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                                                                   EXHIBIT 10.25

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                               GAS SALES AGREEMENT

                                BETWEEN AND AMONG

                         ANADARKO PETROLEUM CORPORATION,

                              PHILLIPS ALASKA, INC.

                                       AND

                             ALASKA PIPELINE COMPANY

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                                TABLE OF CONTENTS

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Article I - Definitions...............................................................     2

Article II - [RESERVED FOR FUTURE USE]................................................     7

Article III - Sale and Purchase of Gas................................................     7

       3.1 Quantity...................................................................     7

       3.2 New Commitments............................................................     9

       3.3 Changes in Annual Purchase Obligation and Deliverability...................     9

       3.4 Gas Balancing..............................................................    13

       3.5 Unanticipated Shortages....................................................    14

       3.6 Gas Production Not Economic................................................    15

       3.7 Quantity Calculation Example...............................................    16

       3.8 Title and Risk of Loss.....................................................    16

       3.9 Operational Communications.................................................    16

Article IV - Price and Transportation Fee.............................................    17

       4.1 Gas Price..................................................................    17

       4.2 References.................................................................    17

       4.3 Calculation................................................................    18

       4.4 No Determination...........................................................    18

       4.5 Transportation Fee.........................................................    18

       4.6 Price Example..............................................................    18
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Article V - Term......................................................................    19

Article VI - Taxes....................................................................    19

       6.1 General Allocation.........................................................    19

       6.2 Specific Allocation........................................................    19

       6.3 New Taxes..................................................................    20

       6.4 Production Tax Adjustment..................................................    20

Article VII - Royalties...............................................................    20

Article VIII - Reservations by Sellers................................................    21

       8.1 Sellers' Reservations......................................................    21

Article IX -Quality...................................................................    22

       9.1 Heating Value of Gas.......................................................    22

       9.2 Deleterious Matter Specification...........................................    23

       9.3 Filtration of Gas..........................................................    23

       9.4 Buyer's Right to Refuse Gas................................................    23

Article X - Pressure, Measurement, Metering, Testing..................................    24

       10.1 Pressure..................................................................    24

       10.2 Measurement...............................................................    24

       10.3 Inaccurate Meters.........................................................    25

       10.4 Testing...................................................................    25

       10.5 Correction................................................................    25

       10.6 Records...................................................................    26
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       10.7 Standards.................................................................    26

       10.8 Check Meters..............................................................    27

Article XI - Billing, Payment and Records.............................................    27

       11.1 Billing...................................................................    27

       11.2  Records...................................................................   28

       11 .3 Interest.................................................................    28

Article XII - RCA Approval ...........................................................    29

       12.1 Timeline..................................................................    29

       12.2 Approval..................................................................    29

       12.3 Termination...............................................................    29

Article XIII - Boiler Plate...........................................................    29

       13.1 Force Majeure.............................................................    29

       13.2 Binding on Successors.....................................................    32

       13.3 Restrictions on Transfers by Sellers......................................    32

       13.4 Easement and Rights-of-Way................................................    33

       13.5 Governing Law.............................................................    33

       13.6 Agreement Not to be Construed Against Any Party as Drafter................    33

       13.7 Notices...................................................................    33

       13.8 Entire Agreement..........................................................    36

       13.9 Headings..................................................................    37

       13.10 No Incidental or Consequential Damages...................................    37
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       13.11 Termination Events.......................................................    37

       13.12 Several, Not Joint, Liability............................................    38

       13.13 Limitation on Right to Terminate.........................................    38

       13.14 Waiver...................................................................    39

       13.15 Multiple Originals.......................................................    39

       13.16 Fees and Costs...........................................................    39

       13.17 Authority to Sign........................................................    40

Exhibit A Existing Commitments........................................................    41

Exhibit B Quantity Calculation Examples...............................................    43

Exhibit C Price Calculation Example...................................................    49

Exhibit D Receipt Point(s)............................................................    51

Exhibit E The Field...................................................................    52
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                               GAS SALES AGREEMENT

      This Gas Sales Agreement ("Agreement") is between and among Anadarko
Petroleum Corporation ("Anadarko"), a Delaware corporation, and Phillips Alaska,
Inc. ("Phillips"), a Delaware corporation and wholly-owned subsidiary of
Phillips Petroleum Company (collectively "Sellers"), and Alaska Pipeline Company
("Buyer"), an Alaska corporation and wholly-owned subsidiary of SEMCO Energy,
Inc.

                                    RECITALS

      1.    Buyer is a public utility which holds Certificate No. 141 from the
            Regulatory Commission of Alaska ("RCA");

      2.    Buyer, and its public utility affiliate ENSTAR Natural Gas Company,
            provide natural gas service to the Municipality of Anchorage, and
            portions of the Matanuska-Susitna and Kenai Peninsula Boroughs;

      3.    Buyer plans to purchase additional Gas beginning January of 2002 to
            meet the needs of ENSTAR's customers;

      4.    Sellers intend to begin development of Gas at the Moquawkie field in
            2000, and to continue development in the Field in 2001;

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      5.    Sellers wish to sell Gas to Buyer if Sellers develop Gas in
            quantities which can be produced economically from the Field;

      6.    An agreement for the sale of Gas from the Field is necessary before
            Sellers incur additional exploration and development costs;

      7.    The RCA must have adequate time to review and approve this
            Agreement; and

      8.    Buyer wishes to have Sellers' Gas committed to Buyer as quickly as
            possible.

      In consideration of all the conditions in this Agreement, Buyer and
Sellers agree as follows:

                                    ARTICLE I
                                   DEFINITIONS

      "Actual Deliverability" means the maximum amount of Gas which can be
produced from the Field each Day, net of Gas reserved and used under Article
VIII.

      "Additional Gas" is defined in paragraph 3.3.5.

      "Agreement" means this document and the attached exhibits as originally
executed, amended, supplemented, or assigned.

      "Annual Purchase Obligation" means the amount of Gas Buyer is obligated to
purchase and the sum of the amount each Seller is obligated to sell and deliver
to Buyer in any Year. The amount of the Annual Purchase Obligation is calculated
using Deliverability and a Swing Rate of 2.5. If the Annual Purchase Obligation
in any Year exceeds Unmet

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Requirements, the Annual Purchase Obligation for that Year shall be reduced to
Unmet Requirements.

      "Balancing Gas" is defined in Section 3.4. Balancing Gas does not include
Gas which Buyer is not obligated to purchase from each Seller but which Buyer
chooses to purchase from each Seller.

      "BTU" means a British thermal unit. A British thermal unit is the amount
of energy required to raise the temperature of one pound of pure water from
fifty-nine degrees Fahrenheit (59(degree) F.) to sixty degrees Fahrenheit
(60(degree) F.) at a constant pressure of 14.73 pounds per square inch absolute.

      "Day" means a period beginning a eight o'clock a.m. (8:00 a.m.), Alaska
Standard Time, on a calendar day and ending at eight o'clock a.m. (8:00 a.m.),
Alaska Standard Time, on the next calendar day.

      "Deliverability" means the maximum amount of Gas which Sellers are
obligated to deliver each Day. Sellers are not obligated to be able to deliver
Gas at a rate which, if sustained for a Day, would result in deliveries greater
than the Deliverability for that Day determined under Article III.
Deliverability is expressed as MMcf per Day.

      "Economic" is defined in Section 3.6.

      "Engineer" means an independent, registered professional petroleum
engineer from the firm of DeGolyer and McNaughton, the firm of Ryder Scott
Company, both of Houston.

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Texas, or from another firm agreed to by Buyer and Sellers. The Engineer's fees
and expenses shall be paid by Sellers.

      "ENSTAR" means the natural gas distribution utility named ENSTAR Natural
Gas Company, a division of SEMCO Energy, Inc. ENSTAR holds RCA Certificate No.
4. ENSTAR and Buyer are regulated as a single entity by the RCA.

      "Existing Commitments" means the Gas Buyer is contractually obligated to
purchase each Year from third parties under the contracts listed in Exhibit A.

      "Field" means the geographic area described by the leases currently held
by Sellers or later acquired by Sellers within the boundaries shown on Exhibit
E. The Field includes the Moquawkie field.

      "Force Majeure" and "Force Majeure Event" are defined in Article XIII.

      "Gas" means natural gas, including both gas well gas and oil well gas of
the quality described in Article IX.

      "Gross Heating Value" means the total calorific value, expressed in BTUs,
obtained by the complete combustion, at constant pressure, of one Standard Cubic
Foot of Gas, with air of the same temperature and pressure as the Gas, when the
products of combustion are cooled to the initial temperature of the Gas and air
and when the water formed by combustion is condensed to the liquid state.

      "Incremental Production Schedule" is defined in paragraph 3.3.5.

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      "LNG" means liquified Gas.

      "Mcf; MMcf; Bcf": "Mcf" means one thousand (1,000) Standard Cubic Feet;

"MMcf" means one million (1,000,000) Standard Cubic Feet; and "Bcf" means one
billion (1,000,000,000) Standard Cubic Feet.

      "Month" means a period beginning at eight o'clock a.m. (8:00 a.m.), Alaska
Standard Time, on the first day of a calendar month and ending at eight o'clock
a.m. (8:00 a.m.), Alaska Standard Time, on the first day of the next calendar
month.

      "New Commitment" is defined in Section 3.2.

