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 1934For
      the quarterly period ended September 30, 2009OR£
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHE
      SECURITIES EXCHANGE ACT OF 1934For the transition period
      from                                                      to





Commission
File Number 1-4101


________________




Tennessee
Gas Pipeline Company


(Exact Name of
Registrant as Specified in Its Charter)





Delaware
            74-1056569(State or
      Other Jurisdictionof Incorporation
      or Organization)
            (I.R.S.
      EmployerIdentification No.)El Paso
      Building1001
      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 þ No o





Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files).   Yes  ̈ No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large accelerated filer o
            Accelerated
      filer o
            Non-accelerated filer þ
            Smaller
      reporting company o (Do not check if a smaller reporting
company)





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





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 $5 per share. Shares outstanding on November 6, 2009:
208





TENNESSEE GAS PIPELINE 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.








TENNESSEE
GAS PIPELINE 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
            9Item  3.
            Quantitative and Qualitative Disclosures About Market
      Risk
            *Item  4T.
            Controls and Procedures
            14PART II — Other InformationItem  1.
            Legal Proceedings
            15Item  1A.
            Risk Factors
            15Item  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
            16Signatures
            17


____________
 
 * 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
              
              Tonne =
      metric tonBBtu = 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”, or “ours”, we are describing Tennessee Gas Pipeline
      Company and/or our subsidiaries.





i
 Table of Contents





PART I — FINANCIAL INFORMATION





Item 1.  Financial Statements





TENNESSEE
GAS PIPELINE COMPANY





CONDENSED
CONSOLIDATED STATEMENTS OF INCOME


(In
millions)


(Unaudited)





Quarter
      Ended
              September 30,
            
            
            Nine
      Months Ended
              September 30,2009
            
            
            2008
            
            
            2009
            
            
            2008Operating
      revenues
            
            $
            221
            
            
            $
            209
            
            
            $
            704
            
            
            $
            671Operating
      expensesOperation
      and maintenance
            
            
            95
            
            
            
            106
            
            
            
            272
            
            
            
            278Depreciation
      and amortization
            
            
            46
            
            
            
            46
            
            
            
            139
            
            
            
            136Loss
      on long-lived assets
            
            
            2
            
            
            
            —
            
            
            
            2
            
            
            
            24Taxes,
      other than income taxes
            
            
            14
            
            
            
            8
            
            
            
            43
            
            
            
            40157
            
            
            
            160
            
            
            
            456
            
            
            
            478Operating
      income
            
            
            64
            
            
            
            49
            
            
            
            248
            
            
            
            193Earnings from
      unconsolidated affiliate
            
            
            3
            
            
            
            2
            
            
            
            8
            
            
            
            10Other income,
      net
            
            
            1
            
            
            
            2
            
            
            
            8
            
            
            
            8Interest and
      debt expense
            
            
            (40
            )
            
            
            (33
            )
            
            
            (117
            )
            
            
            (101
            )Affiliated
      interest income, net
            
            
            4
            
            
            
            7
            
            
            
            12
            
            
            
            24Income before
      income taxes
            
            
            32
            
            
            
            27
            
            
            
            159
            
            
            
            134Income
      taxes
            
            
            12
            
            
            
            11
            
            
            
            61
            
            
            
            53Net
      income
            
            $
            20
            
            
            $
            16
            
            
            $
            98
            
            
            $
            81





See accompanying
notes.


























1
 Table of Contents


TENNESSEE
GAS PIPELINE COMPANY





CONDENSED
CONSOLIDATED BALANCE SHEETS


(In millions,
except for share amounts)


(Unaudited)




September
      30,
              2009
            
            
            December 31,
              2008ASSETSCurrent
      assetsCash and cash
      equivalents
            
            $
            55
            
            
            $
            —Accounts and
      notes receivableCustomer
            
            
            6
            
            
            
            24Affiliates
            
            
            139
            
            
            
            81Other
            
            
            9
            
            
            
            13Deferred
      income taxes
            
            
            44
            
            
            
            8Other
            
            
            52
            
            
            
            51Total current assets
            
            
            305
            
            
            
            177Property,
      plant and equipment, at cost
            
            
            4,571
            
            
            
            4,365Less
      accumulated depreciation and amortization
            
            
            914
            
            
            
            8843,657
            
            
            
            3,481Additional
      acquisition cost assigned to utility plant, net
            
            
            1,973
            
            
            
            2,002Total property, plant and equipment,
      net
            
            
            5,630
            
            
            
            5,483Other
      assetsNotes
      receivable from affiliates
            
            
            998
            
            
            
            800Investment in
      unconsolidated affiliate
            
            
            79
            
            
            
            81Other
            
            
            60
            
            
            
            531,137
            
            
            
            934Total
      assets
            
            $
            7,072
            
            
            $
            6,594LIABILITIES
      AND STOCKHOLDER’S EQUITYCurrent
      liabilitiesAccounts
      payableTrade
            
