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                               FRANCHISE AGREEMENT

     THIS AGREEMENT between Powell Valley Utility District and Tengasco Pipeline
Corporation.

     WHEREAS Tengasco Pipeline Corporation and Powell Valley Utility District
agree to enter into an exclusive agreement to permit Tengasco Pipeline
Corporation ("TPC") to install facilities at TPC's cost and to provide natural
gas utility service through TPC's system to customers, whether residential,
commercial, or industrial within the boundaries of the District. This agreement
is referred to as "Franchise Agreement" and is in the nature of a license
agreement with the District for TPC to provide natural gas service in accordance
with the franchise authority of the District.

     The District and TPC agree as follows:

     SECTION 1. Definitions.  Whenever in this agreement the words or phrases
hereinafter in this section defined are used, they shall have the respective
meanings assigned to them in the following definitions (unless, in the given
instance, the context wherein they are used shall clearly import a different
meaning):

     (a) The word "Grantee" shall mean TPC, the corporation to which the
franchise is granted by this agreement, and its lawful successors or assigns.

     (b) The word "District" shall mean the Powell Valley Utility District, a
municipality of the State of Tennessee.

     (c) The word "Streets" shall mean the public streets, lanes, alleys,
courts, or other public places in the District as they now exist, or as they may
be established at any time during

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the term of this franchise in the District.

     (d) The word "District" shall mean the District or any engineer hired by
the District to review any application, filing, or installation made by Grantee
pursuant to this Agreement.

     (e) The word "Gas" shall mean natural gas. TPC will provide physical
delivery of natural gas to the District from its system of sufficient quality
for residential purposes and shall have the exclusive right to negotiate and
contract on behalf of the District for the purchase of natural gas by the
District including price, quantity, and quality provisions. TPC may negotiate
and contract for such purchase of natural gas from any source it deems
appropriate and under terms it deems reasonable, including without limitation
Tengasco, Inc., the parent company of TPC. TPC shall not at any time be required
to construct additional pipelines or facilities to connect with any other
physical source of supply other than reserves of Tengasco, Inc. Gas shall be
conclusively presumed to be of sufficient quality for residential purposes
pursuant to this Agreement if the gas meets the following specifications, or is
interchangeable with gas of the following specifications pursuant to Bulletin 36
of the American Gas Association or other industry standard selected in the
reasonable discretion of TPC:

     (1) Heating value of not less than 960 BTUs per cubic foot;

     (2) Commercially free of dust, hydrocarbon liquids, water, or other
         substance which may interfere with the safe operation of the
         Facilities;

     (3) Containing not more than 2.0 grains sulfur, nor more than 1/4 grain
         hydrogen sulfide per one hundred cubic feet;

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     (4) Containing not more than 10 ppm by volume of oxygen;

     (5) Containing not more than 6% by volume of combined carbon dioxide and
         nitrogen;

     (6) Containing not more than 7 pounds of entrained water per million cubic
         feet at 14.73 psi pressure base and 60(degree)F temperature.

         (f) The phrase "Facilities or Equipment" shall mean pipe, pipe line,
tube, main, service, trap, vent, vault, manhole, meter, gauge, regulator, valve,
conduit, appliance, attachment, appurtenance, and any other personal property
located or to be located in, upon, along, across, under or over the streets of
the District and actually used in the distribution of gas in the District.

       SECTION 2. That the exclusive right, privilege and franchise, subject to
each and all of the terms and conditions contained in this agreement, be and the
same is hereby granted to TPC, a corporation organized and existing under and by
virtue of the laws of the State of Tennessee, herein referred to as the Grantee,
for the term of ten (10) years from and after the effective date hereof, to lay,
construct, erect, install, operate, maintain, use, repair, or replace in, upon,
along, across, under or over the streets of the District or remove from the
streets of the District its facilities or equipment:

     (a) For the purpose of conducting, conveying, transporting, supplying,
distributing and selling gas to the District and its inhabitants for heat, power
and light and any and all other purposes for which gas may be used, and

     (b) For the purpose of conducting, conveying and transporting gas through
the District for use outside of the boundaries of the District for heat, power
and light and any and


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all other purposes for which gas may be used.

