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UNITED STATES
    SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549
       Form 10-Q
  (Mark One)þ

QUARTERLY REPORT PURSUANT TO
    SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF
    1934For the quarterly period ended
    September 30, 2006ORo

TRANSITION REPORT PURSUANT TO
    SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF
    1934For the transition period
    from          
    to   Commission File Number 1-2700
      El Paso Natural Gas
    Company
   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
  þ o
  non-accelerated Rule 12b-2
 Large
    accelerated filer  o
    Accelerated
    filer  o
    Non-accelerated
    filer  þ  Rule 12b-2 o þ
      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.




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##### 



EL PASO
    NATURAL GAS COMPANY
  TABLE OF
    CONTENTS
  
  Caption

PagePART 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  4.

Controls and
    Procedures


13PART II  Other
    InformationItem  1.

Legal
    Proceedings


14Item  1A.

Risk
    Factors


14Cautionary
    Statements for Purposes of the Safe Harbor
    Provisions of the Private Securities Litigation Reform Act of
    1995Item  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


14Item  6.

Exhibits


15Signatures


16Certification of PEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of PEO Pursuant to Section 906Certification of CFO 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.    /d = per day

BBtu = billion British thermal
    units     and/or
 i




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  EL PASO
    NATURAL GAS COMPANY
  CONDENSED
    CONSOLIDATED STATEMENTS OF INCOME
 (In millions)
 (Unaudited)
  Quarters Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005Operating revenues

$
155


$
125


$
450


$
371Operating expensesOperation and maintenance


44



79



141



168Depreciation, depletion and
    amortization


23



19



71



56Taxes, other than income taxes


8



8



24



2475



106



236



248Operating income


80



19



214



123Other income, net






2



3



6Interest and debt expense


(24
)


(23
)


(71
)


(69
)Affiliated interest income, net


15



9



40



22Income before income taxes


71



7



186



82Income taxes


26



2



70



31Net income

$
45


$
5


$
116


$
51    1




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EL PASO
    NATURAL GAS COMPANY
  CONDENSED
    CONSOLIDATED BALANCE SHEETS
 (In millions, except share amounts)
 (Unaudited)
  September 30,


December 31,2006


2005ASSETSCurrent assetsCash and cash equivalents

$



$
Accounts and notes receivableCustomer, net of allowance of $5
    in 2006 and $18 in 2005


112



114Affiliates


4



4Materials and supplies


40



41Deferred income taxes


23



14Restricted cash


3



17Other


5



3Total current assets


187



193Property, plant and equipment, at
    cost


3,521



3,417Less accumulated depreciation,
    depletion and amortization


1,250



1,193Total property, plant and
    equipment, net


2,271



2,224Other assetsNotes receivable from affiliate


1,010



872Other


86



891,096



961Total assets

$
3,554


$
3,378LIABILITIES AND STOCKHOLDERS
    EQUITYCurrent liabilitiesAccounts payableTrade

$
47


$
84Affiliates


13



6Other


4



17Taxes payable


95



27Accrued interest


23



25Accrued liabilities


61



50Other


16



12Total current liabilities


259



221Long-term debt


1,111



1,110Other liabilitiesDeferred income taxes


394



364Other


96



105490



469Commitments and contingenciesStockholders equityCommon stock, par value
    $1 per share; 1,000 shares authorized, issued and
    outstanding






Additional paid-in capital


1,268



1,268Retained earnings


426



310Total stockholders equity


1,694



1,578Total liabilities and
    stockholders equity

$
3,554


$
3,378    2




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EL PASO
    NATURAL GAS COMPANY
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In millions)
 (Unaudited)
  Nine Months EndedSeptember 30,2006


2005Cash flows from operating
    activitiesNet income

$
116


$
51Adjustments to reconcile net
    income to net cash from operating activitiesDepreciation, depletion and
    amortization


71



56Deferred income taxes


21



7Other non-cash income items


(3
)


(2
)Asset and liabilities changes


21



58Net cash provided by operating
    activities


226



170Cash flows from investing
    activitiesAdditions to property, plant and
    equipment


(102
)


(80
)Net change in notes receivable
    from affiliate


(138
)


