UNITED
STATES SECURITIES AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 ________________
  Form
10-Q
 
 (Mark One)
 
 R
                QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the quarterly period ended September 30, 2009OR£
                TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period
      from                    to                    .
 
 Commission
File Number 1-33825
 
 El
Paso Pipeline Partners, L.P.
 (Exact Name of
Registrant as Specified in Its Charter)
 
 
 Delaware
                26-0789784(State or
      Other Jurisdiction of Incorporation
      or Organization)
                (I.R.S.
      Employer Identification
      No.)El
      Paso Building1001
      Louisiana StreetHouston,
      Texas
                77002(Address of
      Principal Executive Offices)
                (Zip
      Code)
  Telephone
Number: (713) 420-2600
 Internet
Website: www.eppipelinepartners.com
  Indicate by check
mark whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes R     No
£.
 
 Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files). Yes £  No
£
 
 Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of
“large accelerated filer,” “accelerated filer” and “smaller reporting company”
in Rule 12b-2 of the Exchange Act.
 
 Large
      accelerated filer £
                Accelerated
      filer R
                Non-accelerated
      filer £
                Smaller
      reporting company £(Do not check
      if a smaller reporting company)
 
 Indicate by check
mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). Yes £     No
R.
 
 There were
97,615,923 Common Units, 27,727,411 Subordinated Units and 2,558,028 General
Partner Units outstanding as of November 3, 2009.
  
  
 EL
PASO PIPELINE PARTNERS, L.P.
  TABLE OF CONTENTS
 
 Caption
                PagePART I – Financial InformationItem 1.
                Financial Statements
                1Item 2.
                Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
                14Item 3.
                Quantitative and Qualitative Disclosures About Market
      Risk
                23Item 4.
                Controls and Procedures
                23PART II – Other InformationItem 1.
                Legal Proceedings
                24Item 1A.
                Risk Factors
                24Item 2.
                Unregistered Sales of Equity Securities and Use of
      Proceeds
                25Item 3.
                Defaults Upon Senior Securities
                25Item 4.
                Submission of Matters to a Vote of Security
      Holders
                25Item 5.
                Other Information
                25Item 6.
                Exhibits
                25Signatures
                26
 ____________
 
 Below is a list of
terms that are common to our industry and used throughout this
document:
 
 /d
                  = per
      day
                  MMcf
                  = million
      cubic feetBBtu
                  = billion
      British thermal units
                  Tonne
                  = metric
      ton
 
 When we refer to
cubic feet measurements, all measurements are at a pressure of 14.73 pounds per
square inch.
 
 When we refer to
“us”, “we”, “our”, or “ours”, we are describing El Paso Pipeline Partners, L.P.
and/or our subsidiaries.
 
 
 i
 Table of Contents
 
 PART I – FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 EL
PASO PIPELINE PARTNERS, L.P.
 
 CONDENSED
CONSOLIDATED STATEMENTS OF INCOME
 (In
millions, except per unit amounts)
 (Unaudited)
 
 Quarters
      Ended
                  September
      30,
                
                
                Nine
      Months Ended
                  September
      30,2009
                
                
                
                2008*
                
                
                
                2009
                
                
                
                2008*Operating
      revenues
                
                $
                128.8
                
                
                $
                103.3
                
                
                $
                386.5
                
                
                $
                331.7Operating
      expensesOperation and
      maintenance
                
                
                39.2
                
                
                
                40.0
                
                
                
                114.4
                
                
                
                114.5Depreciation
      and amortization
                
                
                16.7
                
                
                
                14.6
                
                
                
                49.8
                
                
                
                43.7Taxes, other
      than income taxes
                
                
                5.9
                
                
                
                5.4
                
                
                
                18.0
                
                
                
                16.161.8
                
                
                
                60.0
                
                
                
                182.2
                
                
                
                174.3Operating
      income
                
                
                67.0
                
                
                
                43.3
                
                
                
                204.3
                
                
                
                157.4Earnings from
      unconsolidated affiliates
                
                
                11.9
                
                
                
                4.8
                
                
                
                37.0
                
                
                
                20.0Other income,
      net
                
                
                0.4
                
                
                
                3.4
                
                
                
                4.7
                
                
                
                6.6Interest and
      debt expense, net
                
                
                (19.4
                )
                
                
                (12.1
                )
                
                
                (53.9
                )
                
                
                (41.9
                )Affiliated
      interest income, net
                
                
                0.4
                
                
                
                4.5
                
                
                
                1.5
                
                
                
                20.5Net
      income
                
                
                60.3
                
                
                
                43.9
                
                
                
                193.6
                
                
                
                162.6Net income
      attributable to noncontrolling interests
                
                
                (13.7
                )
                
                
                (10.7
                )
                
                
                (44.7
                )
                
                
                (42.5
                )Net income
      attributable to El Paso Pipeline Partners, L.P.
                