            $
            33
            
            
            $
            54Affiliates
            
            
            56
            
            
            
            36Other
            
            
            43
            
            
            
            52Taxes
      payable
            
            
            131
            
            
            
            82Contractual
      deposits
            
            
            44
            
            
            
            60Asset
      retirement obligations
            
            
            56
            
            
            
            5Accrued
      interest
            
            
            47
            
            
            
            24Regulatory
      liabilities
            
            
            47
            
            
            
            3Other
            
            
            18
            
            
            
            23Total
      current liabilities
            
            
            475
            
            
            
            339Long-term
      debt
            
            
            1,845
            
            
            
            1,605Other
      liabilitiesDeferred
      income taxes
            
            
            1,361
            
            
            
            1,314Other
            
            
            222
            
            
            
            2651,583
            
            
            
            1,579Commitments
      and contingencies (Note 5)Stockholder’s
      equityCommon stock,
      par value $5 per share; 300 shares authorized; 208 shares
      issued and outstanding
            
            
            —
            
            
            
            —Additional
      paid-in capital
            
            
            2,209
            
            
            
            2,209Retained
      earnings
            
            
            1,294
            
            
            
            1,196Note
      receivable from affiliate
            
            
            (334
            )
            
            
            (334
            )Total
      stockholder’s equity
            
            
            3,169
            
            
            
            3,071Total
      liabilities and stockholder’s equity
            
            $
            7,072
            
            
            $
            6,594





See accompanying
notes.





2
 Table of Contents





TENNESSEE
GAS PIPELINE COMPANY





CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS


(In millions)


(Unaudited)





Nine
      Months Ended
              September 30,2009
            
            
            2008Cash flows
      from operating activitiesNet
      income
            
            $
            98
            
            
            $
            81Adjustments
      to reconcile net income to net cash from operating
    activitiesDepreciation
      and amortization
            
            
            139
            
            
            
            136Deferred income
    taxes
            
            
            11
            
            
            
            10Earnings
      from unconsolidated affiliate, adjusted for cash
    distributions
            
            
            2
            
            
            
            3Loss on
      long-lived assets
            
            
            2
            
            
            
            24Other
      non-cash income items
            
            
            (1
            )
            
            
            (3
            )Asset
      and liability changes
            
            
            99
            
            
            
            103Net cash
      provided by operating activities
            
            
            350
            
            
            
            354Cash flows
      from investing activitiesAdditions to
      property, plant and equipment
            
            
            (251
            )
            
            
            (203
            )Net change in
      notes receivable from affiliates
            
            
            (277
            )
            
            
            (158
            )Other
            
            
            —
            
            
            
            7Net cash used
      in investing activities
            
            
            (528
            )
            
            
            (354
            )Cash flows
      from financing activitiesNet proceeds
      from the issuance of long-term debt
            
            
            234
            
            
            
            —Other
            
            
            (1
            )
            
            
            —Net cash
      provided by financing activities
            
            
            233
            
            
            
            —Net change in
      cash and cash equivalents
            
            
            55
            
            
            
            —Cash and cash
      equivalentsBeginning of
      period
            
            
            —
            
            
            
            —End of
      period
            
            $
            55
            
            
            $
            —





See accompanying
notes.






















3
 Table of Contents





TENNESSEE
GAS PIPELINE 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 2008 Annual Report on Form 10-K, which contains a summary of our
significant accounting policies and other disclosures. The financial statements
as of September 30, 2009, and for the quarters and nine months ended September
30, 2009 and 2008, are unaudited. We derived the condensed consolidated balance
sheet as of December 31, 2008, from the audited balance sheet filed in
our 2008 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. We have evaluated subsequent events through the time of
filing on November 6, 2009, the date of issuance of our financial statements.
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 of our significant accounting policies and accounting
pronouncements as discussed in our 2008 Annual Report on Form
10-K.





Fair Value Measurements.On
January 1, 2009, we adopted new accounting and reporting standards related to
our non-financial assets and liabilities that are measured at fair value on a
non-recurring basis, which primarily relates to any impairment of long-lived
assets or investments. The adoption did not have a material impact on our
financial statements.





Business Combinations and
Noncontrolling Interests.On January 1, 2009, we adopted accounting
standard updates that clarify how to account for and report acquisitions of
businesses and transactions involving noncontrolling interests.
These  updates require that all acquired assets, liabilities,
noncontrolling interests and certain contingencies be measured at fair value,
and certain other acquisition-related costs be expensed rather than capitalized.
Additionally,  all transactions with noncontrolling interest holders
after adoption, including the issuance and repurchase of noncontrolling
interests, should be accounted for as equity transactions unless a change in
control of the subsidiary occurs. The adoption of these accounting standard
updates did not have an impact on our financial statements. Application of these
updates impacts transactions that are entered into after December 31,
2008.