      "Not Economic" is defined in Section 3.6.

      "Parties" means, collectively, Buyer and Sellers.

      "Party" means Buyer, Anadarko, or Phillips, individually.

      "Pipeline System" means Buyer and ENSTAR's entire, interconnected system
of transmission and distribution pipelines. A customer who is not connected to
the interconnected system is not served by the Pipeline System. For example, a
customer served by a satellite LNG system is not connected to the Pipeline
System because that customer is not connected to the interconnected system.

      "Price" is defined in Section 4.1.

      "Production Schedule" is defined in Section 3.3.

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      "Production Taxes" means the tax defined and set by AS 43.55.016, as
amended from time to time.

      "RCA" means the Regulatory Commission of Alaska.

      "Receipt Points" means the metering points where Buyer receives Sellers'
Gas into its Pipeline System and title passes. The Receipt Points are described
in Exhibit D. Exhibit D may be amended for additions or deletions of Receipt
Points.

      "Requirements" means all of the Gas that Buyer purchases, consumes, or
uses to supply ENSTAR customers who are served by connections to the Pipeline
System. "Requirements'" does not include (i) Gas purchased, consumed, or used by
Buyer's customers who are not connected to the Pipeline System, or (ii) Gas
transported by Buyer for third parries under transportation agreements or
tariffs, or exchanged under exchange agreements. "Requirements" also does not
include Storage Gas purchased by Buyer to meet deliverability needs in excess of
Deliverability supplied by Sellers.

      "Standard Cubic Foot" means the amount of Gas which would occupy a volume
of one cubic foot at a temperature of sixty degrees Fahrenheit (60(degree) F.)
and at a pressure of fourteen and sixty-five hundredths (14.65) pounds per
square inch absolute.

      "Storage Gas" means Gas acquired to put into storage (including Gas
purchased or stored as LNG) or Gas taken from storage.

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      "Swing Rate" means the ratio of the Deliverability (MMcf per Day) to the
annual purchases expressed as a daily average (MMcf/Day). For example, if annual
purchases were 2.92 Bcf and Deliverability were 20 MMcf per Day, the Swing Rate
would be [20/(2920/365)] = 2.5. Unless the Parties later agree otherwise, all
Gas sold under this Agreement must have a Swing Rate of at least 2.5.

      "Termination Event" is defined in Section 13.11.

      "Unmet Requirements" means the difference between Requirements for any
Year and Existing Commitments for that Year.

      "Year" means a period of twelve (12) consecutive Months beginning on
January 1 and ending on the next January 1.

                                   ARTICLE II

      2.1 [RESERVED FOR FUTURE USE.]

                                   ARTICLE III
                            SALE AND PURCHASE OF GAS

      3.1 QUANTITY: Buyer is not required to purchase in any Year more Gas than
its Unmet Requirements. Subject to that limitation, Buyer will purchase and
Sellers will sell Gas in the quantities determined by this Article. As of the
effective date of this Agreement, Anadarko and Phillips each hold fifty
percent(50%) of the ownership interest in each of the leases they now hold in
the Field. The Parties recognize that during the term of this Agreement the

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ownership interests may change. The Parties also recognize that if the ownership
interests change, the Production Schedule volumes attributable to Anadarko and
Phillips may not be equal.

            3.1.1 Gas sales will begin January 1, 2002. The Annual Purchase
Obligation for 2002 and 2003 will be Unmet Requirements. If the Field does not
contain enough Gas to satisfy Unmet Requirements for 2002 and 2003, Phillips
will supply the shortfall (i.e., the difference between Unmet Requirements and
what the Field can supply) from sources outside the Field up to a maximum
Deliverability of 20 MMcf per Day and volume of 2.92 Bcf for each Year (at a
Swing Rate of 2.5). Anadarko shall have the option, but not the obligation, to
supply its proportionate share of the shortfall. This obligation to supply any
shortfall cannot be changed under Section 3.3. Beginning with the Year 2004, the
Annual Purchase Obligation, unless changed under Section 3.3, will be the lesser
of 2.92 Bcf or Unmet Requirements.

            3.1.2 Until this Agreement is terminated under Article V, Sellers
dedicate all Gas in the Field to Buyer. Except for sales of small volumes of Gas
for purposes of Field testing, which sales must terminate by January 1, 2002, or
sales made under paragraph 3.3.5, Sellers will not sell Gas from the Field to
third parties. Sellers do not warrant that the Field contains Gas adequate to
satisfy the Annual Purchase Obligations set under Article III. Sellers shall not
be liable to Buyer, and Buyer shall not be entitled to the remedy of cover,

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if the Field does not contain Gas adequate to satisfy the Annual Purchase
Obligations. If Sellers are unable to satisfy the Annual Purchase Obligations
because the Field does not contain adequate Gas, Buyer may, at its option,
terminate this Agreement or take all volumes of Gas that are available from the
Field.

            3.1.3 Unless Deliverability is changed under Section 3.3, Sellers
must in combination have Deliverability of at least 20 MMcf per day during the
term of this Agreement, If Actual Deliverability is greater than 20 MMcf per day
(or greater than any other Deliverability set under Section 3.3), Buyer may, but
is not obligated to, purchase up to Actual Deliverability. Purchases of
additional Deliverability do not change the Annual Purchase Obligation. Over the
life of the Field, it is possible the Actual Deliverability will be less than
Deliverability. If that occurs, the Annual Purchase Obligation will be reduced
based on Actual Deliverability and a Swing Rate of 2.5.

      3.2 NEW COMMITMENTS: Buyer and Sellers (i) do not expect that Sellers will
be able to provide all of Buyer's Unmet Requirements every Year, and (ii)
anticipate that Buyer will purchase Gas from outside the Field to satisfy its
Unmet Requirements (a "New Commitment"). A New Commitment must recognize and may
not reduce the Annual Purchase Obligation in effect when the New Commitment is
made.

      3.3 CHANGES IN ANNUAL PURCHASE OBLIGATION AND DELIVERABILITY: The Annual
Purchase Obligation and Deliverability may be changed for the Years 2003 and
later by

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using Production Schedules as provided in paragraphs 3.3.1 through 3.3.5. The
term "Production Schedule" means a schedule prepared by Sellers which the
Engineer agrees is reasonable which shows:

            a. the Deliverability Sellers will have available from the Field for
each Year;

            b. the portion of that Deliverability which will be supplied by
Anadarko and Phillips; and

            c. the Annual Purchase Obligation for each Year based on a Swing
Rate of 2.5. For example, if the Production Schedule for Year X shows that
Anadarko will provide Deliverability of 15 MMcf per Day, and that Phillips will
provide Deliverability of 15 MMcf per Day, the Deliverability for Year X will be
30 MMcf per Day and the Annual Purchase Obligation will be (30/2.5) x 365 = 4380
MMcf = 4.38 Bcf for Year X.

            3.3.1 No later than February 1, 2001, Sellers shall give Buyer a
Production Schedule. That Production Schedule sets the Deliverability and Annual
Purchase Obligation for the remaining term of the Agreement (beginning in 2003)
unless changed as provided below.

            3.3.2 No later than February 1, 2002, Sellers shall give Buyer a
revised Production Schedule. The revised Production Schedule may increase or
decrease the Deliverability shown each Year in the earlier Production Schedule.
The revised Production

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Schedule sets the Deliverability and Annual Purchase Obligation for the
remaining term of the Agreement (beginning in 2003) unless changed as provided
below.

            3.3.3 During (but not before) the fifteen (15) Day periods ending
September 30 of 2005, and September 30, 2010, Sellers may give Buyer a revised
Production Schedule for the remaining Years of the Agreement, subject to the
following limitations:

                  3.3.3(a) the Deliverability for any remaining Year may be
decreased, but may not be increased unless Buyer agrees to the increase; and

                  3.3.3(b) the Deliverability for any remaining Year cannot be
decreased without 27 Months notice. For example, a revised Production Schedule
given during the fifteen (15) Day period ending September 30, 2005 cannot
decrease Deliverability for any Year before 2008.

            3.3.4 Either Seller may meet its obligations under this Agreement
with Gas from outside the Field. If Anadarko or Phillips at any time has a
reasonable basis for believing that it will not then or in the future be able to
meet its obligations, it must immediately notify Buyer. No later than September
30th of each Year, and at anytime on request with thirty (30) Days notice:

            a. Anadarko and Phillips will give Buyer a forecast of
Deliverability for the remaining Years of the Agreement; and

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            b. Buyer will give Sellers a forecast of Requirements, Existing
Commitments, and New Commitments for the remaining Years of the Agreement and an
estimate of how much additional Gas ENSTAR expects to purchase each Year.

      Whenever Anadarko or Phillips conducts a well test, the results will be
given promptly to Buyer. Buyer will keep the well test data confidential. The
purpose of the forecasts and the well test data is to assist Buyer and Sellers
in planning. The forecasts and well test data are for information only, and do
not change the obligations of the Parties.