                $
                46.6
                
                
                $
                33.2
                
                
                $
                148.9
                
                
                $
                120.1Net income
      attributable to El Paso Pipeline Partners, L.P. per limited partner unit
      —Basic and Diluted:Common
      units
                
                $
                0.35
                
                
                $
                0.29
                
                
                $
                1.14
                
                
                $
                0.87Subordinated units
                
                $
                0.35
                
                
                $
                0.14
                
                
                $
                1.09
                
                
                $
                0.73
 ____________
 (*)
                Retrospectively
      adjusted as discussed in Note
2.
 See accompanying
notes.
 1
 Table of Contents
 El
PASO PIPELINE PARTNERS, L.P.
 
 CONDENSED
CONSOLIDATED BALANCE SHEETS
 (In
millions, except units)
 (Unaudited)
 
 September
      30,
                
                
                December
      31,2009
                
                
                2008*ASSETSCurrent
      assetsCash and cash
      equivalents
                
                $
                12.2
                
                
                $
                10.9Accounts
      receivableCustomer, net
      of allowance of $0.5 in 2009 and 2008
                
                
                13.9
                
                
                
                22.0Affiliates
                
                
                114.1
                
                
                
                138.2Other
                
                
                1.0
                
                
                
                3.1Regulatory
      assets
                
                
                6.1
                
                
                
                28.4Other
                
                
                16.0
                
                
                
                11.9Total current
      assets
                
                
                163.3
                
                
                
                214.5Property,
      plant and equipment, at cost
                
                
                2,637.8
                
                
                
                2,542.5Less
      accumulated depreciation and amortization
                
                
                641.5
                
                
                
                634.4Total
      property, plant and equipment, net
                
                
                1,996.3
                
                
                
                1,908.1Other
      assetsInvestments
      in unconsolidated affiliates
                
                
                412.2
                
                
                
                410.8Notes
      receivable from affiliates
                
                
                20.8
                
                
                
                75.9Other
                
                
                63.9
                
                
                
                66.5496.9
                
                
                
                553.2Total
      assets
                
                $
                2,656.5
                
                
                $
                2,675.8LIABILITIES
      AND PARTNERS’ CAPITALCurrent
      liabilitiesAccounts
      payableTrade
                
                $
                8.2
                
                
                $
                17.5Affiliates
                
                
                24.3
                
                
                
                10.2Other
                
                
                15.8
                
                
                
                34.4Taxes
      payable
                
                
                16.3
                
                
                
                11.9Accrued
      interest
                
                
                11.0
                
                
                
                10.6Regulatory
      liabilities
                
                
                18.7
                
                
                
                29.2Other
                
                
                18.1
                
                
                
                19.3Total current
      liabilities
                
                
                112.4
                
                
                
                133.1Other
      liabilitiesLong-term
      debt and other financing obligations, less current
    maturities
                
                
                1,355.3
                
                
                
                1,357.3Other
      liabilities
                
                
                53.1
                
                
                
                68.01,408.4
                
                
                
                1,425.3Commitments
      and contingencies (Note 7)Partners’
      capitalEl Paso
      Pipeline Partners L.P. partners’ capitalCommon units
      (97,615,923 and 84,970,498 units issued and outstanding at
                  September 30, 2009 and December 31, 2008)
                
                
                1,289.8
                
                
                
                1,064.8Subordinated
      units (27,727,411 units issued and outstanding at
                  September 30, 2009 and December 31, 2008)
                
                
                293.3
                
                
                
                289.4General
      partner units (2,558,028 and 2,299,526 units issued and outstanding at
                  September 30, 2009 and December 31, 2008)
                
                
                (784.4
                )
                
                
                (574.9
                )Total El Paso
      Pipeline Partners L.P. partners’ capital
                
                
                798.7
                
                
                
                779.3Noncontrolling
      interests
                
                
                337.0
                
                
                
                338.1Total
      partners’ capital
                
                
                1,135.7
                
                
                
                1,117.4Total
      liabilities and partners’ capital
                
                $
                2,656.5
                
                
                $
                2,675.8
 ____________
 (*)
                Retrospectively
      adjusted as discussed in Note
2.
 See accompanying
notes.
 2
 Table of Contents
 
 El
PASO PIPELINE PARTNERS, L.P.
 
 CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In
millions)
 (Unaudited)
 
 Nine
      Months Ended
                  September
      30,2009
                
                
                
                2008*Cash flows
      from operating activitiesNet
      income
                
                $
                193.6
                
                
                $
                162.6Adjustments
      to reconcile net income to net cash from operating
    activitiesDepreciation
      and amortization
                
                
                49.8
                
                
                
                43.7Earnings from
      unconsolidated affiliates, adjusted for cash distributions
                
                
                (3.9
                )
                
                
                (4.1
                )Other
      non-cash income items
                
                
                (6.1
                )
                
                
                (6.6
                )Asset and
      liability changes
                
                
                24.9
                
                
                
                (22.0
                )Net cash
      provided by operating activities
                
                
                258.3
                
                
                
                173.6Cash flows
      from investing activitiesCapital
      expenditures
                
                
                (119.1
                )
                
                
                (166.9
                )Cash paid to
      acquire additional interests in CIG and SNG
                
                
                (143.2
                )
                
                
                (254.3
                )Net change in
      notes receivable from affiliates
                
                
                87.5
                
                
                
                165.3Other
                
                
                2.7
                
                
                
                0.7Net cash used
      in investing activities
                
                
                (172.1
                )
                
                
                (255.2
                )Cash flows
      from financing activitiesNet proceeds
      from issuance of common and general partner units
                
                
                216.4
                
                
                
                15.0Net proceeds
      from (payments on) borrowings under credit facility
                
                
                (49.9
                )
                
                
                130.6Net proceeds
      from issuance of long-term debt
                
                
                —
                
                
                
                174.0Payments to
      retire long-term debt and other financing obligations
                
                
                (2.9
                )
                
                
                (103.8
                )Cash
      distributions to unitholders and general partner
                
                
                (116.4
                )
                
                
                (61.6
                )Cash
      distributions to El Paso
                
                
                (60.8
                )
                
                
                (72.6
                )Excess of
      cash paid for CIG interests over contributed book value
                
                
                (71.3
                )
                
                
                —Net cash
      provided by (used in) financing activities
                
                
                (84.9
                )
                
                
                81.6Net change in
      cash and cash equivalents
                
                
                1.3
                
                
                
                —Cash and cash
      equivalentsBeginning of
      period
                
                
                10.9
                
                
                
                4.7End of
      period
                
                $
                12.2
                
                
                $
                4.7
 ____________
 (*)
                Retrospectively
      adjusted as discussed in Note
2.














See accompanying
notes.





3
 Table of Contents





El
PASO PIPELINE PARTNERS, L.P.
 
 CONDENSED
CONSOLIDATED STATEMENTS OF PARTNERS’ CAPITAL *
 (In
millions)
 (Unaudited)
  El
      Paso Pipeline Partners, L.P. Partners’ CapitalLimited
      PartnersCommon
              
              
              Subordinated
              
              
              General
                Partner
              
              
              Total
              
              
              Noncontrolling
                Interests
              
              
              Total Partners’
                CapitalBalance at
      December 31, 2007
              
              $
              831.8
              
              
              $
              284.1
              
              
              $
              (211.3
              )
              
              $
              904.6
              
              
              $
              447.1
              
              
              $
              1,351.7Net
      income
              
              
              47.1
              
              
              
              22.9
              
              
              
              50.1
              
              
              
              120.1
              
              
              
              42.5
              
              
              
              162.6Issuance of
      common units, net of issuance costs
              
              
              15.0
              
              
              
              —
              
              
              
              —
              
              
              
              15.0
              
              
              
              —
              
              
              
              15.0Cash
      distributions to unitholders and general partner
              
              
              (40.7
              )
              
              
              (19.7
              )
              
              
              (1.2
              )
              
              
              (61.6
              )
              
              
              —
              
              
              