(93
)Net change in restricted cash


14



Other






2Net cash used in investing
    activities


(226
)


(171
)Net change in cash and cash
    equivalents






(1
)Cash and cash equivalentsBeginning of period






1End of period

$



$
    3




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EL PASO
    NATURAL GAS COMPANY
  NOTES TO
    CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (Unaudited)
  1.
    Basis of
    Presentation and Significant Accounting Policies  Basis of
    Presentation
  Form 10-Q Form 10-Q Form 10-K, Form 10-K.
  Significant
    Accounting Policies
  Form 10-K.
  Accounting for Pipeline Integrity Costs.
  New
    Accounting Pronouncements Issued But Not Yet Adopted
  Accounting for Uncertainty in Income Taxes. Accounting for
    Uncertainty in Income Taxes. Accounting for Income Taxes,
  Fair Value Measurements. Fair Value
    Measurements
  Accounting for Pension and Other Postretirement
    Benefits. Employers Accounting for
    Defined Benefit Pension and Other Postretirement
    Plans  An Amendment of FASB Statements No. 87,
    88, 106, and 132(R).
 4




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Evaluation of Prior Period Misstatements in Current Financial
    Statements. Considering the
    Effects of Prior Year Misstatements When Quantifying
    Misstatements in Current Year Financial Statements.
  2.
    Credit
    Facilities    3.
    Commitments
    and Contingencies  Legal
    Proceedings
  Sierra Pacific Resources and Nevada Power Company v.
    El Paso et al.
  Phelps Dodge v. EPNG. 2000-2001,
  Carlsbad.
 5




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In addition, a lawsuit entitled Baldonado et al. v.
    EPNG Baldonado
  Gas Measurement Cases. and/or re: Natural Gas Royalties Qui Tam Litigation,
  Will Price, et al. v. Gas Pipelines and Their
    Predecessors, et al.,
  Bank of America. Bank of America, et al. v.
    El Paso Natural Gas Company, et al., Deane
    W. Moore, et al. v. Burlington Northern, Inc.,
    et al., Bank of America,
    et al. v. El Paso Natural Gas and Burlington
    Resources Oil and Gas Company, L.P., El Paso Natural Gas Company v. Burlington
    Resources, Inc. and Burlington Resources Oil and Gas Company,
    L.P.
     6




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Environmental
    Matters
      Balance at January 1, 2006

$
29Additions/adjustments for
    remediation activities


3Payments for remediation activities


(4
)Balance at September 30, 2006

$
28   clean-up
  CERCLA Matters. clean-up
  State of Arizona Chromium Review.
   7




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Rates and
    Regulatory Matters
  Rate Case.
  Rate Settlement.
    Other
    Matters
  Navajo Nation. rights-of-way rights-of-way rights-of-way rights-of-way rights-of-way
   8




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Enron Bankruptcy.
  Guarantees
  Form 10-K
  4.
    Transactions
    with Affiliates  Cash Management Program. short-term
  Taxes.
  Other Affiliate Balances.
  Affiliate Revenues and Expenses. long-term
    Quarters Ended


Nine Months EndedSeptember 30,


September 30,2006


2005


2006


2005(In millions)Revenues from affiliates

$
3


$
5


$
11


$
13Operation and maintenance expenses
    from affiliates


13



19



40



53Reimbursements of operating
    expenses charged to affiliates


4



4



12



12  9




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Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q. Form 10-K, Form 10-Q.
  Results
    of Operations
    2006


2005(In millions, except volumes)Operating revenues

$
450


$
371Operating expenses


(236
)


(248
)Operating income


214



123Other income, net


3



6EBIT


217



129Interest and debt expense


(71
)


(69
)Affiliated interest income, net


40



22Income taxes


(70
)


(31
)Net income

$
116


$
51Throughput volumes
    (BBtu/d)(1)


4,225



4,160     (1)
    
    Throughput volumes exclude
    throughput transported by Mojave Pipeline Company on behalf of
    EPNG.    EBITRevenue


Expense


Other


ImpactFavorable/(Unfavorable)(In millions)EPNG reservation and other
    services revenues

$
65


$



$



$
65Lower litigation
    accruals(1)






