Exhibit 10(b):

Service Agreement No. FSNG1

FIRM TRANSPORTATION SERVICE AGREEMENT

UNDER RATE SCHEDULE FT AND/OR RATE SCHEDULE FT-NN

THIS AGREEMENT, made and entered into as of this 1st day of September, 2005, by
and between Southern Natural Gas Company, a Delaware corporation, hereinafter
referred to as “Company”, and Alabama Gas Corporation, an Alabama corporation,
hereinafter referred to as “Shipper”.

WITNESSETH

WHEREAS, Company is an interstate pipeline, as defined in Section 2(15) of the
Natural Gas Policy Act of 1978 (NGPA); and

WHEREAS, Shipper has requested firm transportation pursuant to Rate Schedule FT
and/or FT-NN of various supplies of gas for redelivery for Shipper’s account and
has submitted to Company a request for such transportation service in compliance
with Section 2 of the General Terms and Conditions applicable to such Rate
Schedules; and/or

WHEREAS, Shipper may acquire, from time to time, released firm transportation
capacity under Section 22 of the General Terms and Conditions of Company’s FERC
Gas Tariff; and

WHEREAS, Company has agreed to provide Shipper with transportation service of
such gas supplies or through such acquired capacity release in accordance with
the terms and conditions of this Agreement.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

TRANSPORTATION QUANTITY

1.1 Subject to the terms and provisions of this Agreement, Rate Schedule FT
and/or FT-NN, as applicable, and the General Terms and Conditions thereto,
Shipper agrees to deliver or cause to be delivered to Company at the Receipt
Point(s) described in Exhibit A and Exhibit A-1 to this Agreement, and Company
agrees to accept at such point(s) for transportation under this Agreement, an
aggregate quantity of natural gas per day up to the total Transportation Demand
set forth on Exhibit B hereto. Company’s obligation to accept gas on a firm
basis at any Receipt Point is limited to the Receipt Points set out on Exhibit A
and to the Maximum Daily Receipt Quantity (MDRQ) stated for each such Receipt
Point. The sum of the MDRQ’s for the Receipt Points on Exhibit A shall not
exceed the Transportation Demand.

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Transportation Demand Service Agreement No. FSNG1

1.2 Subject to the terms and provisions of this Agreement, Rate Schedule FT
and/or FT-NN, as a applicable, and the General Terms and Conditions thereto,
Company shall deliver a thermally equivalent quantity of gas, less the
applicable fuel charge as set forth in the applicable FT or FT-NN Rate Schedule,
to Shipper at the Delivery Point(s) described in Exhibit B and Exhibit B-1
hereto. Company’s obligation to redeliver gas at any Delivery Point on a firm
basis is limited to the Delivery Points specified on Exhibit B and to the
Maximum Daily Delivery Quantity (MDDQ) stated for each such Delivery Point and
in no event shall Shipper be entitled to deliveries in excess of the MDDQ such
that if Shipper elects to take gas at an Exhibit B-1 Delivery Point then the
MDDQ at its Exhibit B Delivery Points will be reduced proportionately. The sum
of the MDDQ’s for the Delivery Points on Exhibit B shall equal the
Transportation Demand.

1.3 In the event Shipper is the successful bidder on released firm
transportation capacity under Section 22 of the Company’s General Terms and
Conditions, Company will promptly email to Shipper the terms of the Capacity
Release Transaction. Upon the issuance of the email, subject to the terms,
conditions and limitations hereof and of Company’s Rate Schedules FT and FT-NN,
Company agrees to provide the released firm transportation service to Shipper
under Rate Schedule FT or FT-NN, the General Terms and Conditions thereto, and
this Agreement.

ARTICLE II

CONDITIONS OF SERVICE

2.1 It is recognized that the transportation service hereunder is provided on a
firm basis pursuant to, in accordance with and subject to the provisions of
Company’s Rate Schedule FT and/or FT-NN, and the General Terms and Conditions
thereto, which are contained in Company’s FERC Gas Tariff, as in effect from
time to time, and which are hereby incorporated by reference. In the event of
any conflict between this Agreement and the terms of the applicable Rate
Schedule, the terms of the Rate Schedule shall govern as to the point of
conflict. Any limitation of transportation service hereunder shall be in
accordance with the priorities set out in Rate Schedule FT and/or FT-NN, as
applicable, and the General Terms and Conditions thereto.