            3.3.5 At various times after February 1, 2002, Sellers may determine
that the Field contains more Gas than is necessary to meet their obligations
under the Production Schedule then in effect plus obligations to third parties.
That Gas is defined as "Additional Gas." Whenever Sellers have Additional Gas,
they shall promptly offer it to Buyer for purchase under the terms of this
Agreement. The offer shall be made by giving Buyer an "Incremental Production
Schedule." An Incremental Production Schedule is identical in concept and form
to the Production Schedule (defined in this Section) but shows the
Deliverability and Annual Purchase Obligation (based on a Swing Rate of 2.5)
available from the Additional Gas. The Buyer must respond to Sellers' offer
within thirty (30) calendar Days of receipt by indicating how much of the
Additional Gas (i.e., the Deliverability and corresponding Annual Purchase
Obligation) Buyer will purchase each Year. The amounts Buyer agrees to purchase
will be added to the Production Schedule then in effect. Any

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Additional Gas which Buyer does not choose to buy may be sold to third parties,
subject to the following conditions:

                  3.3.5(a) The Engineer must first give an opinion that it is
unlikely that the third-party sales will adversely affect Sellers' ability to
meet their obligations under this Agreement; and

                  3.3.5(b) The total term of each third-party sale (whether a
single agreement or multiple agreements) cannot exceed three Years.

      3.4 GAS BALANCING: The quantity of Gas that Buyer actually purchases each
Year may not equal the quantity that Buyer is obligated to purchase ("Annual
Purchase Obligation") under Section 3.1 because of forecasting limitations,
changes in weather, and other operating factors, Buyer will not know the total
Gas purchased from other suppliers until shortly after year-end. Any difference
between the amount purchased from Sellers and the Annual Purchase Obligation for
any Year ("Balancing Gas")shall be balanced in January and February of the next
Year using the following procedures:

            3.4.1 If in any Year Buyer purchases less than the Annual Purchase
Obligation for the reasons listed in Section 3.4 (deducting from actual
purchases any Balancing Gas taken during that Year to satisfy the Annual
Purchase Obligation of prior Years), the Balancing Gas shall be purchased in
January and February of the following Year in addition to the Annual Purchase
Obligation for the following Year. All Gas purchased in

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January and February shall be deemed to be Balancing Gas until Buyer has
purchased all the Balancing Gas it is obligated to purchase.

            3.4.2 If all of the Balancing Gas is not taken during January and
February, Buyer shall pay in March (when the bill for February deliveries is
paid) for the Balancing Gas not taken. Buyer may take the Balancing Gas, paid
for but not taken at any time during the three Years following the Year in which
payment was made, or before any earlier termination of this Agreement, but the
Balancing Gas shall not reduce the Annual Purchase Obligation for each Year.

            3.4.3 If in any Year Buyer purchases more than the Annual Purchase
Obligation for the reasons listed in Section 3.4 (deducting from actual
purchases any Balancing Gas taken during that Year to satisfy prior Years), the
Balancing Gas shall be deducted from the Annual Purchase Obligation for the
following Year if, in Buyer's opinion, the deduction in the following Year is
necessary to comply with the terms of gas purchase agreements with third
parties.

            3.4.4 The price for Balancing Gas shall be the Price in effect for
the Year in which the Balancing Gas should have been purchased as part of the
Annual Purchase Obligation.

      3.5 UNANTICIPATED SHORTAGES: Buyer and ENSTAR are public utilities and
must attempt to meet the needs of customers. If Anadarko or Phillips for any
reason, including

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a Force Majeure Event or a declaration under Section 3.6 that production is not
Economic, does not deliver all of the Gas each would otherwise be obligated to
deliver on any Day or if Buyer or ENSTAR for any reason, including a Force
Majeure Event, cannot take from Anadarko or Phillips all of the Gas Buyer is
obligated to take on any Day, Buyer may acquire whatever Gas is necessary to
cover the shortage, In either event, Buyer will purchase or take only the amount
of Gas necessary to cover the shortage, but any purchases by Buyer to satisfy
the shortage shall not be deemed a waiver of any remedies or rights available to
Buyer, Anadarko, or Phillips. The Annual Purchase Obligation for any Year shall
be reduced by the amount of Gas purchased under this Section during that Year.

      3.6 GAS PRODUCTION NOT ECONOMIC: "Not Economic" means that the cash
out-of-pocket costs (i.e., the costs which would not be incurred if the Gas were
not produced) of producing Gas at a Swing Rate of 2.5 exceed the proceeds (i.e.,
Price times volume), net of all royalties, from the Gas. If the Sellers forecast
and the Engineer agrees that Gas production will be Not Economic, Sellers'
obligation to produce, deliver, and sell Gas will be suspended so long as
production is expected to be Not Economic, but this Agreement will otherwise
remain in effect until terminated under Article V. When determining whether
production is Not Economic or Economic, sunk costs will not be considered, and
any potential capital costs and other costs which would be incurred to benefit
production into the future will be amortized on a straight line over the
expected life

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of the remaining production. Sellers cannot invoke this provision on less than
one hundred eighty (180) Days notice to Buyer. During any period that Gas
production is Not Economic, Anadarko or Phillips may make sales to third parties
at a Swing Rate of 1.2 or less. If Sellers later forecast and the Engineer
agrees that Gas production will become Economic (i.e., the proceeds net of all
royalties will exceed the cash out-of-pocket costs of production), Gas
production sales and purchases will resume except to the extent purchases are
limited by Gas purchased under Section 3.5 (Unanticipated Shortages).

      3.7 QUANTITY CALCULATION EXAMPLE: Exhibit B is a comprehensive example of
Article III.

      3.8 TITLE AND RISK OF LOSS: Title to, risk of loss, and liability for all
Gas sold and delivered by Anadarko or Phillips and purchased and received by
Buyer shall pass to Buyer at the Receipt Point.

      3.9 OPERATIONAL COMMUNICATIONS: Buyer will notify Sellers (or anyone
designated by Sellers) by telephone periodically as to the volumes required by
Buyer. Sellers recognize that Buyer may change its volumes more than once each
Day and that a volume may not be changed for a number of Days. The purpose of
this Section is to provide communication between Buyer and Sellers about Field
operations and Buyer's needs. Communications under this Section do not change
the obligations of the Parties.

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                                   ARTICLE IV
                          PRICE AND TRANSPORTATION FEE

      4.1 GAS PRICE: Buyer shall pay Anadarko and Phillips a Gas price (the
"Price") for each Mcf of Gas purchased from them. The Price will be adjusted
annually and the adjusted Price will be in effect for the following Year.

            4.1.1 Price for 2002: The Price for 2002 shall be $2.75 per Mcf.

            4.1.2 Price for 2003 and Later: The Price for each Year after 2002
shall be determined by the following formula:

                            P = IP x [(1 + Adjuster) / 2]

            P = Price for any given Year beginning 1/1/03(in $ per Mcf)

            IP = $2.75 per Mcf

            Adjuster =  GDPIPD for the Quarter ended June 30 of
                        the Year before the Year for which the
                        Price is calculated GDPIPD for the
                        Quarter ended June 30,2001

      "GDPIPD" means the Gross Domestic Product Implicit Price Deflator prepared
by the Bureau of Economic Analysis, Economics and Statistics Administration,
United States Department of Commerce.

      4.2 REFERENCES: If the source of data or information used to calculate the
Price is not available or any Party believes that (i) the sources have been
computed or published in error, or (ii) the sources have so changed in the basis
of calculation or reporting as to materially alter the validity of the Price
adjustments as originally contemplated, then the Parties shall

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negotiate whether there is a reference failure and an appropriate amendment to
or replacement of the Price formula.

      4.3 CALCULATION: Buyer shall calculate the adjusted Price in October of
each Year and provide the calculation and supporting data to Sellers. Within
thirty (30) Days of receipt of the calculation, Anadarko or Phillips shall
notify Buyer of the reasons for any objections to the calculation.

      4.4 NO DETERMINATION: If an adjusted Price cannot be determined by January
1 of any Year, the current Price will be used until the adjusted Price is
determined. The current Price will then be changed retroactively to January 1st
and Buyer will promptly pay or receive a credit (with interest at the rate set
in Section 11.3) for the difference.

      4.5 TRANSPORTATION FEE: It is Sellers' responsibility to build all
pipelines and other facilities necessary to deliver the Gas to the Receipt
Points. Buyer shall pay Anadarko and Phillips (in addition to the Price) a fee
of $0.15 per Mcf for delivering their Gas to the Receipt Points. The fee will
remain the same during the term of this Agreement.

      4.6 PRICE EXAMPLE: Exhibit C is a comprehensive example of the calculation
of Price.

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                                    ARTICLE V
                                      TERM

      The effective date of this Agreement is the date on which it has been
executed by all Parties. Unless the Parties agree to extend this Agreement, this
Agreement shall terminate on the earlier of (a) December 31, 2016, (b)
termination under another provision of this Agreement, or (c) on January 1 of
the first Year in which a Production Schedule shows Deliverability of zero which
is not subject to a later increase at Sellers' option. For example, the
September 30, 2005 Production Schedule could show Deliverability of zero
beginning in 2012. The Agreement would terminate on January 1, 2012 because
Sellers have no right later to increase the Deliverability for 2012.

                                   ARTICLE VI
                                      TAXES

      6.1 GENERAL ALLOCATION: With the exception of Production Taxes, Sellers
shall pay all taxes, fees, penalties, and assessments attributable to the Gas or
any other activity or facility prior to the Receipt Point. Buyer shall pay all
taxes, fees, penalties, and assessments attributable to the Gas or any other
activity or facility at or after the Receipt Point.

