**UNITED
      STATES SECURITIES AND EXCHANGE COMMISSION**


**Washington, D.C.
      20549**


________________




**Form 10-Q**


**(Mark
      One)**





R
            **QUARTERLY
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                OF 1934****For
                the quarterly period ended September 30, 2007****OR**£
            **TRANSITION
                REPORT PURSUANT TO SECTION 13 OR 15(d) OF**
              **THE
                SECURITIES EXCHANGE ACT OF 1934****For
                the transition period
                from**                             **to**





**Commission
      File Number 1-2700**





**El
      Paso
      Natural Gas Company**


(Exact
      Name of
      Registrant as Specified in Its Charter)




**Delaware**
            **74-0608280**(State
                or
                Other Jurisdiction
              of
                Incorporation or Organization)
            (I.R.S.
                Employer
              Identification
                No.)**El
                Paso Building****1001
                Louisiana Street**
              **Houston,
                Texas**
            **77002**(Address
                of
                Principal Executive Offices)
            (Zip
                Code)




**Telephone
      Number: (713) 420-2600**




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 R   No £





Indicate
      by check mark whether the registrant is a large accelerated filer, an
      accelerated filer, or a non-accelerated filer. See definition of “accelerated
      filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
      (Check one):




Large
                  accelerated filer o
              Accelerated
                  filer o
              Non-accelerated
                  filer þ
  Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).  Yes £ No R





Indicate
      the number of shares outstanding of each of the issuer’s classes of common
      stock, as of the latest practicable date.





Common
      stock, par value $1 per share. Shares outstanding on November 6, 2007:
      1,000





**EL PASO
      NATURAL GAS COMPANY MEETS THE CONDITIONS OF****GENERAL INSTRUCTION
      H(1)(a) AND (b) TO FORM 10-Q
      AND IS
      THEREFORE FILING****THIS REPORT WITH A REDUCED DISCLOSURE FORMAT
      AS PERMITTED BY SUCH INSTRUCTION.**





**EL
      PASO
      NATURAL GAS COMPANY**





**TABLE
      OF
      CONTENTS**





**Caption**
            
            **Page**PART
                I —
                Financial InformationItem  1.
            Financial
                Statements
            
            1Item  2.
            Management’s
                Discussion and Analysis
                of Financial Condition and Results of Operations
            
            10Item  3.
            Quantitative
                and Qualitative Disclosures
                About Market Risk
            
            *Item  4T.
            Controls
                and Procedures
            
            12PART
                II — Other InformationItem  1.
            Legal
                Proceedings
            
            13Item  1A.
            Risk
                Factors
            
            13Item  2.
            Unregistered
                Sales of Equity Securities and
                Use of Proceeds
            
            *Item  3.
            Defaults
                Upon Senior
                Securities
            
            *Item  4.
            Submission
                of Matters to a Vote of Security
                Holders
            
            *Item  5.
            Other
                Information
            
            13Item  6.
            Exhibits
            
            13Signatures
            
            14Certification
              of Principal Executive Officer
              pursuant to Section 302Certification
              of Principal Financial Officer
              pursuant to Section 302Certification
              of Principal Executive Officer
              pursuant to Section 906Certification
              of Principal Financial Officer
              pursuant to Section 906




____________________






*
                We have not
                included a response to this item in this document since no response
                is
                required pursuant to the  reduced disclosure format permitted by
                General Instruction H to
                Form 10-Q.




Below
                  is a
                  list of terms that are common to our industry and used throughout
                  this
                  document:




/d
            = per
                day
            BBtu = billion
                British thermal units




When
                we refer
                to cubic feet measurements, all measurements are at a pressure of
                14.73 pounds per square inch.





When
                we refer
                to “us”, “we”, “our”, “ours” or “EPNG”, we are describing El Paso Natural
                Gas Company and/or our
                subsidiaries.











i







**PART
      I — FINANCIAL INFORMATION**





**Item 1. Financial
      Statements**





**EL
      PASO
      NATURAL GAS COMPANY**





**CONDENSED
      CONSOLIDATED STATEMENTS OF INCOME**


**(In millions)**


**(Unaudited)**





**Quarter
                Ended**
              **September 30,**
            
            
            **Nine
                Months Ended**
              **September 30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006**Operating
                revenues
            
            $
            136
            
            
            $
            155
            
            
            $
            417
            
            
            $
            450Operating
                expensesOperation
                and
                maintenance
            
            
            54
            
            
            
            44
            
            
            
            152
            
            
            
            141Depreciation
                and
                amortization
            
            
            21
            
            
            
            23
            
            
            
            63
            
            
            
            71Taxes,
                other than income
                taxes
            
            
            7
            
            
            
            8
            
            
            
            22
            
            
            
            2482
            
            
            
            75
            
            
            
            237
            
            
            
            236Operating
                income
            
            
            54
            
            
            
            80
            
            
            
            180
            
            
            
            214Other
                income,
                net
            
            
            1
            
            
            
            —
            
            
            
            4
            
            
            
            3Interest
                and
                debt expense
            
            
            (25
            )
            
            
            (24
            )
            
            
            (74
            )
            
            
            (71
            )Affiliated
                interest income, net
            
            
            19
            
            
            
            15
            
            
            
            51
            
            
            
            40Income
                before
                income taxes
            
            
            49
            
            
            
            71
            
            
            
            161
            
            
            
            186Income
                taxes
            
            
            19
            
            
            
            26
            
            
            
            61
            
            
            
            70Net
                income
            
            $
            30
            
            
            $
            45
            
            
            $
            100
            
            
            $
            116





See
      accompanying
      notes.





