##### 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 1-2745
    Southern Natural Gas
    Company
   Delaware

63-0196650(State or Other Jurisdiction
    of Incorporation or Organization)

(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  Rule 12b-2 o þ
      SOUTHERN 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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##### 



SOUTHERN
    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


8Item  3.

Quantitative and
    Qualitative Disclosures About Market Risk


*Item  4.

Controls and
    Procedures


11PART II 
    Other InformationItem  1.

Legal
    Proceedings


12Item  1A.

Risk
    Factors


12Cautionary
    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


12Item  6.

Exhibits


13Signatures


14Certification 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

LNG

= liquefied natural gasBBtu

= billion British thermal
    units

MMcf

= million cubic feet      i




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##### Table of Contents



PART I 
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  SOUTHERN
    NATURAL GAS COMPANY
  CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND
 COMPREHENSIVE INCOME
 (In millions)
 (Unaudited)
  Quarter Ended


Six Months EndedJune 30,


June 30,2006


2005


2006


2005Operating revenues

$
127


$
112


$
262


$
237Operating expensesOperation and maintenance


47



36



94



76Depreciation, depletion and
    amortization


14



13



27



26Gain on sale of long-lived assets






(2
)






(9
)Taxes, other than income taxes


6



7



14



1467



54



135



107Operating income


60



58



127



130Earnings from unconsolidated
    affiliates


23



22



36



40Other income, net






3



3



10Interest and debt expense


(24
)


(24
)


(47
)


(47
)Affiliated interest income


5



3



9



4Income before income taxes


64



62



128



137Income taxes


20



19



40



42Net income


44



43



88



95Other comprehensive income


1







1



1Comprehensive income

$
45


$
43


$
89


$
96    1




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SOUTHERN
    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 $1
    in 2006 and 2005


53



58Affiliates


12



Other


6



5Materials and supplies


12



12Deferred income taxes


8



9Other


10



17Total current assets


101



101Property, plant and equipment, at
    cost


3,469



3,369Less accumulated depreciation,
    depletion and amortization


1,394



1,368Total property, plant and
    equipment, net


2,075



2,001Other assetsInvestments in unconsolidated
    affiliates


702



697Notes receivable from affiliate


345



339Other


57



521,104



1,088Total assets

$
3,280


$
3,190LIABILITIES AND STOCKHOLDERS
    EQUITYCurrent liabilitiesAccounts payableTrade

$
23


$
40Affiliates


13



17Other


12



12Taxes payable


90



67Accrued interest


30



30Other


9



11Total current liabilities


177



177Long-term debt


1,196



1,195Other liabilitiesDeferred income taxes


327



320Other


37



44364



364Commitments and contingenciesStockholders equityCommon stock, par value
    $1 per share; 1,000 shares authorized, issued and
    outstanding






Additional paid-in capital


340



340Retained earnings


1,208



1,120Accumulated other comprehensive
    loss


(5
)


(6
)Total stockholders equity


1,543



1,454Total liabilities and
    stockholders equity

$
3,280


$
3,190    2




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SOUTHERN
    NATURAL GAS COMPANY

    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In millions)
    (Unaudited)
  Six Months EndedJune 30,2006


2005Cash flows from operating
    activitiesNet income

$
88


$
95Adjustments to reconcile net
    income to net cash from operating activitiesDepreciation, depletion and
    amortization


27



26Deferred income taxes


8



16Gain on sale of long-lived assets






(9
)Earnings from unconsolidated
    affiliates, adjusted for cash distributions


(5
)


(10
)Other non-cash income items


(1
)


(3
)Asset and liability changes


(5
)


34Net cash provided by operating
    activities


112



149Cash flows from investing
    activitiesAdditions to property, plant and
    equipment


(104
)


(95
)Proceeds from the sale of assets






32Net change in notes receivable
    from affiliate


(14
)


(88
)Net change in restricted cash


5



3Other


1



(1
)Net cash used in investing
    activities


(112
)


(149
)Net change in cash and cash
    equivalents






Cash and cash equivalentsBeginning of period






End of period

$



$
    3




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SOUTHERN
    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.