      6.2 SPECIFIC ALLOCATION: Buyer shall reimburse Sellers for all Production
Taxes. Sellers shall pay all other taxes required to be paid to governmental
authorities for the Gas produced and for which the taxable incident arises prior
to the Receipt Point. Buyer shall

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pay all taxes based on the Gas which arise at or after passage of title and
possession of the Gas at or after the Receipt Point.

      6.3 NEW TAXES: The payment of any new taxes or increases in existing taxes
enacted or otherwise made effective after the date of this Agreement by any
governmental authority shall be allocated as provided in Sections 6.1 and 6.2.

      6.4 PRODUCTION TAX ADJUSTMENT: As provided in Section 11.1, Sellers shall
bill Buyer each Month for Production Taxes due the State of Alaska on the Gas
purchased during the prior Month. The bill shall include the data and
calculations made to determine the Production Taxes. Any claim by Sellers for
additional Production Taxes must be made within 180 Days of the initial billing.
Buyer shall not be responsible for interest on any additional Production Taxes.
If Sellers determine at any time that they have overbilled Buyer for Production
Taxes, they shall credit Buyer with the overcharge, plus interest at the rate
set in Section 11.3, on the next Month's invoice.

                                   ARTICLE VII
                                    ROYALTIES

      Sellers shall be responsible for the payment of all royalties, and any
fees, penalties and assessments attributable to the royalties, on Gas delivered
under this Agreement.

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<PAGE>

                                  ARTICLE VIII
                             RESERVATIONS BY SELLERS

      8.1 SELLERS' RESERVATIONS. Anadarko and Phillips each reserve the
following rights:

            8.1.1 The right to operate the Field free from any control by Buyer,
including, without limitation, the right, but not the obligation, to drill new
wells, to repair and rework old wells, to renew or extend, in whole or in part,
any oil and gas lease, and to abandon any well or surrender any oil and gas
lease.

            8.1.2 The right, free from any control by Buyer, to continue
participation in or to form or to participate in the formation of any unit which
may include all or any part of the Field, and to increase or decrease the
portion of the Field contained in any unit and to pool and combine any unit or
any part of any unit with properties owned by others.

            8.1.3 The right to use Gas produced from the Field for the
development and operation of the Field, including, without limitation, any uses
incidental to Field development, the production, transportation, testing,
flaring, processing or delivery of Gas.

            8.1.4 The right to deliver Gas produced from the Field for any
royalties required to be paid in-kind. Sellers' obligations to deliver and sell
Gas to Buyer shall be reduced by the amount of royalty Gas taken in-kind under
the terms of the leases.

            8.1.5 The right at any time prior to the delivery of Gas to Buyer to
process Gas from the Field for the removal of any constituents, including, but
not limited to, the right to use Gas as fuel in processing for the recovery of
(i) liquefiable hydrocarbons other than

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<PAGE>

methane; (ii) sulfur; and (iii) helium and other gaseous components. Buyer shall
not acquire any right, title or interest in any products resulting from the
processing.

            8.1.6 The right to commingle Gas produced from the Field with Gas
produced from other areas.

            8.1.7 The right to substitute Gas produced from other areas for Gas
produced from the Field, provided that the substitute Gas is delivered to a
Receipt Point (or to another Receipt Point acceptable to Buyer) at the Sellers'
expense.

                                   ARTICLE IX
                                     QUALITY

      9.1 HEATING VALUE OF GAS:

            9.1.1 Gas shall have a Gross Heating Value of not less than nine
hundred fifty (950) BTUs per Standard Cubic Foot nor more than one thousand
fifty (1,050) BTUs per Standard Cubic Foot.

            9.1.2 The Gross Heating Value of Gas shall be determined from a
representative composite Gas sample taken at the point of measurement by
periodic tests to be conducted monthly by Buyer or at such other intervals as
the Parties may mutually agree. The determination shall be made by means of a
calorimeter, or chromatograph, by calculation from the component analysis using
NGPA Publication 2145, as it may be revised, entitled "Physical Constants of
Paraffin Hydrocarbons or Other Compounds of Natural Gas."

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<PAGE>

      9.2 DELETERIOUS MATTER SPECIFICATION: Gas shall be commercially free of
dust, gum, gum-forming constituents, or other liquid or solid matter which may
separate from the Gas in transportation, shall not exceed one hundred twenty
degrees Fahrenheit (120 degree F.), and shall not contain:

            a. More than four (4) pounds of water per million Standard Cubic
Feet of Gas;

            b. More than one (1) grain of hydrogen sulfide per one hundred (100)
Standard Cubic Feet of Gas;

            c. More than twenty (20) grains of sulphur per one hundred (100)
Standard Cubic Feet of Gas;

            d. In excess of (i) three percent (3%) by volume of carbon dioxide;
or (ii) one percent (1%) by volume of oxygen.

      9.3 FILTRATION OF GAS: Before commencing deliveries under this Agreement,
Sellers shall install, operate and maintain a .3 micron screen coalescing filter
or other similar device to extract condensate from Gas prior to its delivery to
the Receipt Point.

      9.4 BUYER'S RIGHT TO REFUSE GAS: Buyer shall have the right to refuse to
accept delivery of any Gas failing to meet the quality requirements of this
Article IX. It is possible that Gas produced from some wells in the Field will
not meet the quality standards required by this Article because of excess carbon
dioxide or hydrogen sulfide. If Buyer refuses to

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accept that Gas, and if Sellers determine and the Engineer agrees that incurring
the cost of conditioning the Gas to meet the quality standards would not be a
prudent economic decision, that Gas shall no longer be subject to this
Agreement.

                                    ARTICLE X
                    PRESSURE, MEASUREMENT, METERING, TESTING

      10.1 PRESSURE: Gas delivered under this Agreement shall be delivered at a
pressure sufficient to enter Buyer's Pipeline System at the Receipt Point, but
Sellers shall not be required to deliver to the Receipt Point at a pressure
greater than 1050 PSIG.

      10.2 MEASUREMENT: Sellers, at their expense, shall provide at the Receipt
Point continuous data showing production rate from the Field. Buyer shall own,
maintain and operate, at Buyer's expense, measurement stations at or near the
Receipt Point. Unless agreed otherwise, the Receipt Point measurement station
shall consist of (a) standard measuring equipment conforming to the requirements
of American Gas Association Gas Measurement Committee Reports now in effect or
as amended or supplemented during the term of this Agreement, (b) appurtenant
facilities, (c) hydrometers, and (d) data telemetry equipment. Sellers shall
have access to the Receipt Point measurement station(s) at which Sellers tender
Gas at reasonable hours, but Buyer will make all calibrations, measurements and
adjustments.

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<PAGE>

      10.3 INACCURATE METERS: If a meter is out of service or registering
inaccurately, the volumes of Gas delivered shall be estimated:

            a. by using the registration of the check meter or meters of
Sellers, if installed, and accurately registering, or in the absence of (a),

            b. by correcting the error if the percentage of error is
ascertainable by calibration, test or mathematical calculations, or in the
absence of both (a) and (b), then,

            c. by estimating the quantity of deliveries based on deliveries
during comparable periods under similar conditions when the meter was
registering accurately.

      10.4 TESTING: Buyer will test the accuracy of the measuring equipment at
least once a Month. Buyer will give Sellers reasonable advance notice so that
Sellers may conveniently witness the tests. If Sellers notify Buyer that they
desire to test the accuracy of any measuring equipment, Buyer will test the
accuracy of the measuring equipment promptly after notification. Sellers shall
have the right to witness the calibrating, adjusting and testing of the
measuring equipment. Buyer shall, on request, give its physical test and meter
proving reports to Sellers. If there is a dispute about any measurement, the
Parties shall conduct a joint test which shall be dispositive.

      10.5 CORRECTION: If any measuring equipment is found to be inaccurate by
one percent (1%) or less, previous records of the equipment shall be considered
accurate. If any measuring equipment is found to be inaccurate by more than one
percent (1 %), any previous

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records of that equipment will be corrected to zero error for any period known
definitely or agreed upon. If a period of inaccuracy is not definitely known or
agreed upon, the correction shall be made for a period of one-half (1/2) of the
time elapsed since the date of the last test. The correction shall fully settle
all claims based on the inaccuracy. Any measuring equipment found by test to be
inaccurate will be adjusted at once to measure accurately.

      10.6 RECORDS: Each Party shall preserve for a period of at least six (6)
Years all test data, charts and other similar records for amounts of Gas
purchased under this Agreement.

      10.7 STANDARDS: Gas volumes shall be determined as follows:

            a. The unit of volume measurement shall be one Standard Cubic Foot
of Gas with correction for temperature and pressure deviation from the Ideal Gas
Laws according to ANSI/API 2530 or AGA Report No. 8, as applicable.

            b. The average absolute atmospheric pressure shall be assumed to be
fourteen and sixty-five hundredths (14.65) pounds per square inch, irrespective
of actual elevation or location of the Receipt Point above sea level or
variations in actual atmospheric pressure.

            c. The specific gravity of Gas shall be determined by the use of a
spot test method or, if the parties later agree in writing, by the use of a
recording gravitometer generally accepted in the industry. If a recording
gravitometer is used, the arithmetic average of the specific gravity of Gas
flowing through the meters shall be used in computing Gas

GAS SALES AGREEMENT
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<PAGE>
volumes. If a spot test method is used, the specific gravity of the Gas shall be
determined at quarterly intervals, or more often if changes in specific gravity
indicate that it is necessary. Any, test shall determine the specific gravity to
be used in computation of volumes effective the first Day of the following Month
and shall be used until changed by subsequent test.

            d. The temperature of Gas shall be determined by a recording
thermometer so installed that it will record the temperature of the Gas flowing
through the meters. The average of the recorded temperatures to the nearest one
degree Fahrenheit (1 degrees F.) obtained while Gas is being delivered shall be
used in computing measurements for that Day.