1


**EL
      PASO
      NATURAL GAS COMPANY**





**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(In
      millions, except share amounts)**


**(Unaudited)**





**September
                30,**
              **2007**
            
            
            **December 31,**
              **2006**ASSETSCurrent
                assetsCash
                and cash
                equivalents
            
            $
            —
            
            
            $
            —Accounts
                and
                notes receivableCustomer,
                net
                of allowance of $4 in 2007 and $5 in 2006
            
            
            81
            
            
            
            81Affiliates
            
            
            206
            
            
            
            5Other
            
            
            1
            
            
            
            —Materials
                and
                supplies
            
            
            42
            
            
            
            40Deferred
                income taxes
            
            
            51
            
            
            
            42Other
            
            
            5
            
            
            
            6Total
                current
                assets
            
            
            386
            
            
            
            174Property,
                plant and equipment, at cost
            
            
            3,664
            
            
            
            3,557Less
                accumulated depreciation and amortization
            
            
            1,296
            
            
            
            1,251Total
                property, plant and equipment, net
            
            
            2,368
            
            
            
            2,306Other
                assetsNotes
                receivable from affiliate
            
            
            1,061
            
            
            
            1,070Other
            
            
            105
            
            
            
            811,166
            
            
            
            1,151Total
                assets
            
            $
            3,920
            
            
            $
            3,631LIABILITIES
                AND STOCKHOLDER’S EQUITYCurrent
                liabilitiesAccounts
                payableTrade
            
            $
            80
            
            
            $
            59Affiliates
            
            
            14
            
            
            
            17Other
            
            
            25
            
            
            
            9Accrued
                liabilities
            
            
            127
            
            
            
            84Taxes
                payable
            
            
            106
            
            
            
            87Accrued
                interest
            
            
            36
            
            
            
            27Other
            
            
            20
            
            
            
            21Total
                current
                liabilities
            
            
            408
            
            
            
            304Long-term
                debt
            
            
            1,166
            
            
            
            1,111Other
                liabilitiesDeferred
                income taxes
            
            
            428
            
            
            
            405Other
            
            
            88
            
            
            
            85516
            
            
            
            490Commitments
                and contingencies (Note 4)Stockholder’s
                equityCommon
                stock,
                par value $1 per share; 1,000 shares authorized, issued and
                outstanding
            
            
            —
            
            
            
            —Additional
                paid-in capital
            
            
            1,268
            
            
            
            1,268Retained
                earnings
            
            
            562
            
            
            
            462Accumulated
                other comprehensive loss
            
            
            —
            
            
            
            (4
            )Total
                stockholder’s equity
            
            
            1,830
            
            
            
            1,726Total
                liabilities and stockholder’s equity
            
            $
            3,920
            
            
            $
            3,631





See
      accompanying
      notes.




2


**EL
      PASO
      NATURAL GAS COMPANY**





**CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS**


**(In millions)**


**(Unaudited)**





**Nine
                Months Ended**
              **September 30,****2007**
            
            
            **2006**Cash
                flows
                from operating activitiesNet
                income
            
            $
            100
            
            
            $
            116Adjustments
                to reconcile net income to net cash from operating
                activitiesDepreciation
                and amortization
            
            
            63
            
            
            
            71Deferred
                income taxes
            
            
            53
            
            
            
            21Other
            
            
            3
            
            
            
            (3
            )Asset
                and
                liability changes
            
            
            16
            
            
            
            21Net
                cash provided by operating activities
            
            
            235
            
            
            
            226Cash
                flows
                from investing activitiesAdditions
                to property, plant and equipment
            
            
            (83
            )
            
            
            (102
            )Net
                change in notes receivable from affiliate
            
            
            (190
            )
            
            
            (138
            )Net
                change in restricted cash
            
            
            —
            
            
            
            14Other
            
            
            2
            
            
            
            —Net
                cash used in investing activities
            
            
            (271
            )
            
            
            (226
            )Cash
                flows
                from financing activitiesNet
                proceeds from issuance of long-term debt
            
            
            350
            
            
            
            —Payment
                to retire long-term debt
            
            
            (314
            )
            
            
            —Net
                cash provided by financing activities
            
            
            36
            
            
            
            —Net
                change in
                cash and cash equivalents
            
            
            —
            
            
            
            —Cash
                and cash
                equivalentsBeginning
                of period
            
            
            —
            
            
            
            —End
                of period
            
            $
            —
            
            
            $
            —





See
      accompanying
      notes.





3


**EL
      PASO
      NATURAL GAS COMPANY**





**NOTES
      TO
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**(Unaudited)**





**1. Basis
      of Presentation and Significant Accounting Policies**





*****Basis
      of Presentation*





We
      are an indirect
      wholly owned subsidiary of El Paso Corporation (El Paso). We prepared
      this Quarterly Report on Form 10-Q under the rules and regulations of the
      United States Securities and Exchange Commission (SEC). Because this
      is an interim period filing presented using a condensed format, it does not
      include all of the disclosures required by U.S. generally accepted accounting
      principles. You should read this Quarterly Report on Form 10-Q along with
      our 2006 Annual Report on Form 10-K, which includes a summary of our
      significant accounting policies and other disclosures. The financial statements
      as of September 30, 2007, and for the quarters and nine months ended September
      30, 2007 and 2006, are unaudited. We derived the balance sheet as of
      December 31, 2006, from the audited balance sheet filed in our 2006
      Annual Report on Form 10-K. In our opinion, we have made all adjustments,
      which are of a normal recurring nature, to fairly present our interim period
      results. Due to the seasonal nature of our business, information for interim
      periods may not be indicative of our operating results for the entire
      year.