2.2 This Agreement shall be subject to all provisions of the General Terms and
Conditions applicable to Company’s Rate Schedule FT and/or FT-NN as such
conditions may be revised from time to time. Unless Shipper requests otherwise,
Company shall provide to Shipper the filings Company makes at the Federal Energy
Regulatory Commission (“Commission”) of such provisions of the General Terms and
Conditions or other matters relating to Rate Schedule FT or FT-NN.

2.3 Company shall have the right to discontinue service under this Agreement in
accordance with Section 15.3 of the General Terms and Conditions hereto.

2.4 The parties hereto agree that neither party shall be liable to the other
party for any special, indirect, or consequential damages (including, without
limitation, loss of profits or business interruptions) arising out of or in any
manner related to this Agreement.

 

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Service Agreement No. FSNG1

2.5 This Agreement is subject to the provisions of Subpart G of Part 284 of the
Commission’s Regulations under the NGPA and the Natural Gas Act. Upon
termination of this Agreement, Company and Shipper shall be relieved of further
obligation to the other party except to complete the transportation of gas
underway on the day of termination, to comply with the provisions of Section 14
of the General Terms and Conditions with respect to any imbalances accrued prior
to termination of this Agreement, to render reports, and to make payment for all
obligations accruing prior to the date of termination.

ARTICLE III

NOTICES

3.1 Except as provided in Section 8.6 herein, notices hereunder shall be given
pursuant to the provisions of Section 18 of the General Terms and Conditions to
the respective party at the applicable address, telephone number, facsimile
machine number or e-mail addresses :provided by the parties on Appendix E to the
General Terms and Conditions or such other addresses, telephone numbers,
facsimile machine numbers or e-mail addresses as the parties shall respectively
hereafter designate in writing from time to time.

ARTICLE IV

TERM

4.1 Subject to the provisions hereof, this Agreement shall become effective as
of the date first hereinabove written and shall be in full force and effect for
the primary term(s) set forth on Exhibit B hereto, if applicable, and shall
continue and remain in force and effect for successive evergreen terms specified
on Exhibit B hereto unless canceled by either party giving the required amount
of written notice specified on Exhibit B to the other party prior to the end of
the primary term(s) or any extension thereof. The primary term of the Agreement
may be calculated from the date service commences hereunder rather than the
effective date as provided above, if construction of facilities is necessary.

4.2 In the Event Shipper has not contracted for firm Transportation Demand under
this Agreement directly with Company, as set forth on Exhibit B hereto, then the
term of this Agreement shall be effective as of the date first hereinabove
written and shall remain in full force and effect for a primary term through the
end of the month and month to month thereafter unless canceled by either party
giving at least five (5) days written notice to the other party prior to the end
of the primary term or any extension thereof, provided however, this agreement
will automatically terminate if no nominations are requested during a period of
12 consecutive months. It is provided, however that this Agreement shall not
terminate prior to the expiration of the effective date of any Capacity Release
Transaction.

 

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Service Agreement No. FSNG1

ARTICLE V

CONDITIONS PRECEDENT

5.1 Unless otherwise agreed to by the parties, the terms of Rate Schedule FT
and/or FT-NN, as applicable, and the General Terms and Conditions thereto, shall
apply to the acquisition or construction of any facilities necessary to
effectuate this Agreement. Other provisions of this Agreement notwithstanding,
Company shall be under no obligation to construct the facilities or commence
service hereunder unless and until (1) Company has received and accepted the
necessary regulatory approvals and permits to construct the facilities in a form
and substance satisfactory to Company; (2) all facilities, of whatever nature,
as are required to permit the receipt, measurement, transportation, and delivery
of natural gas hereunder have been authorized, installed, and are in operating
condition; (3) (If applicable) Company has obtained the approval of the
appropriate management or management committee and/or board of directors of
Company and/or its parent company to spend the capital necessary to construct
the additional facilities; and (4) SHIPPER completes the construction and places
into operation, using diligent efforts, its upstream or downstream production or
end use facilities required to receive or deliver gas hereunder. (If applicable)
In the event construction of facilities by COMPANY is necessary to provide
service under the Agreement, Company agrees to use its reasonable efforts to
meet an in-service date of                     .