28







28Enron bankruptcy settlement


14



3







17Higher depreciation expense






(15
)






(15
)Higher
    right-of-way
    expense






(11
)






(11
)Other(2)






7



(3
)


4Total impact on EBIT

$
79


$
12


$
(3
)

$
88     (1)
    
    For a discussion of our legal
    matters, see Item 1, Financial Statements, Note 3.(2)
    
    Consists of individually
    insignificant items. 10




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EPNG Reservation and Other Services
    Revenues.
  Enron Bankruptcy Settlement.
  Higher Depreciation Expense.
  Higher
    Right-Of-Way
    Expense. right-of-way
  Recontracting.
  Affiliated
    Interest Income, Net
    Income
    Taxes
 Nine Months EndedSeptember 30,2006


2005(In millions,except for rates)Income taxes

$
70


$
31Effective tax rate


38
%


38
%     Liquidity
    and Capital Expenditures
  Liquidity
    Overview
   11




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Capital
    Expenditures
    Commitments
    and Contingencies
   12




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Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk  Form 10-Q.
  Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
      Changes
    in Internal Control Over Financial Reporting
   13




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PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Form 10-K, Form 10-Q
  Item 1A.
    Risk
    Factors CAUTIONARY
    STATEMENTS FOR PURPOSES OF THE SAFE HARBOR
    PROVISIONS OF THE
    PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995    Form 10-K.
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds  Form 10-Q.
  Item 3.
    Defaults
    Upon Senior Securities  Form 10-Q.
  Item 4.
    Submission
    of Matters to a Vote of Security Holders  Form 10-Q.
  Item 5.
    Other
    Information   14




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Item 6.
    Exhibits    ExhibitNumber

Description10
.A

Amended and Restated Credit
    Agreement dated as of July 31, 2006, among El Paso
    Corporation, Colorado Interstate Gas Company, El Paso
    Natural Gas Company, Tennessee Gas Pipeline Company, the several
    banks and other financial institutions from time to time parties
    thereto and JPMorgan Chase Bank, N.A., as administrative agent
    and as collateral agent (Exhibit 10.A to our Current Report
    on
    Form 8-K,
    filed with the SEC on August 2, 2006).10
.B

Amended and Restated Security
    Agreement dated as of July 31, 2006, among El Paso
    Corporation, Colorado Interstate Gas Company, El Paso
    Natural Gas Company, Tennessee Gas Pipeline Company, the
    Subsidiary Guarantors and certain other credit parties thereto
    and JPMorgan Chase Bank, N.A., not in its individual capacity,
    but solely as collateral agent for the Secured Parties and as
    the depository bank (Exhibit 10.B to our Current Report on
    Form 8-K,
    filed with the SEC on August 2, 2006).*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.   Undertaking
  Regulation S-K,
 15




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SIGNATURES    EL PASO NATURAL GAS COMPANY
    
   President
    (Principal Executive Officer)
   
   Senior Vice President,
  Chief Financial Officer and Controller
    (Principal Accounting and Financial Officer)
 16




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EL PASO
    NATURAL GAS COMPANY
  EXHIBIT INDEX
    ExhibitNumber

Description10
.A

Amended and Restated Credit
    Agreement dated as of July 31, 2006, among El Paso
    Corporation, Colorado Interstate Gas Company, El Paso Natural
    Gas Company, Tennessee Gas Pipeline Company, the several banks
    and other financial institutions from time to time parties
    thereto and JPMorgan Chase Bank, N.A., as administrative agent
    and as collateral agent (Exhibit 10.A to our Current Report
    on
    Form 8-K,
    filed with the SEC on August 2, 2006).10
.B

Amended and Restated Security
    Agreement dated as of July 31, 2006, among El Paso
    Corporation, Colorado Interstate Gas Company, El Paso Natural
    Gas Company, Tennessee Gas Pipeline Company, the Subsidiary
    Guarantors and certain other credit parties thereto and JPMorgan
    Chase Bank, N.A., not in its individual capacity, but solely as
    collateral agent for the Secured Parties and as the depository
    bank (Exhibit 10.B to our Current Report on
    Form 8-K,
    filed with the SEC on August 2, 2006).*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.