*Significant
      Accounting Policies*





The
      information
      below provides an update to the significant accounting policies and accounting
      pronouncements issued but not yet adopted discussed in our 2006 Annual Report
      on
      Form 10-K.





*Accounting
      for
      Uncertainty in Income Taxes.*  On January 1, 2007, we adopted the
      Financial Accounting Standards Board (FASB) Interpretation (FIN) No. 48,
*Accounting for Uncertainty in Income Taxes*and its related
      interpretation*.*FIN No. 48 clarifies Statement of Financial
      Accounting Standards (SFAS) No. 109, *Accounting for Income Taxes,*and requires us to evaluate our tax positions for all jurisdictions
      and for
      all years where a statute of limitations has not expired. FIN No. 48
      requires companies to meet a more-likely-than-not threshold (i.e. a greater
      than
      50 percent likelihood that a tax position would be sustained under
      examination) prior to recording a benefit for their tax positions. Additionally,
      for tax positions meeting this more-likely-than-not threshold, the amount of
      benefit is limited to the largest benefit that has a greater than
      50 percent probability of being realized upon effective settlement. To the
      extent these criteria have not been met, we record unrecognized tax benefits
      (liabilities for uncertain tax matters), which include any anticipated interest
      and penalties.  All interest and penalties on unrecognized tax
      benefits are included as a component of income tax expense in our income
      statement.  The adoption of FIN No. 48 did not have a material impact
      on our financial statements.





**2.
      Income
      Taxes**





El
      Paso files
      consolidated U.S. federal and certain state tax returns which include our
      taxable income. In certain states, we file and pay taxes directly to the state
      taxing authorities. With a few exceptions, we and El Paso are no longer subject
      to U.S. federal, state and local income tax examinations by tax authorities
      for
      years before 1999. Additionally, the Internal Revenue Service has completed
      an
      examination of El Paso’s U.S. income tax returns for 2003 and 2004, with a
      tentative settlement at the appellate level for all issues. For our open tax
      years, we have no unrecognized tax benefits (liabilities for uncertain tax
      matters).





**3. Debt
      and Credit Facilities**





*Debt.*In
      April 2007, we issued $355 million of 5.95% senior notes due in April 2017.
      A
      portion of the net proceeds were used to repurchase approximately $301 million
      of our $355 million, 7.625% notes due in August 2010.











4








*Credit
      Facilities.*We are an eligible borrower under El Paso’s $1.75 billion
      credit agreement and are only liable for amounts we directly borrow. As of
      September 30, 2007, we have no borrowings and approximately $0.6 billion of
      borrowing capacity is available to all eligible borrowers under the agreement.
      For a further discussion of this credit agreement, see our 2006 Annual Report
      on
      Form 10-K.





**4. Commitments
      and Contingencies**





*Legal
      Proceedings*





*Sierra
      Pacific
      Resources and Nevada Power Company v. El Paso et al.*  In
      April 2003, Sierra Pacific Resources and Nevada Power Company filed a suit
      in the U.S. District Court for the District of Nevada against us, our affiliates
      and unrelated third parties, alleging that the defendants conspired to
      manipulate prices and supplies of natural gas in the California-Arizona border
      market from 1996 to 2001. The trial court twice dismissed the lawsuit. The
      U.S. Court of Appeals for the Ninth Circuit, however, reversed the
      dismissal and ordered that the case be remanded to the trial court. The
      defendants will file a motion for reconsideration of that ruling. Our costs
      and
      legal exposure related to this lawsuit are not currently
      determinable.





*Baldonado
      et
      al. v. EPNG.*  In August 2000, a main transmission line owned and
      operated by us ruptured at the crossing of the Pecos River near Carlsbad,
      New Mexico. Twelve individuals at the site were fatally injured. In June
      2003, a lawsuit entitled *Baldonado et al. v. EPNG*was filed in state
      court in Eddy County, New Mexico, on behalf of 26 firemen and emergency medical
      service personnel who responded to the fire and who allegedly have suffered
      psychological trauma. This case was dismissed by the trial court, but was
      appealed to the New Mexico Court of Appeals. In June 2006, the New Mexico
      Court of Appeals affirmed the dismissal of the plaintiff’s claims for negligent
      infliction of emotional distress but reversed the dismissal of the claims for
      intentional infliction of emotional distress. In April 2007, the New Mexico
      Supreme Court upheld the appellate court’s dismissal of the claims for negligent
      infliction of emotional distress, but is still reviewing the claims for
      intentional infliction of emotional distress. Our costs and legal exposure
      related to the *Baldonado*lawsuit are currently not determinable;
      however, we believe these matters will be fully covered by
      insurance.





*Gas
      Measurement
      Cases.*  We and a number of our affiliates were named defendants
      in actions that generally allege mismeasurement of natural gas volumes and/or
      heating content resulting in the underpayment of royalties. The first set of
      cases was filed in 1997 by an individual under the False Claims Act, which
      have
      been consolidated for pretrial purposes (In *re: Natural Gas Royalties Qui
      Tam Litigation,* U.S. District Court for the District of Wyoming). These
      complaints allege an industry-wide conspiracy to underreport the heating value
      as well as the volumes of the natural gas produced from federal and Native
      American lands. In October 2006, a U.S District Judge issued an order dismissing
      all claims against all defendants. An appeal has been filed.





Similar
      allegations
      were filed in a second set of actions initiated in 1999 in *Will**Price, et al. v. Gas Pipelines and Their Predecessors, et al.,*in
      the District Court of Stevens County, Kansas. The plaintiffs currently seek
      certification of a class of royalty owners in wells on non-federal and
      non-Native American lands in Kansas, Wyoming and Colorado. Motions for class
      certification have been briefed and argued in the proceedings and the parties
      are awaiting the court’s ruling.  The plaintiffs seek an unspecified
      amount of monetary damages in the form of additional royalty payments (along
      with interest, expenses and punitive damages) and injunctive relief with regard
      to future gas measurement practices. Our costs and legal exposure related to
      this lawsuit and claim are not currently determinable.