ARTICLE VI

REMUNERATION

6.1 Shipper shall pay Company monthly for the transportation services rendered
hereunder the charges specified in Rate Schedule FT, Rate Schedule FT-NN, and
under each effective Capacity Release Transaction, as applicable, including any
penalty and other authorized charges assessed under the applicable FT or FT-NN
Rate Schedule and the General Terms and Conditions. For service requested from
Company under Rate Schedule FT or FT-NN, Company shall notify Shipper as soon as
practicable of the date services will commence hereunder, and if said date is
not the first day of the month, the Reservation Charge for the first month of
service hereunder shall be adjusted to reflect only the actual number of days
during said month that transportation service is available. Company may agree
from time to time to discount the rates charged Shipper for services provided
hereunder in accordance with the provisions of Rate Schedule FT and/or FT-NN, as
applicable. Said discounted charges shall be set forth on Exhibit E hereto or
the parties may agree to a Negotiated Rate for such services in accordance with
the provisions of Rate Schedule FT or FT-NN. Said discounted or Negotiated Rates
shall be set forth on Exhibit E or Exhibit F, respectively, hereto and shall
take precedence over the charges set forth in Rate Schedules FT or FT-NN during
the period in which they are in effect.

 

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Service Agreement No. FSNG1

6.2 The rates and charges provided for under Rate Schedule FT shall be subject
to increase or decrease pursuant to any order issued by the Commission in any
proceeding initiated by Company or applicable to the services performed
hereunder. Shipper agrees that Company shall, without any further agreement by
Shipper, have the right to change from time to time, all or any part of its
Proforma Service Agreement, as well as all or any part of Rate Schedule FT or
FT-NN, as applicable, or the General Terms and Conditions thereto, including
without limitation the right to change the rates and charges in effect
hereunder, pursuant to Section 4(d) of the Natural Gas Act as may be deemed
necessary by Company, in its reasonable judgment, to assure just and reasonable
service and rates under the Natural Gas Act. It is recognized, however, that
once a Capacity Release Transaction has been awarded, Company cannot increase
the Reservation Charge to be paid by Shipper under that Capacity Release
Transaction, unless in its bid the Acquiring Shipper has agreed to pay a
percentage of the maximum tariff rate in effect and the maximum tariff rate
increases during the term of the Capacity Release Transaction. Nothing contained
herein shall prejudice the rights of Shipper to contest at any time the changes
made pursuant to this Section 6.2, including the right to contest the
transportation rates or charges for the services provided under this Agreement,
from time to time, in any subsequent rate proceedings by Company under Section 4
of the Natural Gas Act or to file a complaint under Section 5 of the Natural Gas
Act with respect to such transportation rates or charges, the Rate Schedules, or
the General Terms and Conditions thereto.

ARTICLE VII

SPECIAL PROVISIONS

7.1 If Shipper is a seller of gas under more than one Service Agreement and
requests that company allow it to aggregate nominations for certain Receipt
Points for such Agreements, Company will allow such an arrangement under the
terms and conditions set forth in this Article VII. To be eligible to aggregate
gas, Shipper must comply with the provisions of Section 2.2 of the General Terms
and Conditions and the terms and conditions of the Supply Pool Balancing
Agreement executed by Shipper and Company pursuant thereto.

7.2 If Shipper is a purchaser of gas from a seller that is selling from an
aggregate of Receipt Points, and Shipper wishes to nominate to receive gas from
such seller’s aggregate supplies of gas, Company will allow such a nomination,
provided that the seller (i) has entered into a Supply Pool Balancing Agreement
with Company and (ii) submits a corresponding nomination to deliver gas to
Shipper from its aggregate supply pool.

 

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Service Agreement No. FSNG1

ARTICLE VIII

MISCELLANEOUS

8.1 This Agreement constitutes the entire Agreement between the parties and no
waiver by Company or Shipper of any default of either party under this Agreement
shall operate as a waiver of any subsequent default whether of a like or
different character.

8.2 The laws of the State of Alabama shall govern the validity, construction,
interpretation, and effect of this agreement, without giving effect to any
conflict of laws doctrine that would apply the laws of another jurisdiction.

8.3 No modification of or supplement to the terms and provisions hereof shall be
or become effective except by execution of a supplementary written agreement
between the parties except that (i) a Capacity Release Transaction may be
issued, and (ii) in accordance with the provisions of Rate Schedule FT and/or
FT-NN, as applicable, and the General Terms and Conditions thereto, Receipt
Points may be added to or deleted from Exhibit A and the Maximum Daily Receipt
Quantity for any Receipt Point on Exhibit A may be changed upon execution by
Company and Shipper of a Revised Exhibit A to reflect said change(s), and
(iii) Delivery Points may be added to or deleted from Exhibit B and the Maximum
Daily Delivery Quantity for any Delivery Point may be changed upon execution by
Company and Shipper of a Revised Exhibit B to reflect said change(s). It is
provided, however, that any such change to Exhibit A or Exhibit B must include
corresponding changes to the existing Maximum Daily Receipt Quantities or
Maximum Daily Delivery Quantities, respectively, such that the sum of the
changed Maximum Daily Receipt Quantities shall not exceed the Transportation
Demand and the sum of the Maximum Daily Delivery Quantities equals the
Transportation Demand.