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,




2. Credit
    Facilities






4



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3. Commitments
    and Contingencies
  Legal
    Proceedings
  Gas Measurement Cases. re: Natural Gas Royalties Qui Tam Litigation,
  Royalty Claim.
      Environmental
    Matters
     5




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Other
    Matter




Duke Litigation.




4. Investments
    in Unconsolidated Affiliates and Transactions with
    Affiliates




Investments
    in Unconsolidated Affiliates








|                                                            |  |               |    |  |                  |   |    |      |  |   |      |  |  |   |     | 
|----------------------------------------------------------- |  | ------------- | -- |  | ---------------- | - | -- | ---- |  | - | ---- |  |  | - | --- | 
|                                                            |  | Quarter Ended |    |  | Six Months Ended |  
|                                                            |  | June 30,      |    |  | June 30,         |  
|                                                            |  | 2006          |    |  | 2005             |   |    | 2006 |  |   | 2005 | 
|                                                            |  | (In millions) |   
|                                                           
|Operating results data:                                     |  |               |    |  |                  |   |    |      |  |   |      |  |  |   |     | 
|Operating revenues                                          |  | $             | 70 |  |                  | $ | 66 |      |  | $ | 128  |  |  | $ | 124 | 
|Operating expenses                                          |  |               | 28 |  |                  |   | 27 |      |  |   | 57   |  |  |   | 52  | 
|Income from continuing operations
    and net
    income(1) |  |               | 22 |  |                  |   | 21 |      |  |   | 36   |  |  |   | 37  | 







|    |                                                                                                                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | The difference between our proportionate share of our equity
    investments net income and our earnings from
    unconsolidated affiliates reflected in our income statement is
    due primarily to the excess purchase price amortization related
    to Citrus and differences between the estimated and actual
    equity earnings from our investments.







|                                                     |  |               |    |  |                  |   |    |      |  |   |      |  |  |   |     | 
|---------------------------------------------------- |  | ------------- | -- |  | ---------------- | - | -- | ---- |  | - | ---- |  |  | - | --- | 
|                                                     |  | Quarter Ended |    |  | Six Months Ended |  
|                                                     |  | June 30,      |    |  | June 30,         |  
|                                                     |  | 2006          |    |  | 2005             |   |    | 2006 |  |   | 2005 | 
|                                                     |  | (In millions) |   
|                                                    
|Operating results data:                              |  |               |    |  |                  |   |    |      |  |   |      |  |  |   |     | 
|Operating revenues                                   |  | $             | 66 |  |                  | $ | 62 |      |  | $ | 119  |  |  | $ | 115 | 
|Operating expenses                                   |  |               | 26 |  |                  |   | 26 |      |  |   | 53   |  |  |   | 48  | 
|Income from continuing operations
    and net income |  |               | 18 |  |                  |   | 17 |      |  |   | 29   |  |  |   | 30  | 







6



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##### Table of Contents



Transactions
    with Affiliates




Cash Management Program. short-term




Taxes.




Other Affiliate Balances.




|                                    |  |               |    |              |  |   |    | 
|----------------------------------- |  | ------------- | -- | ------------ |  | - | -- | 
|                                    |  | June 30,      |    | December 31,
|                                    |  | 2006          |    | 2005        
|                                    |  | (In millions)
|Accounts and notes receivable-other |  | $             | 5  |              |  | $ | 4  | 
|Non-current note receivable         |  |               | 68 |              |  |   | 67 | 
|Other current liabilities           |  |               | 1  |              |  |   | 1  | 





Affiliate Revenues and Expenses.








|                                                       |  |               |    |  |                  |   |    |      |  |   |      |  |  |   |    | 
|------------------------------------------------------ |  | ------------- | -- |  | ---------------- | - | -- | ---- |  | - | ---- |  |  | - | -- | 
|                                                       |  | Quarter Ended |    |  | Six Months Ended |  
|                                                       |  | June 30,      |    |  | June 30,         |  
|                                                       |  | 2006          |    |  | 2005             |   |    | 2006 |  |   | 2005 | 
|                                                       |  | (In millions) |   
|                                                      
|Revenues from affiliates                               |  | $             | 3  |  |                  | $ | 1  |      |  | $ | 5    |  |  | $ | 3  | 
|Operation and maintenance expenses
    from affiliates |  |               | 12 |  |                  |   | 13 |      |  |   | 25   |  |  |   | 25 | 