5


*Bank
      of
      America.*We are a named defendant, along with Burlington
      Resources, Inc. (Burlington), now a subsidiary of ConocoPhillips, in a class
      action lawsuit styled *Bank of America, et al.**v. El Paso
      Natural Gas and Burlington Resources Oil and Gas Company, L.P.,*filed in
      October 2003 in the District Court of Kiowa County, Oklahoma asserting royalty
      underpayment claims related to specified shallow wells in Oklahoma, Texas and
      New Mexico. Plaintiffs assert that royalties were underpaid starting in the
      1980s when the purchase price of gas was lowered below the Natural Gas Policy
      Act maximum lawful prices.  Plaintiffs assert that royalties were
      further underpaid by Burlington as a result of post-production cost deductions
      taken starting in the late 1990s.  This action was transferred to
      Washita County District Court in 2004.  A tentative settlement reached
      in November 2005 was disapproved by the court in June 2007.  A class
      certification hearing has been scheduled for January 2008.  A
      companion case styled *Bank of America v. El Paso Natural Gas* involving
      similar claims made as to certain wells in Oklahoma was settled in
      2006.





In
      addition to the
      above matters, we and our subsidiaries and affiliates are named defendants
      in
      numerous lawsuits and governmental proceedings that arise in the ordinary course
      of our business.  For each of our outstanding legal matters, we
      evaluate the merits of the case, our exposure to the matter, possible legal
      or
      settlement strategies and the likelihood of an unfavorable outcome. If we
      determine that an unfavorable outcome is probable and can be estimated, we
      establish the necessary accruals. While the outcome of these matters, including
      those discussed above, cannot be predicted with certainty, and there are still
      uncertainties related to the costs we may incur, based upon our evaluation
      and
      experience to date, we had no accruals for our outstanding legal matters at
      September 30, 2007. It is possible, however, that new information or future
      developments could require us to reassess our potential exposure related to
      these matters and adjust our accruals accordingly.





*Environmental
      Matters*





We
      are subject to
      federal, state and local laws and regulations governing environmental quality
      and pollution control. These laws and regulations require us to remove or remedy
      the effect on the environment of the disposal or release of specified substances
      at current and former operating sites. At September 30, 2007, we had accrued
      approximately $27 million for expected remediation costs and associated onsite,
      offsite and groundwater technical studies and for related environmental legal
      costs; however, we estimate that our exposure could be as high as
      $46 million. Our accrual includes $23 million for environmental
      contingencies related to properties we previously owned.





Our
      accrual
      represents a combination of two estimation methodologies. First, where the
      most
      likely outcome can be reasonably estimated, that cost has been accrued. Second,
      where the most likely outcome cannot be estimated, a range of costs is
      established and if no one amount in that range is more likely than any other,
      the lower end of the expected range has been accrued. Our environmental
      remediation projects are in various stages of completion. The liabilities we
      have recorded reflect our current estimates of amounts we will expend to
      remediate these sites. Depending on the stage of completion or assessment,
      however, the ultimate extent of contamination or remediation required may not
      be
      known. As additional assessments occur or remediation efforts continue, we
      may
      incur additional liabilities.





Below
      is a
      reconciliation of our accrued liability from January 1, 2007 to September
      30, 2007 (in millions):





Balance
                at
                January 1, 2007
            
            $
            24Additions/adjustments
                for remediation activities
            
            
            5Payments
                for
                remediation activities
            
            
            (2
            )Balance
                at
                September 30, 2007
            
            $
            27





For
      the remainder
      of 2007, we estimate that our total remediation expenditures will be
      approximately $1 million, which will be expended under government directed
      clean-up programs.





6


*Comprehensive
      Environmental Response, Compensation and Liability Act (CERCLA)
      Matters.*  We have received notice that we could be designated, or
      have been asked for information to determine whether we could be designated,
      as
      a Potentially Responsible Party (PRP) with respect to three active sites under
      the CERCLA or state equivalents. We have sought to resolve our liability as
      a
      PRP at these sites through indemnification by third parties and settlements
      which provide for payment of our allocable share of remediation costs. As of
      September 30, 2007, we have estimated our share of the remediation costs at
      these sites to be between $13 million and $17 million. Because the clean-up
      costs are estimates and are subject to revision as more information becomes
      available about the extent of remediation required, and in some cases we have
      asserted a defense to any liability, our estimates could change. Moreover,
      liability under the federal CERCLA statute is joint and several, meaning that
      we
      could be required to pay in excess of our pro rata share of remediation costs.
      Our understanding of the financial strength of other PRPs has been considered,
      where appropriate, in estimating our liabilities. Accruals for these matters
      are
      included in the environmental reserve discussed above.





*State
      of
      Arizona Chromium Review.*  In April 2004, the State of Arizona’s
      Department of Environmental Quality requested information from us regarding
      the
      historical use of chromium in our operations. By June 2004, we had
      responded fully to the request. We are currently working with the State of
      Arizona on this matter and in 2005, we commenced a study of our facilities
      in
      Arizona to determine if there were any issues concerning the usage of chromium.
      We also studied our facilities on tribal lands in Arizona and New Mexico and
      our
      facility at the El Paso Station in El Paso, Texas. Of the 12 Arizona
      sites that were studied, nine were found not to have chromium contamination
      above regulatory thresholds and no further action at these sites is anticipated.
      Of the three remaining sites, one was already enrolled in Arizona’s Voluntary
      Remediation Program (VRP) and the second site has been entered in the VRP.
      We
      are further investigating the chromium levels at the third site. Additional
      work
      will be conducted at these three sites as directed by the State of
      Arizona.





