##### Table of Contents



UNITED
    STATES
 SECURITIES AND EXCHANGE
    COMMISSION
 Washington, 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
    June 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(State or Other
    Jurisdiction
    of Incorporation or Organization)

74-0608280(I.R.S. Employer
    Identification No.)El Paso Building
    1001 Louisiana Street
    Houston, Texas(Address of Principal
    Executive Offices)

77002(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  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


15Item  6.

Exhibits


15Signatures


16Certification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO 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      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)
   Quarter Ended


Six Months EndedJune 30,


June 30,2006


2005


2006


2005Operating revenues

$
142


$
123


$
295


$
246Operating expensesOperation and maintenance


48



40



97



89Depreciation, depletion and
    amortization


24



18



48



37Taxes, other than income taxes


8



8



16



1680



66



161



142Operating income


62



57



134



104Other income, net


2



2



3



4Interest and debt expense


(24
)


(23
)


(47
)


(46
)Affiliated interest income, net


14



8



25



13Income before income taxes


54



44



115



75Income taxes


21



17



44



29Net income

$
33


$
27


$
71


$
46    1




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


December 31,2006


2005ASSETSCurrent assetsCash and cash equivalents

$



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


76



114Affiliates


3



4Materials and supplies


41



41Deferred income taxes


32



14Restricted cash


6



17Other


3



3Total current assets


161



193Property, plant and equipment, at
    cost


3,510



3,417Less accumulated depreciation,
    depletion and amortization


1,231



1,193Total property, plant and
    equipment, net


2,279



2,224Other assetsNotes receivable from affiliate


964



872Other


87



891,051



961Total assets

$
3,491


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

$
39


$
84Affiliates


13



6Other


5



17Taxes payable


68



27Accrued interest


25



25Accrued liabilities


71



50Other


13



12Total current liabilities


234



221Long-term debt


1,111



1,110Other liabilitiesDeferred income taxes


397



364Other


100



105497



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


381



310Total stockholders equity


1,649



1,578Total liabilities and
    stockholders equity

$
3,491


$
3,378    2




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


2005Cash flows from operating
    activitiesNet income

$
71


$
46Adjustments to reconcile net
    income to net cash from operating activitiesDepreciation, depletion and
    amortization


48



37Deferred income taxes


14



19Other non-cash income items


1



(2
)Asset and liabilities changes


30



10Net cash provided by operating
    activities


164



110Cash flows from investing
    activitiesAdditions to property, plant and
    equipment


(83
)


(51
)Net change in notes receivable
    from affiliate


(92
)


(62
)Net change in restricted cash


11



Net proceeds from the sale of
    assets






2Net cash used in investing
    activities


(164
)


(111
)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 Pronouncement Issued But Not Yet Adopted
  Accounting for Uncertainty in Income Taxes. Accounting
    for Uncertainty in Income Taxes. Accounting for Income Taxes, more-likely-than-not more-likely-than-not
  2. Credit
    Facilities
   4




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3. Commitments
    and Contingencies
  Legal
    Proceedings
  Sierra Pacific Resources and Nevada Power Company v.
    El Paso et al.
  Phelps Dodge vs. EPNG. anti-trust
  Carlsbad.
  Baldonado et al. v. EPNG Baldonado
  Gas Measurement Cases. re: Natural Gas Royalties Qui Tam Litigation, Will Price, et al. v. Gas Pipelines and Their Predecessors,
    et al.,
 5




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##### Table of Contents



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.
      Environmental
    Matters
      Balance at January 1, 2006

$
29Additions/adjustments for
    remediation activities


3Payments for remediation activities


(3
)Balance at June 30, 2006

$
29    6




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CERCLA Matters. clean-up




State of Arizona Chromium Review.








Rates
    and Regulatory Matters




Rate Case.




Rate Settlement. inflation-escalated


7



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##### Table of Contents



California Public Utilities Commission (CPUC)s OIR
    Proceeding.








Other
    Matter




Navajo Nation.








Guarantees




Form 10-K




4. Transactions
    with Affiliates




Cash Management Program. short-term


8



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##### Table of Contents







Taxes.




Other Affiliate Balances.




Affiliate Revenues and Expenses.








|                                                               |  |               |    |  |                  |   |    |      |  |   |      |  |  |   |    | 
|-------------------------------------------------------------- |  | ------------- | -- |  | ---------------- | - | -- | ---- |  | - | ---- |  |  | - | -- | 
|                                                               |  | Quarter Ended |    |  | Six Months Ended |  
|                                                               |  | June 30,      |    |  | June 30,         |  
|                                                               |  | 2006          |    |  | 2005             |   |    | 2006 |  |   | 2005 | 
|                                                               |  | (In millions) |   
|                                                              
|                                                               |  |               |    |  |                  |   |    |      |  |   |      |  |  |   |    | 
|Revenues from affiliates                                       |  | $             | 4  |  |                  | $ | 4  |      |  | $ | 8    |  |  | $ | 8  | 
|Operation and maintenance expenses
    from affiliates         |  |               | 13 |  |                  |   | 17 |      |  |   | 27   |  |  |   | 34 | 
|Reimbursements of operating
    expenses charged to affiliates |  |               | 4  |  |                  |   | 4  |      |  |   | 8    |  |  |   | 8  | 



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 volume amounts)Operating revenues

$
295


$
246Operating expenses


(161
)


(142
)Operating income


134



104Other income, net


3



4EBIT


137



108Interest and debt expense


(47
)


(46
)Affiliated interest income, net


25



13Income taxes


(44
)


(29
)Net income

$
71


$
46Throughput volumes
    (BBtu/d)(1)


4,093



4,071    (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

$
49


$



$



$
49Operational gas and revaluations






2







2Higher depreciation expense






(11
)






(11
)Higher right-of-way expense






(7
)






(7
)Other(1)






(3
)


(1
)


(4
)Total impact on EBIT

$
49


$
(19
)

$
(1
)

$
29    (1)
    Consists of individually insignificant items. 10




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EPNG Reservation and Other Services
    Revenues.
  Operational Gas and Revaluations.
  Higher Depreciation Expense.
  Higher Right-Of-Way Expense.
  Affiliated
    Interest Income, Net
    Income
    Taxes
  Six Months Ended June 30,2006


2005(In millions, except for rates)Income taxes

$
44


$
29Effective tax rate


38
%


39
%     Liquidity
    and Capital Expenditures
  Liquidity
    Overview
  non-current
   11




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three-year five-year
    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,
  Arizona Pipe-Coating.
  Tucson Waste Management.
 Item 1A. Risk
    Factors CAUTIONARY
    STATEMENTS FOR PURPOSES OF THE SAFE HARBOR
    PROVISIONS OF THE PRIVATE SECURITIES LITIGATION
    REFORM ACT OF 1995  forward-looking forward-looking forward-looking forward-looking forward-looking
   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.
 14




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##### Table of Contents



Item 5. Other
    Information   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 Chief 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 Chief 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
    JAMES
    J. CLEARY
   Chairman of the Board and President
    (Principal Executive Officer)
   JOHN
    R. SULT
   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 Chief 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 Chief 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.