      10.8 CHECK METERS: Sellers shall have the right to operate and maintain
check meters and other test equipment and devices at its expense.

                                   ARTICLE XI
                          BILLING, PAYMENT AND RECORDS

      11.1 BILLING: Each Seller shall provide Buyer on or before the second
(2nd) business day of each Month a statement showing its share of the total
volume of Gas produced from the Field during the preceding Month. On or before
the tenth (10th) Day of each Month, Buyer shall furnish to Sellers a statement
showing the total volume of Gas delivered during the preceding Month. By the
fifteenth (15th) Day of each Month, each Seller shall give Buyer an invoice
showing the cost of the Gas (i.e., the Price times the total volume), the
transportation fee for the Gas (at $0.15 per Mcf), and Production Taxes due
under Article VI.

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<PAGE>

Buyer shall make payment to each Seller by check or wire transfer on or before
the twenty-fifth (25th) Day of each Month. Should Buyer's payment be different
than the invoice amount, Buyer will provide sufficient detail to support the
adjustments made by Buyer to the invoice amount. The Parties shall cooperate to
resolve any disputed amount in a timely manner. Buyer may, without prejudice to
any claim or right, pay any disputed amount and must pay any undisputed amount.

      11.2 RECORDS: Each Party shall have the right to inspect the files, books
and records of any other Party that pertain to this Agreement Inspections shall
be conducted during regular business hours after reasonable notice. Adjustments
for any over or under payments shall be made promptly upon determination. All
billings shall be conclusively presumed final and accurate unless objected to in
writing within two (2) Years after the end of the Year in which the Gas was
delivered. The obligations to make payment for Gas received and to balance the
over and under deliveries, if any, to zero shall survive the termination or
cancellation of this Agreement.

      11.3 INTEREST: Any amount not paid when due (or any overpayment) shall
accrue interest daily at the prime rate charged by the First National Bank of
Anchorage or its successor (but not to exceed the maximum rate permitted by
law).

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<PAGE>

                                   ARTICLE XII
                                  RCA APPROVAL

      12.1 TIMELINE: This Agreement must be approved by the RCA before Buyer
purchases Gas. Buyer will submit this Agreement to the RCA within thirty
(30)days of the effective date of Agreement. Buyer will, at its expense, proceed
diligently, using its best efforts to obtain RCA approval. Buyer will give
Sellers copies of all pleadings and will keep Sellers informed about the status
of the RCA proceedings. Sellers will cooperate with and assist Buyer in Buyer's
efforts to obtain RCA approval.

      12.2 APPROVAL: This Agreement shall be deemed approved when the RCA issues
an order, not subject to further appeal, finding that all costs of purchasing
the Gas are fully recoverable in the rates of ENSTAR.

      12.3 TERMINATION: If the RCA does not approve all the terms of this
Agreement or if it imposes terms and conditions unacceptable to Buyer or either
Seller, Buyer, Anadarko, or Phillips may terminate the Agreement by giving
notice of termination within thirty (30) Days of the date the RCA's order is
served. If the RCA has not approved this Agreement by May 1, 2001, any Party may
terminate the Agreement after thirty (30) Days notice.

                                  ARTICLE XIII
                                  BOILER PLATE

      13.1 FORCE MAJEURE:

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            a. Non-Performance: No Party shall be responsible for any loss or
damage to another Party resulting from any delay in performing or failure to
perform any obligation under this Agreement (other than Buyer's obligation to
make payments due and owing under this Agreement) if the failure or delay is
caused by a Force Majeure Event.

            b. Force Majeure Event: "Force Majeure Event" means any event that
directly or indirectly renders a Party unable, wholly or in part, to perform or
comply with any obligation, covenant or condition in this Agreement if the
event, or the adverse effects of the event, is outside of the control of, and
could not have been prevented by, the affected Party with reasonable foresight,
at reasonable cost, and by the exercise of reasonable diligence in good faith,
and is not attributable to the negligence or willful misconduct of the affected
Party. Force Majeure Events include the following events (to the extent they
otherwise satisfy the definition):

                  i. act of God, fire, lightning, landslide, earthquake, storm,
hurricane, hurricane warning, flood, high water, washout, explosion, or well
blowout;

                  ii. strike, lockout, or other industrial disturbance, act of
the public enemy, war, military operation, blockade, insurrection, riot,
epidemic, arrest or restraint by government of people, terrorist act, civil
disturbance, or national emergency;

                  iii. the inability of the affected Party to acquire, or the
delay on the part of the affected Party in acquiring materials, supplies,
machinery, equipment, servitudes,

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<PAGE>

right-of-way grants, easements, permits or licenses, approvals, or
authorizations by regulatory bodies or oil and gas lessors needed to enable the
Party to perform;

                  iv. breakage of or accident to machinery, equipment,
facilities, or lines of pipe, and the repair, maintenance, improvement,
replacement, test, or alteration to the machinery, equipment, facilities, or
lines of pipe, and the freezing of a well or line of pipe, well blowout, or the
partial or entire failure of a Gas well; or

                  v. act, order, or requisition of any governmental agency or
acting governmental authority, or any governmental proration, regulation, or
priority.

            c. Notice and Remedv: The Party claiming the excuse of Section 13.1
(a) shall:

                  i. notify the other Parties of the Force Majeure Event within
a reasonable time after its occurrence, giving reasonably full particulars and
its best estimate of the time required to remedy the Force Majeure Event;

                  ii. keep the other Parties informed of all significant
developments;

                  iii. exercise diligence in good faith to remedy the Force
Majeure Event and resume full performance under this Agreement as soon as
reasonably practicable (except that the settlement of strikes, lockouts, or
other labor disputes or the restoration of a failed Gas well shall be entirely
within the discretion of the affected Party); and

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<PAGE>

                  iv. if the Party claiming the Force Majeure Event estimates
that the Force Majeure Event will not be remedied for twelve (12) months or
more, any other Party may terminate this Agreement on sixty (60) Days notice.

      13.2 BINDING ON SUCCESSORS: This Agreement shall be binding upon and inure
to the benefit of the legal representatives, successors and assigns of the
Parties. No Party may assign its obligations without first obtaining the written
consent of the other Parties, which consent shall not be unreasonably withheld
or delayed; provided, however, that no consent shall be required in the event
that all or substantially all of the assets of a Party are acquired by another
person or in the event that a Party is merged, consolidated or reorganized with
another person; further provided, however, that in the event of an acquisition,
merger, reorganization, stock transfer, corporate restructuring or
consolidation, the surviving entity shall assume the obligations and benefits of
this Agreement. Nothing contained in this Section shall in any way prevent any
Party from pledging or mortgaging its rights under the Agreement as security for
its indebtedness.

      13.3 RESTRICTIONS ON TRANSFERS BY SELLERS: Anadarko or Phillips shall not
assign or sublease any lease which is used to supply Gas under this Agreement
unless the assignee or sublessee ratifies and joins in this Agreement as a party
seller by executing an instrument describing the lease and dedicating the Gas to
the performance of this Agreement.

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<PAGE>

      13.4 EASEMENT AND RIGHTS-OF-WAY: Sellers and Buyer, at no expense to the
other, grant and assign to each other all necessary easements and rights-of-way
for the construction of pipelines or other facilities necessary or convenient
for the delivery or receipt of Gas.

      13.5 GOVERNING LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of Alaska, excluding its rules of
conflicts of laws which would refer it to the laws of another jurisdiction. The
Parties agree that any judicial proceeding shall be brought in the state courts
for the State of Alaska in Anchorage.

      13.6 AGREEMENT NOT TO BE CONSTRUED AGAINST ANY PARTY AS DRAFTER: The
Parties recognize that this Agreement is the product of the joint efforts of the
Parties and agree that it shall not be construed against any Party as drafter.