       At the end of the initial ten year term of this agreement, the District
shall have the option to extend this agreement for an additional ten-year term.
If the District exercises its option to extend this agreement for an additional
ten-year term, the District shall own all facilities installed by TPC at the end
of such additional term and Sections 5 and 5.1 hereof shall not apply. TPC shall
transfer ownership of such facilities to the District by appropriate instruments
at that time and the District shall expressly assume all obligations under the
gas purchase contracts whereby TPC purchases or is to purchase gas for supply to
the District. If the District does not exercise its option to extend this
agreement for a second ten-year term, then the District shall be obligated to
purchase the Facilities and the provisions of Sections 5 and 5.1 hereof will
apply at the end of the initial ten-year term.

       SECTION 3. TPC will pay to the District as a franchise fee the sum equal
to 5% of the gross sales proceeds received by TPC from sales of all natural gas
sold or transported by TPC and consumed within Hancock County. The remainder of
the gross sales proceeds shall be retained by TPC as compensation for its
services hereunder. TPC will also pay 5% of the gross sales price of gas, if
any, transported by TPC across the distribution facilities to be constructed by
TPC pursuant to this agreement to supply customers of the District (but not any
other part of TPC's system or separate pipeline constructed pursuant to Section
2(b) above through any part of the District and not connected directly to the
Facilities to be constructed hereunder) and sold to any industrial customer
located outside the District.

       SECTION 4. All work undertaken or performed, all service rendered, and
all facilities or equipment operated, maintained or used pursuant to the
provisions of this


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franchise shall be the standard required by law, by the orders of the Tennessee
Regulatory Authority of the State of Tennessee, and by any other body or
governmental authority having jurisdiction in the premises. All facilities or
equipment of the Grantee to be laid, constructed, erected, installed or
repaired, in, upon, along, across, under or over the streets of the District, or
removed from the streets of the District pursuant to the provisions of this
franchise, shall be laid, constructed, erected, installed, repaired or removed
in accordance with the rules and regulations of the District now or hereafter
adopted or prescribed with the agreement of TPC which agreement shall not be
unreasonably withheld, except where in conflict with the State law, orders of
the Tennessee Regulatory Authority, or other governmental authority having
jurisdiction in the premises.

       SECTION 5. The ownership of the Facilities shall remain in TPC while this
agreement is in effect. The Facilities may be sold by TPC to the District at the
following times and under the following terms: (1) at the sole option of the
District at the end of the initial ten-year term hereof only; (2) by agreement
of TPC at any time during and prior to the end of the initial term; or (3) if
extended for a second ten-year term, by agreement of TPC during and prior to the
end of the second ten-year term. At any time the Facilities are purchased by the
District, the District shall be entitled to purchase and TPC shall be obligated
to sell the Facilities of TPC installed pursuant to this Agreement at the fair
market value of the Facilities. The District shall, at the time of any purchase,
assume all of TPC's gas contracts for gas to supply the District. The fair
market value of the Facilities shall include an element for replacement cost and
going concern value as well as net book value and shall be determined in the
exercise of sole reasonable discretion by TPC. Should the District not agree

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with the fair market value so determined, at the end of the initial term only,
the fair market value at that time only shall be determined by a single
arbitrator in binding arbitration under the Commercial Arbitration Rules of the
American Arbitration Association as then in force, or by any other means of
binding arbitration by one or more arbitrators upon which the parties to this
agreement may specifically agree in writing. In all other instances when fair
market value is to be determined, the fair market value is in the sole
reasonable discretion of TPC.

       SECTION 5.1 If the termination of this agreement occurs at the expiration
of the ten year initial term, TPC agrees that the net book value of the
Facilities shall be deemed to have been paid to TPC in the rates charged and
collected, to the extent and only to the extent that such rates charged and
collected have been in excess of TPC's cost of service (gas costs, operating
costs, taxes, interest expense on monies borrowed by TPC to install the
facilities, and return on investment). TPC expressly agrees that any excess of
the fair market value as may be determined by the provisions of Section 5 which
may exceed the net book value deemed paid pursuant to the previous sentence, if
any, maybe paid by promissory note or other obligation of the District as the
District may elect which shall not cause the District to attempt to issue bonds
in any amount which may not be supported by law. Any promissory note or other
obligation for any portion of the fair market value shall be payable for a
period not exceeding five (5) years and at an interest rate of not less than
prime (Wall Street Journal) plus one percent as published most recently prior to
the date of such note, payable monthly, unless TPC agrees to other terms. In
such instance where a promissory note may be given, TPC shall transfer ownership
of the facilities in place to the District, and the District shall secure
payment of any such promissory note or other agreed obligation by a security
interest

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in the facilities so transferred.

