.S. generally accepted accounting principles.

/s/  Ernst & Young LLP                                                                        

Houston, Texas

March 5, 2003

 TEXAS GAS TRANSMISSION, LLC

STATEMENTS OF FINANCIAL POSITION

(Thousands of Dollars)

TEXAS GAS TRANSMISSION, LLC

STATEMENTS OF FINANCIAL POSITION

(Thousands of Dollars)