Transfers of Financial Assets.In June 2009, the Financial Accounting Standards Board (FASB) issued
updates to the existing accounting standards on financial asset transfers.Among otheritems,these accounting standard
updates eliminate the concept of a qualifying special-purpose entity (QSPE) for
purposes of evaluating whether an entity should be consolidated as a variable
interest entity and are effective for existing QSPEs as of January 1, 2010 and
for transactions entered into on or after January 1, 2010. We are currently
assessing the impact that these accounting standard updates may have on our
financial statements, including any impacts it may have on accounting for our
accounts receivable sales program and related senior beneficial interests (see
Note 6).





Variable Interest Entities.In June 2009, the FASB issued updates to existing accounting standards
for variable interest entities which revise how companies determine their
primary beneficiaries, among other changes. These updates require companies to
use a qualitative approach based on their responsibilities and controlling power
over the variable interest entities’ operations rather than a quantitative
approach in determining the primary beneficiary as previously required. We are
currently assessing the impact that these accounting standard updates, effective
January 1, 2010, may have on our financial statements, including any impact it
may have on accounting for our accounts receivable sales program (see Note
6).





4
 Table of Contents








2.
Loss on Long-Lived Assets





During the third
quarter of 2009, we recorded an impairment of $2 million associated with an
asset anticipated to be sold in the fourth quarter of 2009. During the nine
months ended September 30, 2008, we recorded impairments of $24 million,
including an impairment related to our Essex-Middlesex Lateral project due to
its prolonged permitting process.





3.  Fair
Value of Financial Instruments





At September 30,
2009 and December 31, 2008, the carrying amounts of cash and cash equivalents
and trade and other receivables and payables are representative of their fair
value because of the short-term nature of these instruments. At September 30,
2009 and December 31, 2008, we had a note receivable from El Paso of
approximately $1.1 billion and $0.8 billion due upon demand, with a variable
interest rate of 1.5% and 3.2%. While we are exposed to changes in interest
income based on changes to the variable interest rate, the fair value of this
note receivable approximates its carrying value due to the note being due on
demand and the market-based nature of its interest rate.





In addition, the
carrying amounts and estimated fair values of our long-term debt are based on
quoted market prices for the same or similar issues and are as
follows:





September 30, 2009
            
            
            December 31, 2008Carrying
              Amount
            
            
            Fair
              Value
            
            
            Carrying
              Amount
            
            
            Fair
              Value(In
      millions)Long-term
      debt
            
            $
            1,845
            
            
            $
            2,081
            
            
            $
            1,605
            
            
            $
            1,311





4.
Debt





In 2009, we issued
$250 million of 8.00% senior notes due in February 2016 and received proceeds of
$234 million, net of issuance costs.





5. Commitments
and Contingencies





Legal
Proceedings





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 and have been consolidated for pretrial
purposes (Inre: 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, the U.S. District Judge issued an
order dismissing all claims against all defendants. In March 2009, the Tenth
Circuit Court of Appeals affirmed the dismissals and in October 2009, the
plaintiff’s petition for writ of certiorari to the United States Supreme Court
was denied.





Similar allegations
were filed in a second set of actions initiated in 1999 inWill 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 were argued in March 2005 and in
September 2009, the Kansas State Court Judge denied the
motions.  Plaintiffs have filed a motion for
reconsideration.  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 these
lawsuits and claims are not currently determinable.














5
 Table of Contents





In addition to the
above proceedings, we and our subsidiaries and affiliates are named as
defendants in numerous lawsuits and governmental proceedings that arise in the
ordinary course of our business. For each of these 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
believe we have established appropriate reserves for these matters. It is
possible, however,  that new information or future developments could
require us to reassess our potential exposure related to these matters and
establish our accruals accordingly, and these adjustments could be
material.  At September 30, 2009, we had accrued approximately $2
million for our outstanding legal matters.




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, 2009 and December 31,
2008, we had accrued approximately $6 million for expected remediation costs and
associated onsite, offsite and groundwater technical studies and for related
environmental legal costs. We estimate that our exposure could be as high as $7
million at September 30, 2009.





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. Our recorded
liabilities reflect our current estimates of amounts we will expend to remediate
these sites. However, depending on the stage of completion or assessment, 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.





For the remainder
of 2009, we estimate that our total remediation expenditures will be less than
$1 million, which will be expended under government directed clean-up
programs.





Polychlorinated Biphenyls (PCB) Cost
Recoveries and Refund. Since 1994, we have been conducting remediation
activities at certain of our compressor stations associated with PCB’s and other
hazardous materials. We have collected amounts, substantially in excess of
remediation costs actually incurred to date, through a surcharge to our
customers under a settlement approved by the Federal Energy Regulatory
Commission (FERC) in November 1995. In November 2009, the FERC approved an
amendment to the 1995 settlement that provides for interim refunds over a three
year period of approximately $157 million of our collected amounts plus interest
of 8%. The refunds will be paid beginning in December 2009, assuming no requests
for rehearing are filed. Our refund obligations are recorded as regulatory
liabilities on our balance sheet and as of September 30, 2009, we have
classified approximately $47 million as current liabilities based on the timing
of when these amounts are expected to be refunded to our customers.