It
      is possible that
      new information or future developments could require us to reassess our
      potential exposure related to environmental matters. We may incur significant
      costs and liabilities in order to comply with existing environmental laws and
      regulations. It is also possible that other developments, such as increasingly
      strict environmental laws and regulations and claims for damages to property,
      employees, other persons and the environment resulting from our current or
      past
      operations, could result in substantial costs and liabilities in the future.
      As
      this information becomes available, or other relevant developments occur, we
      will adjust our accrual amounts accordingly. While there are still uncertainties
      related to the ultimate costs we may incur, based upon our evaluation and
      experience to date, we believe our reserves are adequate.





*****Rates
      and Regulatory Matters*





*EPNG
      Rate
      Case.*  In August 2007, we received approval of the settlement of
      our rate case from the Federal Energy Regulatory Commission (FERC). The
      settlement provides benefits for both us and our customers for a three year
      period ending December 31, 2008. Under the terms of the settlement, EPNG is
      required to file a new rate case to be effective January 1, 2009. We have
      received approval from the FERC to begin billing the settlement rates on October
      1, 2007 and we will refund amounts, with interest, within 120 days of that
      date.
      Our financial statements reflect the proposed rates and we have estimated and
      reserved a sufficient amount to meet our obligations under this settlement.
      The
      refunds will be funded through repayments by El Paso of amounts we advanced
      under the cash management program.





*Mojave
      Pipeline
      Company (Mojave) Rate Case.*  In February 2007, as required by its
      prior rate case settlement, Mojave filed with the FERC a general rate case
      proposing a 33 percent decrease in its base tariff rates resulting from a
      variety of factors, including a decline in rate base and various changes in
      rate
      design since its last rate case. No new services were proposed. The new base
      rates were effective March 1, 2007 and are subject to further adjustment upon
      the outcome of the rate case proceeding. In October 2007, Mojave filed an offer
      of settlement to resolve all issues in the rate case. The offer has either
      been
      supported or unopposed by all participants, and the Presiding Judge over the
      proceeding has certified the settlement offer to the FERC for its
      review.





While
      the outcome
      of our outstanding rates and regulatory matters cannot be predicted with
      certainty, based on current information, we do not expect the ultimate
      resolution of these matters to have a material adverse effect on our financial
      position, operating results or cash flows. It is possible,
      however, that new information or future developments could require us to
      reassess our potential exposure related to these matters, which could have
      a
      material effect on our results of operations, our financial position and our
      cash flow.






7






*Other
      Matters*





*Navajo
      Nation.*Approximately 900 looped pipeline miles of the
      north mainline of our EPNG pipeline system are located on lands held in trust
      by
      the United States for the benefit of the Navajo Nation. Our rights-of-way on
      lands crossing the Navajo Nation are the subject of a pending renewal
      application filed in 2005 with the Department of the Interior’s Bureau of Indian
      Affairs. An interim agreement with the Navajo Nation expired at the end of
      December 2006. Negotiations on the terms of the long-term agreement are
      continuing. In addition, we continue to preserve other legal, regulatory and
      legislative alternatives, which includes continuing to pursue our application
      with the Department of the Interior for renewal of our rights-of-way on Navajo
      Nation lands. It is uncertain whether our negotiation, or other alternatives,
      will be successful, or if successful, what the ultimate cost will be of
      obtaining the rights-of-way and whether we will be able to recover these costs
      in our rates.





*Tuba****City**Uranium Milling Facility*.  For a period of approximately ten years
      beginning in the mid to late 1950s, Rare Metals Corporation, an
      historical affiliate of us, conducted uranium mining and milling operations
      in the vicinity of Tuba City, Arizona, under a contract with the United States
      Government as part of the Cold War nuclear weapons program. The site of the
      Tuba
      City uranium mill, which is on land within the Navajo Indian Reservation,
      reverted to the Navajo Nation after the mill closed in 1966 and the tailings
      at
      the mill site were encapsulated and a ground water remediation system was
      installed by the U.S. Department of Energy (DOE) under the Federal Uranium
      Mill
      Tailings Radiation Control Act of 1978.  In May 2007, we filed suit against
      the DOE and other federal agencies requesting a judicial determination that
      the
      DOE was fully and legally responsible for any remediation of any waste
      associated with historical uranium production activity at two sites in the
      vicinity of the mill facilities near Tuba City, Arizona.  We are also
      cooperating with the Navajo Nation in joint legislative efforts to achieve
      appropriations for the DOE to assess and remediate the sites. Pending the
      potential remedial response by the United States government, we are undertaking
      certain interim site control measures in coordination with the Navajo
      Nation.





While
      the outcome
      of these matters cannot be predicted with certainty, based on current
      information, we do not expect the ultimate resolution of these matters to have
      a
      material adverse effect on our financial position, operating results or cash
      flows. It is possible that new information or future developments could require
      us to reassess our potential exposure related to these matters. The impact
      of
      these changes may have a material effect on our results of operations, our
      financial position, and our cash flows in the periods these events
      occur.





*Guarantees*





We
      or El Paso are
      or have been involved in various ownership and other contractual arrangements
      that sometimes require us to provide additional financial support that result
      in
      our issuance of financial and performance guarantees. As of September
      30, 2007, we had approximately $11 million of financial and
      performance guarantees not otherwise recorded in our financial
      statements.