7



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##### Table of Contents



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

$
262


$
237Operating expenses


(135
)


(107
)Operating income


127



130Earnings from unconsolidated
    affiliates


36



40Other income, net


3



10EBIT


166



180Interest and debt expense


(47
)


(47
)Affiliated interest income


9



4Income taxes


(40
)


(42
)Net income

$
88


$
95Throughput volumes
    (BBtu/d)(1)


3,105



2,944     (1)
    Throughput volumes include volumes associated with our
    proportionate share of our 50 percent equity interest in
    Citrus and billable transportation throughput volumes for
    storage injection. 8




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##### Table of Contents









|                                                           |  |                         |    |   |         |   |     |       |  |   |        |   |  |   |     |  
|---------------------------------------------------------- |  | ----------------------- | -- | - | ------- | - | --- | ----- |  | - | ------ | - |  | - | --- | -
|                                                           |  |                         |    |   |         |   |     |       |  |   | EBIT   |  
|                                                           |  | Revenue                 |    |   | Expense |   |     | Other |  |   | Impact |  
|                                                           |  | Favorable/(Unfavorable) |   
|                                                           |  | (In millions)           |   
|                                                          
|Higher services revenues                                   |  | $                       | 13 |   |         | $ |    |       |  | $ |       |   |  | $ | 13  |  
|Elba Island expansion                                      |  |                         | 12 |   |         |   | (2  | )     |  |   | (5     | ) |  |   | 5   |  
|Gas not used in operations and
    other natural gas sales |  |                         | (1 | ) |         |   | (8  | )     |  |   |       |   |  |   | (9  | )
|Hurricane Katrina                                          |  |                         |   |   |         |   | (9  | )     |  |   |       |   |  |   | (9  | )
|Gain on the sale of assets in 2005                         |  |                         |   |   |         |   | (9  | )     |  |   |       |   |  |   | (9  | )
|Earnings from our equity
    investment in Citrus          |  |                         |   |   |         |   |    |       |  |   | (4     | ) |  |   | (4  | )
|Other(1)                                                   |  |                         | 1  |   |         |   |    |       |  |   | (2     | ) |  |   | (1  | )
|                                                           |  |                         |    |   |         |   |     |       |  |   |        |   |  |   |     |  
|Total impact on EBIT                                       |  | $                       | 25 |   |         | $ | (28 | )     |  | $ | (11    | ) |  | $ | (14 | )
|                                                           |  |                         |    |   |         |   |     |       |  |   |        |   |  |   |     |  









|    |                                              
|--- | ---------------------------------------------
|(1) | Consists of individually insignificant items.







Higher Services Revenues.




Elba Island Expansion.




Gas Not Used in Operations and Other Natural Gas
    Sales. Form 10-K.




Hurricane Katrina.




Gain on the Sale of Assets.




Citrus.




Cypress Expansion.


9



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##### Table of Contents



Affiliated
    Interest Income








Income
    Taxes


|                   |  |                   |    |   |      |   |    |  
|------------------ |  | ----------------- | -- | - | ---- | - | -- | -
|                   |  | Six Months Ended  |   
|                   |  | June, 30,         |   
|                   |  | 2006              |    |   | 2005 |  
|                   |  | (In millions,     |   
|                   |  | except for rates) |   
|                  
|Income taxes       |  | $                 | 40 |   |      | $ | 42 |  
|Effective tax rate |  |                   | 31 | % |      |   | 31 | %









Liquidity
    and Capital Expenditures




Liquidity
    Overview












Capital
    Expenditures










10



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##### Table of Contents







Commitments
    and Contingencies








|        |                                                               
|------- | --------------------------------------------------------------
|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






11



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##### Table of Contents



PART II 
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings    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
  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   12




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##### Table of Contents



Item 6.
    Exhibits    ExhibitNumber

Description*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,
 13




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##### Table of Contents



SIGNATURES    SOUTHERN NATURAL GAS COMPANY
   
   Chairman of the Board and President
 (Principal Executive Officer)
    
   Senior Vice President,
 Chief Financial Officer and Controller
 (Principal Accounting and Financial Officer)
 14




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SOUTHERN
    NATURAL GAS COMPANY
    EXHIBIT INDEX
   ExhibitNumber

Description*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.