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 four 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, 2009, we have
estimated our share of the remediation costs at these sites to be between $1
million and $2 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.






6
 Table of Contents


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, regulations and orders of regulatory agencies, as
well as claims for damages to property and the environment or injuries to
employees and other persons 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.





Regulatory
Matter





Notice of Proposed
Rulemaking. In October 2007, the Minerals Management Service (MMS) issued
a Notice of Proposed Rulemaking for Oil and Gas and Sulphur Operations in the
Outer Continental Shelf (OCS) — Pipelines and Pipeline Rights-of-Way. If
adopted, the proposed rules would substantially revise MMS OCS pipeline and
rights-of-way regulations. The proposed rules would have the effect of: (i)
increasing the financial obligations of entities, like us, which have pipelines
and pipeline rights-of-way in the OCS; (ii) increasing the regulatory
requirements imposed on the operation and maintenance of existing pipelines and
rights of way in the OCS; and (iii) increasing the requirements and
preconditions for obtaining new rights-of-way in the OCS.





Other
Commitments





Asset Retirement Obligations.At September 30, 2009 and December 31, 2008, we had total asset
retirement liabilities of $84 million and $42 million. During 2009, we increased
our asset retirement liabilities by $42 million primarily resulting from our
continuing assessment of the impacts of Hurricanes Gustav and Ike on our
offshore pipeline assets. As of September 30, 2009, we have classified $56
million as current liabilities on our balance sheet.





Purchase Obligations.We have
entered into contracts to purchase and install pipe associated with our 300 Line
Expansion Project which is anticipated to be placed in service in
2011.  Our current estimated obligations under these agreements are
approximately $32 million in the fourth quarter of 2009, $27 million in 2010,
and $189 million in 2011.




6. Investment
in Unconsolidated Affiliate and Transactions with Affiliates





Investment
in Unconsolidated Affiliate





We have a 50
percent ownership interest in Bear Creek Storage Company, a joint venture with
Southern Natural Gas Company, our affiliate and we received $10 million and $13
million in dividends for the nine months ended September 30, 2009 and 2008.
Summarized income statement information of our proportionate share of the income
of this investment for the periods ended September 30 is as
follows:





Quarter
      Ended
              September 30,
            
            
            Nine
      Months Ended
              September 30,2009
            
            
            2008
            
            
            2009
            
            
            2008(In
      millions)Operating
      results data:Operating
      revenues
            
            $
            5
            
            
            $
            4
            
            
            $
            14
            
            
            $
            15Operating
      expenses
            
            
            2
            
            
            
            2
            
            
            
            6
            
            
            
            6Income
      from continuing operations and net income
            
            
            3
            
            
            
            2
            
            
            
            8
            
            
            
            10











7
 Table of Contents





Transactions
with Affiliates





Cash Management Program and Other
Notes Receivable.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. El Paso uses the cash
management program to settle intercompany transactions between participating
affiliates. We have historically advanced cash to El Paso in exchange for an
affiliated note receivable that is due upon demand. At September 30, 2009 and
December 31, 2008, we had interest bearing notes receivable from El Paso of $1.1
billion and $0.8 billion. We classified approximately $79 million of this
receivable as current on our balance sheet at September 30, 2009, based on the
net amount we anticipate using in the next twelve months considering available
cash sources and needs. The interest rate on these variable rate notes was 1.5%
at September 30, 2009 and 3.2% at December 31, 2008.





At September 30, 2009 and December 31, 2008, we had non-interest bearing
notes receivable of $334 million from an El Paso affiliate. These notes are
reflected as a reduction of our stockholders’ equity based on uncertainties
regarding the timing and method through which El Paso will settle these
balances.





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. At September 30, 2009 and December 31, 2008, we had
federal and state income taxes payable of $107 million and $58 million. The
majority of these balances, as well as deferred income taxes and amounts
associated with the resolution of unrecognized tax benefits, will become payable
to El Paso.