      13.7 NOTICES: All notices, consents, requests, demands, instructions,
approvals and other communications permitted or required shall be made in
writing by two of the following methods: (a) personally delivered, (b) delivered
and confirmed by facsimile transmission, (c) delivered by Federal Express, DHL
or other reputable overnight courier delivery service, (d) e-mail, or (e)
deposited in the United States mail, first class, postage prepaid, certified or
registered, return receipt requested, addressed as follows:

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<PAGE>

      If to Phillips:

            For Gas Sales and Scheduling:

                  Attention: Cook Inlet Gas Marketing
                  Address:   P.O. Box 100360
                             Anchorage, AK 99510-0360
                  Telephone: (907)265-1686
                  Facsimile: (907)263-4994

            For Payments:

                  Attention: Accounting Specialist
                  Address:   P.O. Box 196598
                             Anchorage, AK 99519-6598
                  Telephone: (907) 265-6046
                  Facsimile: (907) 263-4988

            For All Other Notices:

                  Attention: Cook Inlet Asset Manager
                  Address:   P.O. Box 100360
                             Anchorage, AK 99510-0360
                  Telephone: (907) 265-4511
                  Facsimile: (907) 263-4035

      If to Anadarko:

            For Gas Sales and Scheduling:

                  Attention: Project Manager - Development Alaska
                  Address:   3201 C Street, Suite 603
                             Anchorage, AK 99510-0360
                  Telephone: (907) 563-9519
                  Facsimile: (907) 563-9479

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<PAGE>

            For Payments:

                  Attention: Mellon Bank, Pittsburgh, PA
                             ABA No. 043-000-261
                             SWIFT - MELN US 3P
                             Anadarko Petroleum Account No. 1862921

            For All Other Notices:

                  Attention: Manager - Trading and Operations

                  Address:   Physical: 17001 North chase Drive
                                        Houston, TX 77060
                             Mailing:   P.O. Box 1330
                                        Houston, TX 77251-1330
                  Telephone: (281) 875-1101
                  Facsimile: (281) 876-8663

      If to Buyer:

            For Gas Sales and Scheduling:

                  Attention: Vice President, Finance and Rates
                  Address:   Physical: 3000 Spenard Road
                                       Anchorage, AK 99503
                             Mailing:  P.O. Box 190288
                                       Anchorage, AK  99519
                  Telephone: (907) 264-3661
                  Facsimile: (907) 264-3671

            For Payments:

                  Attention: General Accounting Manager
                  Address:   Physical:  3000 Spenard Road
                                        Anchorage, AK 99503
                             Mailing:   P.O. Box 190288
                                        Anchorage, AK 99519
                  Telephone: (907) 264-3628
                  Facsimile: (907) 272-3403

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<PAGE>

            Day-to-Day Operations and Scheduling:

                  Attention: Gas Control
                  Address:   Physical: 3000 Spenard Road
                                       Anchorage, AK 99503
                             Mailing:  P.O. Box 190288
                                       Anchorage, AK 99519
                  Telephone: (907) 264-3788
                  Facsimile: (907) 264-3779

            For All Other Notices:

                  Attention: Vice President, Finance and Rates
                  Address:   Physical: 3000 Spenard Road
                                       Anchorage, AK 99503
                             Mailing:  P.O. Box 190288
                                       Anchorage, AK 99519
                  Telephone: (907) 264-3661
                  Facsimile: (907) 264-3671

or to any other place within the United States of America designated in writing.
All notices given by personal delivery, overnight courier, or mail shall be
effective on the date of actual receipt at the appropriate address. Notice given
by facsimile shall be effective upon actual receipt if received during
recipient's normal business hours or at the beginning of the next business Day
after receipt if received after the recipient's normal business hours.

      13.8 ENTIRE AGREEMENT: This Agreement constitutes the entire agreement and
understanding between the Parties about the subject matter of this transaction
and all prior agreements, understandings and representations, whether oral or
written, about this subject

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<PAGE>

matter are merged into and superseded by this written Agreement. No amendment to
this Agreement shall be binding on any Party until reduced to writing and signed
by the Parties.

      13.9 HEADINGS: The headings throughout this Agreement are for reference
purposes only and shall not be construed or considered in interpreting the terms
and provisions of this Agreement.

      13.10 NO INCIDENTAL OR CONSEQUENTIAL DAMAGES: Neither Party shall have any
liability to the other for incidental or consequential damages resulting from or
arising out of this Agreement.

      13.11 TERMINATION EVENTS:

            a. Termination Event Defined: Each of the following events is a
Termination Event: (i)any Party makes an assignment or general arrangement for
the benefit of creditors; (ii) any Party defaults in its payment obligations
under this Agreement; (iii) any Party commences, authorizes, or acquiesces in
the commencement of a proceeding under any bankruptcy, insolvency, or similar
law, or has such a proceeding commenced against it; or (iv) any Party or any
Party's parent company becomes bankrupt or insolvent, or is unable to pay its
debts when due.

            b. Cure Period: If a Termination Event described in(ii)or(iv)
occurs, any non-defaulting Party may give notice to the defaulting Party
specifying the default. The defaulting Party shall have sixty (60) Days from the
notice to cure. If the default is not cured

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within sixty (60) Days, any non-defaulting Party has the right to withhold or
suspend deliveries or payment, or terminate this Agreement. If any other
Termination Event occurs, any, non-defaulting Party has the right immediately to
withhold or suspend deliveries or payment, or terminate this Agreement. The
right to terminate is limited by Section 13.13.

          c. Reservations: Each Party reserves all rights, set-offs,
counterclaims, and other defenses to which it is entitled under this Agreement.

      13.12 SEVERAL, NOT JOINT, LIABILITY: The rights, duties, obligations, and
liabilities of Phillips and Anadarko shall be several and not joint or
collective, and each Seller shall be responsible only for its obligations under
this Agreement. The Sellers do not intend to create, and this Agreement shall
not be construed as creating, any type of partnership or association which would
make the Sellers liable as partners. This Agreement was drafted as one document
for the convenience of the Parties. This Agreement shall be construed as two
separate and distinct obligations between (i) Buyer and Phillips and (ii) Buyer
and Anadarko.

      13.13 LIMITATION ON RIGHT TO TERMINATE: One Seller cannot terminate this
Agreement or suspend or withhold performance to Buyer because of a default by
the other Seller or a default under Section 13.11(a)(iv) by a Seller's parent
company. If this Agreement is terminated under Section 13.11 by one Seller but
not the other, the remaining

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Seller and the Buyer may continue the Agreement at whatever Deliverability and
Annual Purchase Obligation levels they find acceptable or either may terminate
the Agreement.

      13.14 WAIVER: No failure or delay by any Party in exercising any right
under this Agreement shall operate as a waiver of that right, nor shall any
partial exercise of a right preclude any further exercise of that or any other
right. The rights shall be cumulative and not exclude any rights or remedies
provided by law.

      13.15 MULTIPLE ORIGINALS: Each copy of this Agreement which is properly
signed by all Parties shall be deemed an original.

      13.16 FEES AND COSTS: In the event of any action, or any judicial or
arbitration proceeding to resolve any dispute under this Agreement, or to
enforce any term of this Agreement, or to protect or preserve any rights under
this Agreement, the prevailing party shall be entitled to an award of costs and
actual reasonable attorney fees incurred. In the event of any bankruptcy
proceeding, including relief from stay, assumption or rejection of executory
contracts or transfer avoidance, the debtor in bankruptcy shall pay all costs
and actual reasonable attorney fees incurred by the non-debtor Parties, which
payment shall be necessary to the cure of all defaults under this Agreement.

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<PAGE>

      13.17 AUTHORITY TO SIGN: Each person signing this Agreement warrants that
he or she has authority to sign the Agreement.

ALASKA PIPELINE COMPANY                 ANADARKO PETROLEUM CORPORATION

By /s/ Daniel M. Dieckgraeff            By /s/ R. J. Shaffer
   --------------------------------        ---------------------------
Its:  Daniel M.  Dieckgraeff            Its:
      Vice President, Rates  &  Finance
Date: 5-16-2000                         Date: 04-28-00

                                        PHILLIPS ALASKA, INC.

                                        By /s/ J. O. Leonard
                                           ---------------------------
                                        Its: VP, GKA and Cook Inlet

                                        date: 05-15-00

GAS SALES AGREEMENT
Page 40

<PAGE>

                                    EXHIBIT A

                  TO THE GAS SALES AGREEMENT BETWEEN AND AMONG
                    ANADARKO PETROLEUM CORPORATION, PHILLIPS
                    ALASKA, INC., AND ALASKA PIPELINE COMPANY

      ALASKA PIPELINE COMPANY'S EXISTING COMMITMENTS

1.    Agreement between Shell Oil Company and Alaska Pipeline Company dated
      December 20, 1982.

      a.    Letter Agreement dated May 24, 1983 amending Agreement between Shell
            Oil Company and Alaska Pipeline Company dated December 20, 1982,

      b.    Agreement between Shell Western E & P, Inc. and Alaska Pipeline
            Company dated January 26, 1988 amending Agreement between Shell Oil
            Company and Alaska Pipeline Company dated December 20, 1982.

      c.    Partial assignment of Agreement between Shell Oil Company and Alaska
            Pipeline Company dated December 20, 1982, as amended, from Shell
            Western E & P, Inc. to ARCO Alaska, Inc. effective October 1, 1989.

      d.    Agreement between Alaska Pipeline Company and Shell Western E & P,
            Inc. dated November 15, 1991, to amend a retained interest in the
            Agreement between Shell Oil Company and Alaska Pipeline Company
            dated December 20, 1982, as amended.

      e.    Agreement between ARCO Alaska, Inc. and Alaska Pipeline Company
            dated November 15, 1991, to amend an assigned interest in the
            Agreement between Shell Oil Company and Alaska Pipeline Company,
            dated December 20, 1982, as amended.

      f.    Partial assignment of Agreement between Shell Oil Company and Alaska
            Pipeline Company dated December 20, 1982, as amended, from Shell
            Western E & P, Inc. to Chevron U.S.A., Inc. effective January 1,
            1993.

GAS SALES AGREEMENT
Page 41

                                    EXHIBIT A
                               Page 1 of 2 pages

<PAGE>

      g.    Assignment of the retained interest in the Agreement between Shell
            Oil Company and Alaska Pipeline Company dated December 20, 1982, as
            amended, from Shell Western E & P, Inc. to the Municipality of
            Anchorage d/b/a Municipal Light & Power effective September 1, 1996.