8.4 This Agreement shall bind and benefit the successors and assigns of the
respective parties hereto. Subject to the provisions of Section 22 of the
General Terms and Conditions applicable hereto, either party may assign this
Agreement to an affiliated company without the prior written consent of the
other party, provided that the affiliated company is creditworthy pursuant to
Section 2.1(d) of the General Terms and Conditions, but neither party may assign
this Agreement to a nonaffiliated company without the prior written consent of
the other party, which consent shall not be unreasonably withheld; provided,
however, that either party may assign or pledge this Agreement under the
provisions of any mortgage, deed of trust, indenture or similar instrument.

8.5 Exhibits A, A-1, B, B-1, and/or other exhibits, from time to time, attached
to this Agreement constitute a part of this Agreement and are incorporated
herein.

8.6 This Agreement is subject to all present and future valid laws and orders,
rules, and regulations of any regulatory body of the federal or state government
having or asserting jurisdiction herein. After the execution of this Agreement
for firm transportation capacity from Company, each party shall make and
diligently prosecute all

 

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Service Agreement No. FSNG1

necessary filings with federal or other governmental bodies, or both, as may be
required for the initiation and continuation of the transportation service which
is the subject of this Agreement and to construct and operate any facilities
necessary therefore. Each party shall have the right to seek such governmental
authorizations as it deems necessary, including the right to prosecute its
requests or applications for such authorization in the manner it deems
appropriate. Upon either party’s request, the other party shall timely provide
or cause to be provided to the requesting party such information and material
not within the requesting party’s control and/or possession that may be required
for such filings. Each party shall promptly inform the other party of any
changes in the representations made by such party herein and/or in the
information provided pursuant to this paragraph. Each party shall promptly
provide the party with a copy of all filings, notices, approvals, and
authorizations in the course of the prosecution of its filings. In the event all
such necessary regulatory approvals have not been issued or have not been issued
on terms and conditions acceptable to Company or Shipper within twelve
(12) months from the date of the initial FERC application therefore, then
Company or Shipper may terminate this Agreement without further liability or
obligation to the other party by giving written notice thereof at any time
subsequent to the end of such twelve-month period, but prior to the receipt of
all such acceptable approvals. Company or Shipper may waive their rights to
terminate this Agreement under this Section upon mutual agreement in writing.
Such notice will be effective as of the date it is delivered to the U.S. Mail,
for delivery by certified mail, return receipt requested.

8.7 If Shipper experiences the loss of any load by direct connection of such
load to the Company’s system, Shipper may reduce its Transportation Demand under
this Service Agreement or any other Service Agreement for firm transportation
service between Shipper and Company by giving Company 30 days prior written
notice of such reduction within six (6) months of the date Company initiates
direct service to the industrial customer; provided, however, that any such
reduction shall be applied first to the Transportation Demand under the Service
Agreement with the shortest remaining contract term.

In order to qualify for a reduction in its Transportation Demand, Shipper must
certify and provide supporting data that:

 

 

(i)

The load was actually being served by Shipper with gas transported by Company
prior to November 1, 1993.

 

 

(ii)

If the load lost by Shipper was served under a firm contract, the daily contract
quantity shall be provided.

 

 

(iii)

If the load lost by Shipper was served under an interruptible contract, the
average daily volumes during the latest twelve months of service shall be
provided.

Shipper may reduce its aggregate Transportation Demand under all its Service
Agreements by an amount up to the daily contract quantity in the case of the
loss of a

 

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Service Agreement No. FSNG1

firm customer and/or up to the average daily deliveries during the latest twelve
month period in the case of the loss of an interruptible customer. Such
reduction shall become effective thirty days after the date of Shipper’s notice
that it desires to reduce its Transportation Demand.

8.8 This Agreement supersedes and cancels the Service Agreement Nos. 866940
dated November 1, 1993, and 866941 dated November 1, 1993, as amended April 17,
2002, between the parties hereto.

IN WITNESS WHEREOF, this Agreement has been executed by the parties as of the
date first written above by their respective duly authorized officers.

 

Attest/Witness:

 

SOUTHERN NATURAL GAS COMPANY

 

 

By

 

 

 

Its

 

 

 

ALABAMA GAS CORPORATION

 

 

By

 

 

 

Its