Accounts Receivable Sales Program.We sell certain accounts receivable to a QSPE whose purpose is solely
to invest in our receivables, which are short-term assets that generally settle
within 60 days. During the quarter and nine months ended September 30, 2009, we
received net proceeds of approximately $0.2 billion and $0.7 billion related to
sales of receivables to the QSPE and changes in our subordinated beneficial
interests and recognized losses of less than $1 million on these
transactions.  As of September 30, 2009 and December 31, 2008, we had
approximately $75 million and $97 million of receivables outstanding with the
QSPE, for which we received cash of $37 million and $38 million, and received
subordinated beneficial interests of approximately $37 million and $58 million.
The QSPE also issued senior beneficial interests on the receivables sold to a
third party financial institution, which totaled $38 million and $39 million as
of September 30, 2009 and December 31, 2008. We reflect the subordinated
beneficial interest in receivables sold at their fair value on the date they are
issued.  These amounts (adjusted for subsequent collections) are
recorded as accounts receivable from affiliate in our balance sheets. Our
ability to recover our carrying value of our subordinated beneficial interests
is based on the collectibility of the underlying receivables sold to the QSPE.
We reflect accounts receivable sold under this program and changes in the
subordinated beneficial interests as operating cash flows in our statement of
cash flows. Under the agreements, we earn a fee for servicing the receivables
and performing all administrative duties for the QSPE which is reflected as a
reduction of operation and maintenance expense in our income statement. The fair
value of these servicing and administrative agreements as well as the fees
earned were not material to our financial statements for the quarters and nine
months ended September 30, 2009 and 2008.





Other Affiliate Balances. At
September 30, 2009 and December 31, 2008, we had contractual deposits from our
affiliates of $9 million.





Affiliate Revenues and
Expenses. We enter into transactions with our affiliates within the
ordinary course of business. For a further discussion of our affiliated
transactions, see our 2008 Annual Report on Form 10-K. The following table shows
revenues and charges from our affiliates for the periods ended September
30:





Quarter
      Ended
              September 30,
            
            
            Nine
      Months Ended
              September 30,2009
            
            
            2008
            
            
            2009
            
            
            2008(In
      millions)Revenues from
      affiliates
            
            $
            4
            
            
            $
            5
            
            
            $
            12
            
            
            $
            15Operation and
      maintenance expenses from affiliates
            
            
            18
            
            
            
            16
            
            
            
            52
            
            
            
            47Reimbursement
      of operating expenses charged to affiliates
            
            
            11
            
            
            
            12
            
            
            
            34
            
            
            
            35














8
 Table of Contents





Item 2. Management’s
Discussion 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, information disclosed in our
2008 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 measure to assess
the operating results and effectiveness of our business, which consists of
consolidated operations as well as an investment in an unconsolidated affiliate.
We believe EBIT is useful to investors to provide them with the same measure
used by El Paso to evaluate our performance. We define EBIT as net income
adjusted for items such as (i) interest and debt expense, (ii) affiliated
interest income, and (iii) income taxes. We exclude interest and debt expense
from this measure so that investors may evaluate our operating results without
regard to our financing methods. EBIT may not be comparable to measures used by
other companies. Additionally, EBIT should be considered in conjunction with net
income, income before income taxes 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 an analysis and discussion
of our results for the nine months ended September 30, 2009 compared to the same
period in 2008.





Operating
Results:


2009
            
            
            2008(In
      millions,
              except
      for volumes)Operating
      revenues
            
            $
            704
            
            
            $
            671Operating
      expenses
            
            
            (456
            )
            
            
            (478
            )Operating
      income
            
            
            248
            
            
            
            193Earnings from
      unconsolidated affiliate
            
            
            8
            
            
            
            10Other income,
      net
            
            
            8
            
            
            
            8EBIT
            
            
            264
            
            
            
            211Interest and
      debt expense
            
            
            (117
            )
            
            
            (101
            )Affiliated
      interest income, net
            
            
            12
            
            
            
            24Income
      taxes
            
            
            (61
            )
            
            
            (53
            )Net
      income
            
            $
            98
            
            
            $
            81Throughput
      volumes (BBtu/d)
            
            
            4,650
            
            
            
            4,875





EBIT
Analysis:


Revenue
            
            
            Expense
            
            
            Other
            
            
            EBIT
              ImpactFavorable/(Unfavorable)(In
      millions)Gas not used
      in operations and other natural gas sales
            
            $
            23
            
            
            $
            9
            
            
            $
            —
            
            
            $
            32Reservation
      and other services revenues
            
            
            4
            
            
            
            —
            
            
            
            —
            
            
            
            4Hurricanes
            
            
            7
            
            
            
            (1
            )
            
            
            —
            
            
            
            6Loss on
      long-lived assets
            
            
            —
            
            
            
            22
            
            
            
            —
            
            
            
            22Other(1)
            
            
            (1
            )
            
            
            (8
            )
            
            
            (2
            )
            
            
            (11
            )Total impact
      on EBIT
            
            $
            33
            
            
            $
            22
            
            
            $
            (2
            )
            
            $
            53


______________


(1)
      Consists of individually insignificant
      items.





Gas Not Used in
Operations and Other Natural Gas Sales.  Gas not used for
operations results in revenues to us, which we recognize when the volumes are
retained. During the nine
months ended September 30, 2009, our EBIT increased primarily due to a
$19 million favorable impact resulting from higher retained fuel volumes in
excess of fuel used to operate our system and higher average realized prices on
operational sales, partially offset by a lower index price used to value the
volumes that we retained as compared to the same period in 2008. Our EBIT was
also favorably impacted by $9 million due to lower electric compression
utilization. For a further discussion of gas not used in operations and other
natural gas sales, see our 2008 Annual Report on  Form
10-K.