**5.
      Retirement Benefits**





In
      December 2006,
      we adopted the recognition provisions of SFAS No. 158, *Employers’ Accounting
      for Defined Benefit Pension and Other Postretirement Plans – an amendment of
      FASB Statements No. 87, 88, 106, and 132(R)*, and began reflecting assets
      and liabilities related to our postretirement benefit plans based on their
      funded or unfunded status and reclassified all actuarial deferrals as a
      component of accumulated other comprehensive income. In March 2007, the FERC
      issued guidance requiring regulated pipeline companies to recognize a regulatory
      asset or liability for the funded status asset or liability that would otherwise
      be recorded in accumulated other comprehensive income under SFAS No. 158, if
      it
      is probable that amounts calculated on the same basis as SFAS No. 106,
*Employers’ Accounting for Postretirement Benefits Other Than Pensions,*would be included in our rates in future periods. Upon adoption of
      this
      FERC guidance, we reclassified approximately $4 million from the beginning
      balance of accumulated other comprehensive loss to other non-current assets
      on
      our balance sheet.





8


**6. Transactions
      with Affiliates**





*Cash
      Management
      Program.*  We participate in El Paso’s cash management
      program which matches short-term cash surpluses and needs of participating
      affiliates, thus minimizing total borrowings from outside sources. We have
      historically advanced cash to El Paso in exchange for an affiliated note
      receivable that is due upon demand. At September 30, 2007 and
      December 31, 2006, we have a note receivable from El Paso of
      approximately $1.3 billion and $1.1 billion. We classified $199 million of
      this
      receivable as current on our balance sheet at September 30, 2007, based on
      amounts we anticipate settling within twelve months. The interest rate on this
      note at September 30, 2007 and December 31, 2006 was 6.4% and
      5.3%.





*Taxes.*  El Paso
      files consolidated U.S. federal and certain state tax returns which include
      our
      taxable income. In certain states, we file and pay taxes directly to the state
      taxing authorities. At September 30, 2007 and December 31, 2006,
      we had income taxes payable of $86 million and $81 million. The majority of
      these balances, as well as our deferred income taxes, will become payable to
      El Paso.





During
      the first
      quarter of 2007, we amended our tax sharing agreement and intercompany tax
      billing policy with El Paso to clarify the billing of taxes and tax related
      items to El Paso’s subsidiaries. We also settled $40 million through our cash
      management program with El Paso for certain tax attributes previously reflected
      as deferred income taxes in our financial statements.





*Other
      Affiliate
      Balances.*  At September 30, 2007 and December 31, 2006, we
      have contractual deposits from our affiliates of $7 million, included in
      other current liabilities on our balance sheets.





*Affiliate
      Revenues and Expenses.* The following table shows revenues and charges from
      our affiliates for the periods ended September 30:




**Quarter
                Ended**
              **September
                30,**
            
            
            **Nine
                Months Ended**
              **September
                30,****2007**
            
            
            **2006**
            
            
            **2007**
            
            
            **2006****(In
                millions)**Revenues
                from
                affiliates
            
            $
            5
            
            
            $
            3
            
            
            $
            14
            
            
            $
            11Operation
                and
                maintenance expenses from affiliates
            
            
            14
            
            
            
            13
            
            
            
            41
            
            
            
            40Reimbursements
                of operating expenses charged to affiliates
            
            
            5
            
            
            
            4
            
            
            
            13
            
            
            
            12


9


**Item 2. Management’sDiscussion
      and Analysis of Financial Condition and****Results of
      Operations**





The
      information
      required by this Item is presented in a reduced disclosure format pursuant
      to
      General Instruction H to Form 10-Q. In addition, this Item updates,
      and should be read in conjunction with the information disclosed in our 2006
      Annual Report on Form 10-K, and our condensed consolidated financial
      statements and the accompanying footnotes presented in Item 1 of this
      Quarterly Report on Form 10-Q.





**Results
      of
      Operations**





Our
      management uses
      earnings before interest expense and income taxes (EBIT) as a key measure to
      assess the operating results and effectiveness of our business. We believe
      EBIT
      is useful to our investors because it allows them to more effectively evaluate
      our operating performance using the same performance measure analyzed internally
      by our management. We define EBIT as net income adjusted for (i) items that
      do not impact our income from continuing operations, (ii) income taxes,
      (iii) interest and debt expense and (iv) affiliated interest income. We
      exclude interest and debt expense from this measure so that our investors may
      evaluate our operating results independently from our financing methods. EBIT
      may not be comparable to measurements used by other companies. Additionally,
      EBIT should be considered in conjunction with net income and other performance
      measures such as operating income or operating cash flows. Below is a
      reconciliation of our EBIT to net income, our throughput volumes, and a
      discussion of our results for the nine months ended September 30:





**2007**
            
            
            **2006****(In
                millions,**
              **except
                volumes)**Operating
                revenues
            
            $
            417
            
            
            $
            450Operating
                expenses
            
            
            (237
            )
            
            
            (236
            )Operating
                income
            
            
            180
            
            
            
            214Other
                income,
                net
            
            
            4
            
            
            
            3EBIT
            
            
            184
            
            
            
            217Interest
                and
                debt expense
            
            
            (74
            )
            
            
            (71
            )Affiliated
                interest income, net
            
            
            51
            
            
            
            40Income
                taxes
            
            
            (61
            )
            
            
            (70
            )Net
                income
            
            $
            100
            
            
            $
            116Throughput
                volumes (BBtu/d)(1)
            
            
            4,192
            
            
            
            4,225


____________




(1) 
Throughput
                volumes exclude
                throughput transported by the Mojave system on behalf of the EPNG
                system.