2.    Agreement between Phillips Petroleum Company and Alaska Pipeline Company
      dated November 26, 1984.

      a.    Amendment dated May 29, 1986 to Agreement between Phillips Petroleum
            Company and Alaska Pipeline Company dated November 26, 1984.

3.    Agreement between Marathon Oil Company and Alaska Pipeline Company dated
      May 1, 1988.

      a.    Amendment dated December 20, 1989 to the Agreement between Marathon
            Oil Company and Alaska Pipeline Company dated May 1, 1988.

      b.    Amendment dated November 19, 1991 to the Agreement between Marathon
            Oil Company and Alaska Pipeline Company dated May 1, 1988.

GAS SALES AGREEMENT
Page 42

                                    EXHIBIT A
                                Page 2 of 2 pages

<PAGE>

                                    EXHIBIT B

                  TO THE GAS SALES AGREEMENT BETWEEN AND AMONG
           ANADARKO PETROLEUM CORPORATION, PHILLIPS ALASKA, INC., AND
                             ALASKA PIPELINE COMPANY

                          QUANTITY CALCULATION EXAMPLES

This Exhibit contains examples of quantity calculations under Article III of the
Agreement. When computing the Annual Purchase Obligation (which will be stated
in Bcf), the calculations will be rounded to two decimal places. Intermediate
calculations will also be rounded to two decimal places and carried through the
calculation. Instructions for rounding are as follows:

   If the value of the digits following      To round, drop all of the digits
   the second decimal place is:              after the second decimal place and:

   Greater than .005                         Add .01.
   Less than .005                            Do nothing.
   Equals .005                               Do nothing if the digit in the
                                             second decimal place is even. If
                                             the digit in the second decimal
                                             place odd, add .01.

            Examples:

            19.16514         rounds to 19.17
            25.4721          rounds to 25.47
            19.145000        rounds to 19.14
            12.215000        rounds to 12.22

GAS SALES AGREEMENT
Paae 43

                                    EXHIBIT B
                               Page 1 of 6 pages

<PAGE>

      1. Example 1 - Assume that on February 1, 2002, Sellers have provided a
Production Schedule (in accordance with Article 3.3.2) that includes the
following information:

<TABLE>
<CAPTION>
                  ANADARKO         PHILLIPS          TOTAL
               DELIVERABILITY   DELIVERABILITY   DELIVERABILITY
   YEAR         (IN MMCF/DAY)    (IN MMCF/DAY)    (IN MMCF/DAY)
<S>            <C>              <C>              <C>
   2002             12.5             12.5              25
   2003             22.5             22.5              45
   2004             22.5             22.5              45
   2005             22.5             22.5              45
   2006             22.5             22.5              45
   2007             22.5             22.5              45
   2008             22.5             22.5              45
   2009             22.5             22.5              45
   2010             22.5             22.5              45
   2011             22.5             22.5              45
   2012             22.5             22.5              45
   2013             20               20                40
   2014             20               20                40
   2015             20               20                40
   2016             20               20                40
</TABLE>

      Article 3.3 provides that the Annual Purchase Obligation is determined by
the Deliverability. Annual Purchase Obligation and Deliverability for 2002 and
2003 will be Unmet Requirements in accordance with Article 3.1.1. For each Year
from 2004 through the end of 2016, the Annual Purchase Obligation shall equal
(in accordance with Article 3.3) the Deliverability available from the Field for
each Year (expressed in MMcfs per Day) divided by the Swing Rate (2.5)
multiplied by the number of days in the year (365), and divided by 1000 Mcfper
Bcf. The Annual Purchase Obligation for 2004 would be calculated as follows:

      Annual Purchase Obligation = Deliverability / Swing Rate x Days per Year /
1000 MMcf per Bcf

GAS SALES AGREEMENT
Page 44

                                    EXHIBIT B
                               Page 2 of 6 pages

<PAGE>

      Annual Purchase Obligation = (45 MMcf / 2.5) x 365 / 1000 = 18 x 365 /
            1000 = 6,570/1000 = 6.57 Bcf
      Given the Deliverability provided above, the Annual Purchase Obligation
            for the

February 1, 2002 Production Schedule in this example would be:

<TABLE>
<CAPTION>
                 ANADARKO        PHILLIPS           TOTAL        ANNUAL PURCHASE
               DELIVERABILITY   DELIVERABILITY   DELIVERABILITY    OBLIGATION
  YEAR         (IN MMCF/DAY)    (IN MMCF/DAY)    (IN MMCF/DAY)      (IN BCF)
<S>            <C>              <C>              <C>             <C>
  2002             12.5             12.5              25              Unmet
                                                                   Requirements
  2003             22.5             22.5              45              Unmet
                                                                   Requirements
  2004             22.5             22.5              45              6.57
  2005             22.5             22.5              45              6.57
  2006             22.5             22.5              45              6.57
  2007             22.5             22.5              45              6.57
  2008             22.5             22.5              45              6.57
  2009             22.5             22.5              45              6.57
  2010             22.5             22.5              45              6.57
  2011             22.5             22.5              45              6.57
  2012             22.5             22.5              45              6.57
  2013             20               20                40              5.84
  2014             20               20                40              5.84
  2015             20               20                40              5.84
  2016             20               20                40              5.84
</TABLE>

Assume further that the year is 2003 and Buyer's Requirements are 28,282,529 Mcf
(28.282529 Bcf) and Existing Commitments are 22.2 Bcf for 2003. Buyer's Unmet
Requirements for 2003 would be calculated as follows:

          Unmet Requirements =   Requirements - Existing Commitments

          Unmet Requirements =   28,282,529 Mcf - 22,200,000 Mcf

          Unmet Requirements =   6,082,529 Mcf = 2003 Unmet Requirements

GAS SALES AGREEMENT
Page 45

                                    EXHIBIT B
                                Page 3 of 6 pages

<PAGE>

The Annual Purchase Obligation for 2003, in accordance with Article 3.1.1, would
be Buyer's Unmet Requirements, 6,082,529 Mcf.

            To illustrate the balancing provision, assume that for the Year
ended December 31, 2003, Buyer had actually taken 6,202,554 Mcf from Sellers and
22,079,975 Mcf from Existing Commitments. Buyer would have overtaken from
Sellers (and undertaken from Existing Commitments) by 120,025 Mcf (Balancing
Gas). Under Article 3.4.3 120,025 Mcf would be deducted from the Annual Purchase
Obligation for the following year, 2004. The 120,025 Mcf would also be priced at
the 2004 Price.

      2. Example 2 - Assume all the information in Example 1 above, but for five
days during 2003, Buyer's Unmet Requirements exceeded 45,000 Mcf per day (the
amount available from Seller). Assume further that Sellers were unable to
provide any volumes above 45,000 Mcf on those days and Buyer purchased a total
of 25,342 Mcf from third parties to supply its customers. The 2003 Annual
Purchase Obligation, calculated in accordance with Article 3.5, would be the
6,082,529 Mcf calculated in Example 1 above less the 25,342 Mcf or 6,057,187
Mcf.

      3. Example 3 - Assume all the information in Example 1 above, and that the
year is 2005 and Buyer's Requirements are 29,053,226 Mcf (29.053226 Bcf) and
Existing Commitments are 19.1 Bcf for 2005. Buyer's Unmet Requirements for 2005
would be calculated as follows:

GAS SALES AGREEMENT
Page 46

                                    EXHIBIT B
                               Page 4 of 6 pages

<PAGE>


    Unmet Requirements   =   Requirements - Existing Commitments

    Unmet Requirements   =   29,053,226 Mcf - 19,100,000 Mcf

    Unmet Requirements   =   9,953,226 Mcf = 2005 Unmet Requirements

The Annual Purchase Obligation for 2005, in accordance with Article 3.1.1 would
be the lesser of (i) Buyers Unmet Requirements, 9,953,226 Mcf, or (ii) the
Annual Purchase Obligation for the Year (2005) from the February 1, 2002
Production Schedule, 6.57 Bcf (6,570,000 Mcf). For 2005, the Annual Purchase
Obligation would be 6.57 Bcf (6,570,000 Mcf).