       SECTION 5.2 All billing and administrative functions in connection with
services hereunder shall be performed by TPC or its designee as agent of the
District. The District shall not be charged any fee for such functions. The
District shall have access at all reasonable times to the books and records of
TPC or its designee insofar as all records of TPC or its designee under this
agreement are concerned in order to verify the accuracy of any computations
required hereunder.

       SECTION 6. The Grantee of this franchise shall not lay, construct, erect
or install its facilities or equipment, in, upon, along, across, under or over
the streets of the District until and unless the proposed location of such
facilities or equipment shall have been approved by the District, or such other
officer of the District as the District may direct, and which approval shall not
be unreasonably withheld.

       SECTION 7. (a) Before making any opening or excavation in any street, or
before distributing the earth beneath the surface of any street, regardless of
whether the surface thereof is damaged or removed or not, except in case of
emergency, the Grantee shall file with the District a drawing or plan showing
the proposed location, elevation above or below the established grade of the
center line of the street, and the character of its facilities or equipment to
be laid, constructed, erected, installed, used, repaired in, upon, along,
across, under or over the streets of the District, or removed from the streets
of the District for all its facilities except service connections which shall be
furnished within thirty (30) days after installation.

       (b) If the proposed location of any facilities or equipment to be


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laid, constructed, erected, used, repaired or replaced by the Grantee in, upon,
along, across, under or over the streets of the District, or removed from the
streets of the District by the Grantee does not interfere (1) with the use of
the streets for the purpose of travel, (2) with any proposed or contemplated use
of the streets by the District either above or below the surface of the street,
for which plans have been prepared, or for which plans are in the course of
preparation, which plans have been authorized by the District, or the
legislative body of the District, (3) with personal property lawfully in, upon,
along, across, under or over the streets, and otherwise complies with this
franchise, and any agreement, rule or regulation of the District in force and
effect at the time of such application, the District shall approve said
application and a permit shall be issued therefor by the proper District
authority.

       SECTION 8. The work of laying, constructing, erecting, installing, using,
operating, maintaining, repairing or replacing in, upon, along, across, under or
over the streets of the District, or removing from the streets of the District,
any facilities or equipment of the Grantee, shall be done, performed, or
conducted with the least practicable hindrance of the use of the streets for the
purpose of travel or any other public purpose.

       SECTION 9. (a) When any opening or excavation is made, or work done, in,
upon, along, across, under or over the streets, for any purpose whatsoever by
the Grantee, in connection with the exercise of any right or privilege granted
by this franchise, any portion of said streets affected or damaged thereby shall
be restored as promptly as practicable by the Grantee to as useful, safe,
durable and good condition as existed prior to the making of such opening or
such excavation or the doing of such work.

       (b) By the acceptance of this franchise, the Grantee agrees that

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after the work of restoring such portion of said street has been completed as
provided in the paragraph above, it will keep such portion of said street so
restored, in as useful, safe, durable and good condition as existed prior to the
making of such opening or excavation or the doing of such work, ordinary wear,
tear and use excepted, for a period of twelve (12) months, if the District
determines that such portion of such street was affected or damaged by such
opening or excavation made, or such work done in, upon, along, across or over
the said street by the Grantee, provided such obligation on the part of the
Grantee shall terminate twelve (12) months after the date of any such original
restoration.

       SECTION 10. After any work has been commenced by the Grantee in, upon,
along, across, under or over the streets of the District, pursuant to the
provisions of this franchise, the same shall be prosecuted in good faith and
with due diligence until completed.

       SECTION 11. (a) Any pipe, pipe line, tube, main, service, conduit, duct
or other structure laid, constructed, erected, or installed pursuant to the
provisions of this franchise, or any tunnel or bore dug or made in the streets
of the District in connection with the laying, constructions, erection or
installation of the property above mentioned in this section, shall be not less
than thirty (30) inches below the surface of the street or the ground, as the
case may be, when such installation is three (3) inches or over in diameter and
shall be not less than twenty-four (24) inches when such installation is under
three (3) inches in diameter and measured in each instance from said established
grade of the nearest point to said property, tunnel or bore as the case may be.