**Revenue**
            
            
            **Expense**
            
            
            **Other**
            
            
            **EBIT**
              **Impact****Favorable/(Unfavorable)****(In
                millions)**Transportation
                revenues
            
            $
            (21
            )
            
            $
            —
            
            
            $
            —
            
            
            $
            (21
            )Enron
                bankruptcy settlement
            
            
            (12
            )
            
            
            (3
            )
            
            
            —
            
            
            
            (15
            )Depreciation
                and amortization expense
            
            
            —
            
            
            
            8
            
            
            
            —
            
            
            
            8Other
(1)
            
            
            —
            
            
            
            (6
            )
            
            
            1
            
            
            
            (5
            )Total
                impact on EBIT
            
            $
            (33
            )
            
            $
            (1
            )
            
            $
            1
            
            
            $
            (33
            )


____________





(1) 
Consists
      of individually insignificant
      items.





10


*Transportation
      Revenues.*  For the nine months ended September 30, 2007, our
      transportation revenues were lower compared to the same period in 2006,
      primarily as a result of a higher provision recorded in 2007 for EPNG’s rate
      refund and lower reservation revenues for the Mojave system due to a decrease
      in
      tariff rates and the expiration of certain firm contracts, both effective March
      1, 2007. EPNG and Mojave’s rate proceedings are further discussed in Item 1,
      Financial Statements, Note 4.





*Enron
      Bankruptcy Settlement.* During the third quarter of 2006 and the second
      quarter of 2007, we recorded income of approximately $17 million and $2 million,
      net of amounts owed to certain customers as a result of the Enron bankruptcy
      settlement.





*Depreciation
      and Amortization Expense.*During the nine months ended September 30, 2007,
      our depreciation and amortization expense was lower as a result of changes
      to
      depreciation and amortization rates proposed in both our EPNG and Mojave rate
      cases.





**Interest
      and Debt Expense**





Interest
      and debt
      expense for the nine months ended September 30, 2007, was $3 million higher
      than
      the same period in 2006 primarily due to a higher provision recorded in 2007
      for
      EPNG’s rate refund, partially offset by lower average interest rates on
      outstanding debt.





**Affiliated
      Interest Income, Net**





Affiliated
      interest
      income, net for the nine months ended September 30, 2007, was $11 million
      higher than the same period in 2006 due to higher average short-term interest
      rates and higher average advances to El Paso under its cash management
      program. The average short-term interest rate for the nine months increased
      from
      5.8% in 2006 to 6.1% for the same period in 2007. In addition, the average
      advances due from El Paso of $924 million for the nine months of 2006
      increased to $1.1 billion for the same period in 2007.





**Income
      Taxes**





Our
      effective tax
      rate of 38 percent was higher than the statutory rate of 35 percent in both
      periods due to the effect of state income taxes.





**Liquidity
      and Capital Expenditures**





*Liquidity
      Overview.*Our liquidity needs are provided by cash flows from operating
      activities. In addition, we participate in El Paso’s cash management
      program and depending on whether we have short-term cash surpluses or
      requirements, we either advance cash to El Paso or El Paso advances
      cash to us in exchange for an affiliated note receivable or payable that is
      due
      upon demand. We have historically advanced cash to El Paso, which we
      reflect in investing activities in our statement of cash flows. At September
      30, 2007, we have a note receivable from El Paso of approximately $1.3
      billion of which approximately $199 million is classified as current based
      on
      amounts we anticipate settling within twelve months. A portion of the current
      balance will be used to refund obligations under EPNG’s recently approved
      rate case. See Item 1, Financial Statements, Note 6, for a further
      discussion of El Paso’s cash management program.





In
      addition to the
      cash management program, we are eligible to borrow amounts available under
      El Paso’s $1.75 billion credit agreement and are only liable for
      amounts we directly borrow. As of September 30, 2007, we have no borrowings
      and
      approximately $0.6 billion of borrowing capacity is available to all
      eligible borrowers under the agreement. For a further discussion of this credit
      agreement, see our 2006 Annual Report on Form 10-K.





We
      believe that
      cash flows from operating activities combined with amounts available to us
      under
      El Paso’s cash management program and its credit agreement, if necessary,
      will be adequate to meet our capital requirements, our existing operating needs
      and our planned expansion opportunities.





*Debt.*In
      April 2007, we issued $355 million of 5.95% senior notes due in April 2017.
      A
      portion of the net proceeds were used to repurchase approximately $301 million
      of our $355 million, 7.625% notes due in August 2010. The remaining proceeds
      were used for general corporate purposes.


11


In
      March 2007,
      Moody’s Investor Services upgraded our senior unsecured debt rating to an
      investment grade rating of Baa3 and upgraded El Paso’s senior unsecured debt
      rating to Ba3 while maintaining a positive outlook.  Additionally, in
      March 2007, (i) Standard and Poor’s upgraded our senior unsecured debt ratings
      to BB and upgraded El Paso’s senior unsecured debt rating to BB- maintaining a
      positive outlook and (ii) Fitch Ratings initiated coverage on us and assigned
      an
      investment grade rating of BBB- on our senior unsecured debt and a rating of BB+
      on El Paso’s senior unsecured debt.





*Capital
      Expenditures.*Our cash capital expenditures for the nine months ended
      September 30, 2007, and our expected capital expenditures for the remainder
      of
      this year to expand and maintain our businesses are listed below. We expect
      to
      fund these capital expenditures through a combination of internally generated
      funds and repayments by El Paso of amounts we advanced under its cash management
      program.