      4. Example 4 - Assume that in addition to the February 1, 2002 Production
Schedule used in Example 1 above. Sellers have provided a revised Production
Schedule on September 30, 2005 (in accordance with Article 3.3.3) that includes
the following information:

<TABLE>
<CAPTION>
   YEAR           ANADARKO         PHILLIPS         TOTAL        ANNUAL PURCHASE
               DELIVERABILITY   DELIVERABILITY   DELIVERABILITY    OBLIGATION
                (IN MMcf/DAY)    (IN MMcf/DAY)    (IN MMcf/DAY)     (IN Bcf)
<S>            <C>              <C>              <C>             <C>
  2006               22               22              44               6.42
  2007               22               22              44               6.42
  2008               22               22              44               6.42
  2009               22               22              44               6.42
  2010               22               22              44               6.42
  2011               20               18              38               5.55
  2012               15               10              25               3.65
  2013               10                5              15               2.19
  2014                5                0               5               0.73
  2015                0                0               0                  0
  2016                0                0               0                  0
</TABLE>

GAS SALES AGREEMENT
Page 47

                                    EXHIBIT B
                               Page 5 of 6 pages
<PAGE>
            a. In accordance with Article 3.3.3(b), Deliverability for any
remaining year can not be reduced without 27 months notice. Therefore, the
Deliverability and Annual Purchase Obligation for 2006 and 2007 would remain as
provided in the February 1, 2002 Production Schedule (in this example,
Deliverability of 45 MMcf/day and Annual Purchase Obligation of 6.57 Bcf for
both 2006 and 2007).

            b. Assume further that the year is 2009 and Buyer's Requirements are
30,932,415 Mcf and Existing Commitments are 9,000,000 Mcf for 2009. Buyer's
Unmet Requirements for 2009 would be calculated as follows:

     Unmet Requirements = Requirements - Existing Commitments

     Unmet Requirements = 30,932,415 Mcf - 9,000,000 Mcf

     Unmet Requirements = 21,932,415 Mcf = 2009 Unmet Requirements

The Annual Purchase Obligation for 2009, in accordance with Article 3.1.1 would
be the lesser of (i) Buyers Unmet Requirements, 21,932,415 Mcf, or (ii) the
Annual Purchase Obligation for the Year (2009) from the September 30, 2005
Production Schedule, 6.42 Bcf (6,420,000 Mcf). For 2009, the Annual Purchase
Obligation would be 6.42 Bcf (6,420,000 Mcf).

            c. Note that in this example, the Agreement will terminate on
January 1, 2015 (under the terms of Article V), as that is the first year that
the Production Schedule shows Deliverability of zero.

GAS SALES AGREEMENT
Page 48

                                    EXHIBIT B
                               Page 6 of 6 pages

<PAGE>

                                    EXHIBIT C

                  TO THE GAS SALES AGREEMENT BETWEEN AND AMONG
           ANADARKO PETROLEUM CORPORATION, PHILLIPS ALASKA, INC., AND
                             ALASKA PIPELINE COMPANY

                            PRICE CALCULATION EXAMPLE

      This Exhibit is an example of the basic Price calculation under Article IV
of the Agreement.

      1. Rounding - Price calculations will be rounded to four decimal places.
Intermediate calculations (e.g., calculation of an average price) will also be
rounded to four decimal places and carried through the calculation. Instructions
for rounding are as follows:

     If the value of the digits     To round, drop all of the digits after the
     following the fourth decimal   fourth decimal place and:
     place is:

     Greater than .00005            Add .0001.
     Less than .00005               Do nothing.
     Equals .00005                  Do nothing if the digit in the fourth
                                    decimal place is even. If the digit in the
                                    fourth decimal place odd, add .0001.
            Examples:

            19.1916514    rounds to 19.1917
            25.624721     rounds to 25.6247
            19.12145000   rounds to 19.1214
            12.76215000   rounds to 12.7622

GAS SALES AGREEMENT
Page 49

                                    EXHIBIT C
                               Page 1 of 2 pages

<PAGE>

      2. Source - "GDPIPD" (the Gross Domestic Product Implicit Price Deflator)
used in the calculation of "P" in Article 4.1 shall be that which is calculated
and reported by the U.S. Department of Commerce, Economics and Statistics
Administration, Bureau of Economic Analysis or its successor. The GDPIPD's
employed shall be the "Final Revision" for the second quarter of each year.

      3. Price Calculation - This example assumes that the Price, or "P", is
being calculated for 2003.

                - The Initial Price (IP) equals $2.75 per Mcf

                - Multiplied by [(1 plus the change in the GDPIPD from the
                  quarter ended in June of 2001 to the quarter ended in June of
                  the Year prior to the sale) divided by 2].

      In this example, the quarter ended in June of the Year prior to the sale
      would be the quarter ended June of 2002. To illustrate the calculation,
      assume the GDPIPD for the second quarter of 2002 is 120.69. The GDPIPD for
      the second quarter of 2001 was 112.62. The change is:

            120.69 = 1.0716568 . . .
            ------
            112.62

Rounded to four decimal places = 1.0717

      Price is:

            $2.75 x [( 1+1.0717)/2] = Price
            $2.75 x [2.0717/2] = Price
            $2.75 x 1.0358 = $2.8484

      Rounded to four decimal places = $2.8484 = Price

      GAS SALES AGREEMENT
      Page 50

                                    EXHIBIT C
                               Page 2 of 2 pages

<PAGE>

                                    EXHIBIT D

                  TO THE GAS SALES AGREEMENT BETWEEN AND AMONG
           ANADARKO PETROLEUM CORPORATION, PHILLIPS ALASKA, INC., AND
                             ALASKA PIPELINE COMPANY

                                RECEIPT POINT(S)

1.    Beluga-Anchorage Pipeline

      a.    Beluga Connection
            At the upstream flange of the Buyer's meter at or near the inlet of
            the Buyer's Beluga-Anchorage pipeline located within the West 1/2,
            Southwest 1/4, of Section 26, Township 13 North, Range 10 West,
            Kenai Peninsula Borough, Seward Meridian,State of Alaska.

GAS SALES AGREEMENT
Page 51

                                    EXHIBIT D
                               Page 1 of 1 pages

<PAGE>

                                    EXHIBIT E

                  TO THE GAS SALES AGREEMENT BETWEEN AND AMONG
           ANADARKO PETROLEUM CORPORATION, PHILLIPS ALASKA, INC., AND
                             ALASKA PIPELINE COMPANY

                                    THE FIELD

                                LEGAL DESCRIPTION

Seward Meridian, Township 11 North, Range 11 West:

      The following lands within U.S. Survey 1865:

            Sections 3-10 (protracted), all;
            Sections 15-19 (protracted)(fractional), all;

      and

      All tidelands and submerged lands within the following sections:

            Sections 15-22 (protracted).

Seward Meridian, Township 11 North, Range 12 West:

      The following lands within U.S. Survey 1865:

            Sections 1-2 (protracted), all;
            Section 3 (protracted) (fractional), all;
            Section 10 (protracted) (fractional), all;
            Sections 11-14 (protracted), all;
            Section 15 (protracted) (fractional), all;
            Section 22 (protracted) (fractional), all;
            Section 23 (protracted), all;
            Sections 24-27 (protracted) (fractional), all (not including any
            tidelands or submerged lands);

      and

      GAS SALES AGREEMENT
      Page 52

                                    EXHIBIT E
                               Page 1 of 4 pages

<PAGE>


      The following lands outside U.S. Survey 1865:

            Tract A, comprising the following:

                  Section 3 (fractional), all;

                  Sections 4-9, all;

                  Section 10 (fractional), all;

                  Section 15 (fractional), all;

                  Sections 16-18, all;

                  Section 21, all;

                  Section 22 (fractional), all;

                  Section 27 (fractional), all (not including USS 1808, USS 4548
                        (Lot 1), USS 4548 (Lot 2), USS 3895, or any tidelands or
                        submerged lands);

                  Section 28 (fractional), all (not including USS 3895, USS 4549
                        (Lot 1), USS 4549 (Lot 2), USS 4549 (Lot 3), USS 4549
                        (Lot 4), USS 4550, or any tidelands or submerged lands).

      and

      U.S. Survey 1808;
      U.S. Survey 3895;
      U.S. Survey 3895;
      U.S. Survey 4548 (Lots l and 2);
      U.S. Survey 4549 (Lots 1,2,3 and 4);
      U.S. Survey 4550.

Seward Meridian, Township 12 North, Range 11 West:

      The following lands outside U.S. Survey 1865:

            Tract A, comprising the following:

                  Sections 3 - 10, all;
                  Sections 15-18, all;
                  Section 19 (fractional), all;
                  Section 20 (fractional), all (not including USS 4547);
                  Sections 21 - 22, all;
                  Sections 27-28 (fractional), all;
                  Section 29 (fractional), all (not including USS 4547);

GAS SALES AGREEMENT
Page 53

                                    EXHIBIT E
                               Page 2 of 4 pages

<PAGE>

      and

            U.S. Survey 4547;

      and

      The following lands within U.S. Survey 1865:

                  Sections 19-20 (protracted) (fractional), all;
                  Sections 27-29 (protracted) (fractional), all;
                  Sections 30-34 (protracted), all.

Seward Meridian, Township 12 North, Range 12 West:

      The following lands outside U.S. Survey 1865:

            Tract A, comprising the following:

                        Sections 1-21, all;
                        Sections 22-24 (fractional), all;
                        Section 27 (fractional), all;
                        Sections 28-33, all;
                        Section 34 (fractional), all;

      and

      The following lands within U.S. Survey 1865:

                  Sections 22-24 (protracted) (fractional), all;
                  Sections 25-26 (protracted), all;
                  Section 27 (protracted) (fractional), all;
                  Section 34 (protracted) (fractional), all;
                  Sections 35-36 (protracted), all.

GAS SALES AGREEMENT
Page 54

                                    EXHIBIT E
                               Page 3 of 4 pages

<PAGE>

Seward Meridian, Township 13 North, Range 1l West:

      The following lands within Tract A:

                  Section 13, SE4;
                  Sections 19-36, all (not including USS 3964);

      and

      The lands within U.S. Survey 3964 (Lots 1 and 2).

GAS SALES AGREEMENT
Page 55

                                    EXHIBIT E
                                Page 4 of 4 pages

<PAGE>

[PROSPECT AREA MAP]

                                   Exhibit E
                            Moquawkie Prospect Area
                                as of April 2000
                                     Page 5