                   (b) Where, however, such depths are impracticable due to
extraordinary circumstances, the Grantee shall secure the approval of the
District or other


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duly authorized officer of the District as to the suitable depth or location of
said property, tunnel or bore and the same shall be placed in conformity with
such approved location or depth, and in a manner reasonably satisfactory to the
District or other authorized officer of the District.

                   (c) All manholes, vaults, traps, catch basins or other
structures, shall be so capped and covered as to be flush with the surface of
the street, and shall not interfere in any way with the use of the streets for
the purpose of travel.

                   (d) The Grantee shall not lay, construct, erect, or install
in the streets of the District any vent pipe from any vault, manhole or other
structure of the Grantee except in the manner and at the location or locations
prescribed or approved by the District and only in accordance with sound
engineering practices.

       SECTION 12. Upon abandonment of any of the facilities or equipment of the
Grantee located above or below the surface of the streets, the Grantee shall
notify the District in writing of such abandonment within twenty (20) days
thereafter; and if such abandoned facilities or equipment will then unreasonably
interfere with the then contemplated use of said street by the District, the
District shall give written notice thereof to the Grantee within twenty (20)
days after receipt of said notice of abandonment and the Grantee shall commence
the removal of same within twenty (20) days after receipt of said notice from
the District and prosecute said work to completion with reasonable diligence and
at its own cost and expense.

       SECTION 13. If during the term of this franchise, the District shall
change the grade, width or location of any street, or improve any street in any
manner, including laying of any sewer, storm drain, conduit, water or other
pipe, or construct any pedestrian tunnel

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or other improvement, and, in the opinion of the District such work shall render
necessary any change in the position or location of any facilities or equipment
of the Grantee in the streets including the support thereof while such work is
being done or performed, the Grantee, at its own cost and expense, within twenty
(20) days after written notice from the District so to do, shall begin the work
of doing any and all things to effect such change in position or location in
conformity with such written instructions.

       SECTION 14. If the Grantee is dissatisfied with any determination of the
District permitted by the foregoing Sections hereof, it may petition the
District to review the same within ten (10) days after such determination, but
such remedy shall be cumulative and not exclusive.

       SECTION 15. The District shall not impose any rental, license fee, charge
or tax upon the Grantee for the rights hereby granted, or the exercise thereof,
that is not uniformly imposed and collected by the District upon the same basis
on all other publicly or privately owned competing public service companies.

       SECTION 16. TPC shall maintain a policy of general liability insurance in
the amount of ten million dollars, including umbrella coverage, at all times
this agreement is in effect. The District and the directors of the District
shall be named as additional insureds on such policy.

       TPC agrees to provide at its initial cost and expense, for the benefit of
the District a performance bond in the amount of $200,000 guaranteeing its
performance of obligations under this Franchise Agreement, and payable to the
District in the event and to the extent judgment is rendered in a court of
competent jurisdiction that the District has incurred and is entitled to receive
damages as a result of any breach of this agreement by TPC, and to

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maintain that bond in force during the term of this agreement. The District
agrees that because the bond is required and maintained for benefit of the
District and its customers, the annual cost of acquiring and maintaining this
bond shall be either deducted in equal monthly installments from the five
percent of gross proceeds to which the District is entitled under this agreement
until repaid in full to TPC, or collected as an additional charge from consumers
purchasing gas from the District until paid in full and thereafter reimbursed to
TPC, as TPC and the District may agree.

       SECTION 17. The Grantee shall use reasonable care and precaution in
laying, constructing, erecting, installing, using, operating, repairing, or
maintaining its facilities and equipment located in, upon, along, across, under
or over the streets of the District to avoid damage or injury to persons or
property; and shall indemnify, defend (including payments of attorneys' fees,
court costs, etc.) and save harmless the District from any and all liability by
reason of damage or injury to persons or property on account of the Grantee's
negligence in such work, provided the District shall have notified the Grantee
in writing of any claims against the District on account thereof in ample time
to enable the Grantee to defend the same.

       The Grantee shall furnish the District annually certificate or
certificates evidencing its insurance coverage of the foregoing risks in good
and solvent insurance companies authorized to do business in the State of
Tennessee.