9
 Table of Contents


Reservation and Other Services
Revenues.During the nine months ended September 30, 2009, our EBIT
was favorably impacted as compared to the same period in 2008 by additional
capacity sales primarily from the Marcellus Basin in the northeast market area
due to transportation contracts with shippers which were executed during
2009.  In addition, the Carthage project was placed in-service in May
2009, generating additional sales in the southern region of our system.Partially offsetting
these increases was a decrease in usage revenues due to reduced throughput in
2009.





In July 2009, we
filed an application with the FERC for certificate authorization of our 300 Line
Expansion Project to add firm transportation capacity to our existing pipeline
system in the northeast U.S. market area.  All of the firm
transportation capacity resulting from this project is fully subscribed with one
shipper based on a precedent agreement which was executed in the third quarter
of 2009. In October 2009, we entered into a pipeline installation contract of
approximately $194 million.





Our system is
located over a significant portion of the Marcellus Basin that is under various
phases of development by producers.  We have executed firm
transportation contracts with shippers from the basin utilizing existing
capacity. We have been in discussions with producers to expand our system to
provide additional transportation capacity from the Marcellus
Basin.  Higher contracting of capacity by our customers may or may not
be sustained.





For the nine months
ended September 30, 2009, our throughput volumes decreased compared with the
same period in 2008.  This was due, in part, to general weakness in
natural gas demand in the United States, including general reductions in
industrial and power generation loads in the northeast. The demand for gas from
the power generation sector was negatively impacted by economic factors but
positively impacted by the displacement of coal-fired generation by gas-fired
generation due to lower gas sales. If the economy recovers, electricity demand
will positively affect throughput but may be offset by loss of market share in
the event of higher gas prices. Although fluctuations in throughput on our
system has a limited impact on our short-term results due to the fact that a
material portion of our revenues are derived from firm reservation charges, it
can be an indication of the risks we may face when seeking to recontract or
renew any of our existing firm transportation contracts in the future.
Continuing negative economic impacts on demand, as well as adverse shifting of
sources of supply, could negatively impact basis differentials and our ability
to renew firm transportation contracts that are expiring on our system or our
ability to renew such contracts at current rates.  If we determine
there is a significant change in our costs or billing determinants, we will have
the option to file a rate case with the FERC to recover our prudently incurred
costs.




Hurricanes.During the third
quarter of 2008, we incurred damage to sections of our Gulf Coast and
offshore pipeline facilities due to Hurricanes Ike and Gustav. For the nine
months ended September 30, 2009 and 2008, we recorded losses of $1 million and
$7 million related to gas loss from various damaged facilities, lower volume of
gas not used in operations, lower usage revenue and repair costs that were not
recoverable from insurance due to losses not exceeding self-retention
levels.  We continue to evaluate those damaged facilities for further
repair or retirement.





Loss on Long-lived
Assets. During the third quarter of 2009, we recorded an impairment of $2
million associated with an asset anticipated to be sold in the fourth quarter of
2009. During the nine months ended September 30, 2008, we recorded impairments
of $24 million, including an impairment related to our Essex-Middlesex Lateral
project due to its prolonged permitting process.




Interest
and Debt Expense





Interest and debt expense for the nine months ended September 30, 2009, was
approximately $16 million higher than the same period in 2008 primarily due to
the issuance of $250 million of 8.00% senior notes in January 2009.










10
 Table of Contents




Affiliated
Interest Income, Net





Affiliated interest
income, net for the nine months ended September 30, 2009, was $12 million lower
than the same period in 2008 due to lower average short-term interest rates on
advances to El Paso under its cash management program, partially offset by
higher average advances. The following table shows the average advances due from
El Paso and the average short-term interest rates for the nine months ended
September 30:





2009
            
            
            2008(In
      millions, except for rates)Average
      advance due from El Paso
            
            $
            899
            
            
            $
            751Average
      short-term interest rate
            
            
            1.8
            %
            
            
            4.5
            %





Income
Taxes





Our effective tax rates of 38 percent
and 40 percent for the nine months ended September 30, 2009 and 2008 were higher
than the statutory rate of 35 percent primarily due to the effect of state
income taxes.



























11
 Table of Contents








Liquidity
and Capital Expenditures





Our primary sources
of liquidity are cash on hand, cash flows from operating activities and El
Paso’s cash management program. At September 30, 2009, we had a notes
receivable from El Paso of approximately $1.1 billion of which
approximately $79 million was classified as current based on the net amount we
anticipate using in the next twelve months considering available cash sources
and needs. In addition, we had non-interest bearing notes receivable of $334
million from an El Paso affiliate. See Item 1, Financial Statements, Note 6, for
a further discussion of El Paso’s cash management program and our other
affiliate notes receivable. Our primary uses of cash are for working capital and
capital expenditures. Our cash capital expenditures for the nine months ended
September 30, 2009, and our estimated capital expenditures for the remainder of
this year to expand and maintain our system are listed below.