**Nine
                Months**
              **Ended**
              **September
                30, 2007**
            
            
            **2007**
              **Remaining**
            
            
            **Total****(In
                millions)**Maintenance
            
            $
            74
            
            
            $
            37
            
            
            $
            111Expansion
            
            
            9
            
            
            
            17
            
            
            
            26$
            83
            
            
            $
            54
            
            
            $
            137





**Commitments
      and Contingencies**





See
      Item 1,
      Financial Statements, Note 4, which is incorporated herein by
      reference.





**Item
      3. Quantitativeand Qualitative
      Disclosures About Market Risk**





Omitted
      from this
      report pursuant to the reduced disclosure format permitted by General
      Instruction H to Form 10-Q.





**Item 4T. Controls
      and
      Procedures**





**Evaluation
      of Disclosure Controls and Procedures**





As
      of September 30,
      2007, we carried out an evaluation under the supervision and with the
      participation of our management, including our President and Chief Financial
      Officer, as to the effectiveness, design and operation of our disclosure
      controls and procedures, as defined by the Securities Exchange Act of 1934,
      as
      amended. This evaluation considered the various processes carried out under
      the
      direction of our disclosure committee in an effort to ensure that information
      required to be disclosed in the SEC reports we file or submit under the Exchange
      Act is accurate, complete and timely. Our management, including our President
      and Chief Financial Officer, does not expect that our disclosure controls and
      procedures or our internal controls will prevent and/or detect all errors and
      all fraud. A control system, no matter how well conceived and operated, can
      provide only reasonable, not absolute, assurance that the objectives of the
      control system are met. Further, the design of a control system must reflect
      the
      fact that there are resource constraints, and the benefits of controls must
      be
      considered relative to their costs. Because of the inherent limitations in
      all
      control systems, no evaluation of controls can provide absolute assurance that
      all control issues and instances of fraud, if any, within a company have been
      detected. Based on the results of our evaluation, our President and Chief
      Financial Officer concluded that our disclosure controls and procedures are
      effective at a reasonable level of assurance at September 30, 2007.





**Changes
      in
      Internal Control Over Financial Reporting**





There
      were no
      changes in our internal control over financial reporting that have materially
      affected or are reasonably likely to materially affect our internal control
      over
      financial reporting during the third quarter of 2007.





12


**PART
      II — OTHER INFORMATION**





**Item 1. LegalProceedings**





See
      Part I,
      Item 1, Financial Statements, Note 4, which is incorporated herein by
      reference.





**Item 1A. Risk
      Factors**





**CAUTIONARY
      STATEMENTS FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF**


**THE
      PRIVATE****SECURITIES LITIGATION
      REFORM ACT OF 1995**





This
      report
      contains forward-looking statements within the meaning of the Private Securities
      Litigation Reform Act of 1995. Such forward-looking statements are based on
      assumptions and beliefs that we believe to be reasonable; however, assumed
      facts
      almost always vary from the actual results, and the differences between assumed
      facts and actual results can be material, depending upon the circumstances.
      Where we or our management express an expectation or belief as to future
      results, that expectation or belief is expressed in good faith and based on
      assumptions believed to have a reasonable basis. We cannot assure you, however,
      that the stated expectation or belief will occur or be achieved or accomplished.
      The words “believe,” “expect,” “estimate,” “anticipate” and similar expressions
      will generally identify forward-looking statements. Our forward-looking
      statements, whether written or oral, are expressly qualified by these cautionary
      statements and any other cautionary statements that may accompany those
      statements. In addition, we disclaim any obligation to update any
      forward-looking statements to reflect events or circumstances after the date
      of
      this report.





Important
      factors
      that could cause actual results to differ materially from estimates or
      projections contained in forward-looking statements are described in our 2006
      Annual Report on Form 10-K under Part I, Item 1A, Risk Factors. There have
      been no material changes in these risk factors since that report.





**Item 2. UnregisteredSales
      of Equity
      Securities and Use of Proceeds**





Omitted
      from this
      report pursuant to the reduced disclosure format permitted by General
      Instruction H to Form 10-Q.





**Item 3. DefaultsUpon
      Senior
      Securities**





Omitted
      from this
      report pursuant to the reduced disclosure format permitted by General
      Instruction H to Form 10-Q.





**Item 4. Submission
      of Matters to a Vote
      of Security Holders**





Omitted
      from this
      report pursuant to the reduced disclosure format permitted by General
      Instruction H to Form 10-Q.





**Item 5. OtherInformation**





None.





**Item 6. Exhibits**





The
      Exhibit Index is hereby incorporated herein by reference and sets forth a
      list of those exhibits filed herewith, and includes and identifies contracts
      or
      arrangements required to be filed as exhibits to this Form 10-Q by Item
      601(b)(10)(iii) of Regulation S-K.





13


**SIGNATURES**





Pursuant
      to the
      requirements of the Securities Exchange Act of 1934, El Paso Natural Gas
      Company has duly caused this report to be signed on its behalf by the
      undersigned thereunto duly authorized.








**EL
                PASO NATURAL GAS COMPANY**Date:  November
                6, 2007
            */s/
                JAMES J. CLEARY*James
                J.
                Cleary*President**(Principal
                Executive Officer)*Date:  November
                6, 2007
            */s/
                JOHN R. SULT*John
                R.
                Sult*Senior
                Vice President,**Chief
                Financial Officer and Controller**(Principal
                Accounting and Financial Officer)*













14


**EL PASO
      NATURAL GAS COMPANY**





**EXHIBIT
      INDEX**





Each
      exhibit
      identified below is filed as a part of this report.





**Exhibit**
              **Number**
            **Description**31.A
            Certification
                of Principal Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.B
            Certification
                of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
                Act of 2002.32.A
            Certification
                of Principal Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.B
            Certification
                of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002.