       SECTION 18. The Grantee shall run a service pipe to the gas meter serving
all buildings on the lines of its mains, provided a written application is made
by the consumer agreeing to use gas, and provided that the point wherever the
service pipe to the gas meter

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serving the building shall not be more than sixty (60) feet inside the property
line. The Grantee shall also maintain, repair and keep in good condition all of
the service pipes, and keep the same free from all obstruction up to the point
of entrance to the building free of charge to the consumer. The Grantee shall
not be obligated to extend its mains except upon written application therefor by
the prospective consumer upon Grantee's customary forms, agreeing to accept and
pay for service in accordance with Grantee's rules and regulations and tariffs
on file. Grantee shall not in any event be required to install or extend any
mains if in Grantee's reasonable judgment it would be uneconomical to do so.
Nothing contained in this Section 18 shall be construed as limiting or impairing
the authority of the Tennessee Regulatory Authority of the State of Tennessee.

       SECTION 19. All gas transmitted, distributed, supplied and sold by the
Grantee under this agreement, shall be furnished and paid for in accordance
with, and subject to, all of the provisions of the applicable rates, and
schedule of charges and such change or changes as may be made in the terms and
conditions of service from time to time.

       The District shall have jurisdiction to prescribe and fix rates, charges,
terms and conditions governing the furnishing of said gas service, which shall
be sufficient to yield the Grantee a reasonable return upon the fair value of
its Facilities, including Facilities paid for with either borrowed or invested
capital, used and useful in rendering said service. Because the number of
customers, the purchased volumes, and investment costs are uncertain, the
District agrees that to assure a reasonable return to TPC, the rates prescribed
by the District shall not be less than an average of rates for comparable
service provided by at least three districts adjacent to or near the District to
be selected by TPC, unless TPC agrees in its sole

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discretion to a lesser rate.

       SECTION 20. No transfer, assignment or lease, or attempted transfer,
assignment or lease, of this franchise, or of any right, privilege or interest
therein, to any person, firm or corporation shall have any force, effect or
validity unless and until: .

       (1) The Grantee shall have duly executed a good and sufficient instrument
making such transfer, assignment or lease, and a duplicate original thereof
shall have been filed in the office of the District.

       (2) The transferee, assignee, or lessee shall have duly executed a good
and sufficient instrument accepting such transfer, assignment or lease, and
assuming all the obligations of the Grantee (including without limitation all
gas contracts entered into by TPC for purchase of gas to be supplied to the
District) under this franchise, and an original thereof shall have been filed in
the office of the District.

       Nothing contained in this Section 20 shall be construed to apply or
effect in any manner any mortgage, deed of trust, indenture or other instrument
given by the Grantee (or by any person, firm or corporation under a transfer,
assignment or lease made in full accordance with the provisions of this Section)
to secure an issue of bonds or other evidence of indebtedness. However, the
terms of clauses (1) and (2) shall apply to the surviving corporation pursuant
to any statutory merger.

       SECTION 21. Any written notice herein required to be given by the
District, or any of its officers or agents, to the Grantee, shall be deemed to
have been duly served if delivered in person to any officer of the Grantee or to
its local agent or manager, or if sent by certified mail to the postal address
of the Grantee, or by facsimile transmission.

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       SECTION 22. The use of the singular number herein shall include the
plural, and the use of the plural number shall include the singular.

       SECTION 23. This agreement shall become effective and all its terms,
provisions and conditions binding upon both the District and the Grantee fifteen
(15) days after its execution by the District, provided the Board of Directors
of Grantee approves the agreement and Grantee shall within said fifteen (15)
days endorse on the original document its acceptance of this agreement in words
and figures following: "Tengasco Pipeline Corporation hereby accepts this
Agreement this 25th day of January 2000."

                                    POWELL VALLEY UTILITY DISTRICT


January 25, 2000                    BY: /s/ illegible
------------------                     -----------------------------------
Date                                               President


                                    TENGASCO PIPELINE CORPORATION


January 25, 2000                    BY: /s/ Robert M. Carter
------------------                     -----------------------------------
Date                                               President




Tengasco Pipeline Corporation hereby accepts this Agreement this 25th day of
January 2000.

TENGASCO PIPELINE CORPORATION


BY: /s/ Robert M. Carter
   --------------------------
   President



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