Nine
      Months Ended
              September 30, 2009
            
            
            2009
              Remaining
            
            
            Total(In
      millions)Maintenance
            
            $
            93
            
            
            $
            65
            
            
            $
            158Expansion
            
            
            88
            
            
            
            51
            
            
            
            139Hurricanes
            
            
            29
            
            
            
            6
            
            
            
            35Other(1)
            
            
            41
            
            
            
            24
            
            
            
            65$
            251
            
            
            $
            146
            
            
            $
            397







(1)
Relates to building renovations at our corporate facilities.





Volatility in the
financial markets, the energy industry and the global economy will likely
continue through the remainder of 2009 and beyond.  In January 2009, we
issued $250 million of 8.00% senior notes due February 2016 for net proceeds of
$234 million. Although recent financial market conditions have shown signs of
improvement, continued volatility in the financial markets could impact our
longer-term access to capital for future growth projects as well as the cost of
such capital. Additionally, although the impacts are difficult to quantify at
this point, a prolonged recovery of the global economy could have adverse
impacts on natural gas consumption and demand. However, we believe our exposure
to changes in natural gas consumption and demand is largely mitigated by a
revenue base that is mostly comprised of long-term contracts that are based on
firm demand charges and are less affected by a potential reduction in the actual
usage or consumption of natural gas.





We believe we have
adequate liquidity available to us to meet our capital requirements and our
existing operating needs through cash on hand and cash flows from operating
activities combined with amounts available to us under El Paso’s cash management
program. As of September 30, 2009, El Paso had approximately $2.4 billion of
available liquidity, including approximately $1.4 billion of capacity available
to it under various committed credit facilities. In addition to the cash
management program above, we are eligible to borrow amounts available under El
Paso’s $1.5 billion credit agreement and are only liable for amounts we directly
borrow. As of September 30, 2009, El Paso had approximately $0.9 billion of
capacity remaining and available to us and our affiliates under this credit
agreement, and none of the amount outstanding under the facility was issued or
borrowed by us. For a further discussion of this credit agreement, see our 2008
Annual Report on Form 10-K. While we do not anticipate a need to further access
the financial markets for the remainder of 2009 for any of our operating
activities or expansion capital needs based on liquidity available to us,
volatility in the financial markets could impact our or El Paso’s ability to
access these markets at reasonable rates in the future.


























12
 Table of Contents







Commitments
and Contingencies





For a
further discussion of our commitments and contingencies, see Item 1,
Financial Statements, Note 5, which is incorporated herein by
reference.





Climate Change and Energy
Legislation.There are various legislative and regulatory measures
relating to climate change and energy policies that have been proposed and, if
enacted, will likely impact our business.





Climate Change
Regulation.Measures to address climate change and greenhouse
gas (GHG) emissions are in various phases of discussions or implementation at
international, federal, regional and state levels. It is likely that federal
legislation requiring GHG controls will be enacted within the next few years in
the United States. Although it is uncertain what legislation will ultimately be
enacted, it is our belief that cap-and-trade or other legislation that sets a
price on carbon emissions will increase demand for natural gas, particularly in
the power sector. We believe this increased demand will occur due to
substantially less carbon emissions associated with the use of natural gas
compared with alternate fuel sources for power generation, including coal and
oil-fired power generation.  However, the actual impact on demand will
depend on the legislative provisions that are ultimately adopted, including the
level of emission caps, allowances granted and the cost of emission
credits.





It is also likely
that any federal legislation enacted would increase our cost of environmental
compliance by requiring us to install additional equipment to reduce carbon
emissions from our larger facilities as well as to potentially purchase emission
credits.  Based on 2007 data we reported to the California Climate
Action Registry (CCAR), our operations in the United States emitted
approximately 4.5 million tonnes of carbon dioxide equivalent emissions during
2007.We believe
that approximately 4.2 million tonnes of the GHG emissions that we reported to
CCAR would be subject to regulations under the climate change legislation that
passed in the U.S. House of Representatives in July 2009, with approximately
one-third of this amount being subject to the cap-and-trade rules contained in
the proposed legislation and the remainder being subject to performance
standards.  As proposed, the portion of our GHG emissions that would
be subject to performance standards could require us to install additional
equipment or initiate new work practice standards to reduce emission levels at
many of our facilities, the costs of which would likely be
material.  Although we believe that many of these costs should be
recoverable in the rates charged to customers, recovery is still uncertain at
this time.





The Environmental
Protection Agency (EPA) finalized regulations to monitor and report GHG
emissions on an annual basis and recently proposed new regulations to regulate
GHGs under the Clean Air Act, which EPA has indicated could be finalized as
early as March 2010.  In addition, various lawsuits have been filed
seeking to force further regulation of GHG emissions, as well as to require
specific companies to reduce GHG emissions from their operations. Enactment of
additional regulations, as well as lawsuits, could result in delays and have
negative impacts on our ability to obtain permits and other regulatory approvals
with regard to existing and new facilities, could impact our costs of
operations, as well as require us to install new equipment to control emissions
from our facilities, the costs of which would likely be material.





Energy
Legislation.In conjunction with these climate change
proposals, there have been various federal and state legislative and regulatory
proposals that would create additional incentives to move to a less carbon
intensive “footprint”.  These proposals would establish renewable
portfolio standards at both the federal and state level, some of which would
require a material increase of renewable sources, such as wind and solar power
generation, over the next several decades. Additionally, the proposals would
establish incentives for energy efficiency and conservation.  Although
the ultimate targets that would be established in these areas are uncertain at
this time, such proposals if enacted could negatively impact natural gas usage
over the longer term.
















13
 Table of Contents





Item 3. Quantitative and 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,
2009, we carried out an evaluation under the supervision and with the
participation of our management, including our President and our Chief Financial
Officer, as to the effectiveness, design and operation of our disclosure
controls and procedures. 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 our 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. Our disclosure controls
and  procedures are designed to provide reasonable assurance of
achieving their objectives and our President and our Chief Financial Officer
concluded that our disclosure controls and procedures (as defined in the
Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of September 30,
2009.





Changes
in Internal Control Over Financial Reporting





During the third
quarter of 2009, we implemented a new financial accounting system and
consolidated financial chart of accounts. The system implementation efforts were
carefully planned and executed. Training sessions were administered to
individuals who are impacted by the new system and chart of accounts, and system
controls and functionality were reviewed and successfully tested prior and
subsequent to implementation.  Following evaluation, management
believes that  the new system has been successfully implemented. There
were no other changes in our internal control over financial reporting during
the third quarter of 2009 that have materially affected or are reasonably likely
to materially affect our internal control over financial reporting.



















14
 Table of Contents





PART II — OTHER INFORMATION





Item 1. Legal Proceedings





See Part I,
Item 1, Financial Statements, Note 5, 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. These forward-looking statements are based on
assumptions or beliefs that we believe to be reasonable; however, assumed facts
almost always vary from actual results, and differences between assumed facts
and actual results can be material, depending upon the circumstances. Where,
based on assumptions, we or our management express an expectation or belief as
to future results, that expectation or belief is expressed in good faith and is
believed to have a reasonable basis. We cannot assure you, however, that the
stated expectation or belief will occur, be achieved or accomplished. The words
“believe,” “expect,” “estimate,” “anticipate,” and similar expressions will
generally identify forward-looking statements. All of our forward-looking
statements, whether written or oral, are expressly qualified by these cautionary
statements and any other cautionary statements that may accompany such
forward-looking 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 2008
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. Unregistered Sales 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. Defaults Upon 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. Other Information





None.























15
 Table of Contents





Item 6. Exhibits





The
Exhibit Index is hereby incorporated herein by reference and sets forth a
list of those exhibits filed herewith.





The agreements
included as exhibits to this report are intended to provide information
regarding their terms and not to provide any other factual or disclosure
information about us or the other parties to the agreements. The agreements may
contain representations and warranties by the parties to the agreements,
including us, solely for the benefit of the other parties to the applicable
agreement and:





·
            should not in
      all instances be treated as categorical statements of fact, but rather as
      a way of allocating the risk to one of the parties if those statements
      prove to be inaccurate;


·
            may have been
      qualified by disclosures that were made to the other party in connection
      with the negotiation of the applicable agreement, which disclosures are
      not necessarily reflected in the
agreement;


·
            may apply
      standards of materiality in a way that is different from what may be
      viewed as material to certain
  investors; and


·
            were made
      only as of the date of the applicable agreement or such other date or
      dates as may be specified in the agreement and are subject to more recent
      developments.





Accordingly, these
representations and warranties may not describe the actual state of affairs as
of the date they were made or at any other time.




























16
 Table of Contents


SIGNATURES
 
 Pursuant to the
requirements of the Securities Exchange Act of 1934, Tennessee Gas Pipeline
Company has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 TENNESSEE GAS PIPELINE
      COMPANYDate:  November
      6, 2009
                /s/ James C.
      YardleyJames C.
      YardleyChairman of the Board and
      President(Principal Executive
      Officer)Date:  November
      6, 2009
                /s/ John R.
      SultJohn R.
      SultSenior Vice
      President,Chief Financial Officer and
      Controller(Principal Accounting and
      Financial Officer)





























17
 Table of Contents





TENNESSEE
GAS PIPELINE COMPANY





EXHIBIT
INDEX





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





Exhibit
              Number
            Description12
            Ratio of
      Earnings to Fixed Charges.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.


















































18