              (61.6
              )Cash
      distributions to El Paso
              
              
              —
              
              
              
              —
              
              
              
              (38.7
              )
              
              
              (38.7
              )
              
              
              (33.9
              )
              
              
              (72.6
              )Non-cash
      distributions to El Paso
              
              
              —
              
              
              
              —
              
              
              
              (144.1
              )
              
              
              (144.1
              )
              
              
              (125.9
              )
              
              
              (270.0
              )Excess of
      contributed book value of CIG and SNG over cash paid
              
              
              205.2
              
              
              
              —
              
              
              
              4.5
              
              
              
              209.7
              
              
              
              —
              
              
              
              209.7Elimination
      of CIG additional acquired interest from historical
capital
              
              
              —
              
              
              
              —
              
              
              
              (237.9
              )
              
              
              (237.9
              )
              
              
              —
              
              
              
              (237.9
              )Other
              
              
              —
              
              
              
              —
              
              
              
              0.3
              
              
              
              0.3
              
              
              
              —
              
              
              
              0.3Balance at
      September 30, 2008
              
              $
              1,058.4
              
              
              $
              287.3
              
              
              $
              (578.3
              )
              
              $
              767.4
              
              
              $
              329.8
              
              
              $
              1,097.2Balance at
      December 31, 2008
              
              $
              1,064.8
              
              
              $
              289.4
              
              
              $
              (574.9
              )
              
              $
              779.3
              
              
              $
              338.1
              
              
              $
              1,117.4Net
      income
              
              
              100.2
              
              
              
              31.0
              
              
              
              17.7
              
              
              
              148.9
              
              
              
              44.7
              
              
              
              193.6Issuance of
      common and general partner  units, net of issuance
      costs
              
              
              211.9
              
              
              
              —
              
              
              
              4.5
              
              
              
              216.4
              
              
              
              —
              
              
              
              216.4Cash
      distributions to unitholders and general partner
              
              
              (87.0
              )
              
              
              (27.1
              )
              
              
              (2.3
              )
              
              
              (116.4
              )
              
              
              —
              
              
              
              (116.4
              )Cash
      distributions to El Paso
              
              
              —
              
              
              
              —
              
              
              
              (15.0
              )
              
              
              (15.0
              )
              
              
              (45.8
              )
              
              
              (60.8
              )Cash paid to
      general partner to acquire additional interest in CIG
              
              
              —
              
              
              
              —
              
              
              
              (214.5
              )
              
              
              (214.5
              )
              
              
              —
              
              
              
              (214.5
              )Other
              
              
              (0.1
              )
              
              
              —
              
              
              
              0.1
              
              
              
              —
              
              
              
              —
              
              
              
              —Balance at
      September 30, 2009
              
              $
              1,289.8
              
              
              $
              293.3
              
              
              $
              (784.4
              )
              
              $
              798.7
              
              
              $
              337.0
              
              
              $
              1,135.7
 ____________
 (*)
              Retrospectively
      adjusted as discussed in Note
2.





See accompanying
notes.





4
 Table of Contents





El
PASO PIPELINE PARTNERS, L.P.





NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


(Unaudited)





1.
Basis of Presentation and Significant Accounting Policies





Basis
of Presentation





We prepared this
Quarterly Report on Form 10-Q under the rules and regulations of the United
States Securities and Exchange Commission (SEC). Because this is an interim
period filing presented using a condensed format, it does not include all the
disclosures required by U.S. generally accepted accounting principles (GAAP).
You should read this Quarterly Report on Form 10-Q along with our 2008 Annual
Report on Form 10-K, which also contains the consolidated financial statements
of Colorado Interstate Gas Company (CIG), for a summary of our significant
accounting policies and other disclosures. The financial statements as of
September 30, 2009 and December 31, 2008, and for the quarters and nine months
ended September 30, 2009 and 2008, are unaudited. In our opinion, we have made
all adjustments, which are of a normal recurring nature, to fairly present our
interim period results. We have evaluated subsequent events through the time of
filing on November 6, 2009, the date of issuance of our financial statements.
Due to the seasonal nature of our business, information for interim periods may
not be indicative of our operating results for the entire year.





On July 24, 2009,
we acquired an additional 18 percent general partner interest in CIG from El
Paso Corporation (El Paso) for $214.5 million. Subsequent to the acquisition, we
own a 58 percent general partner interest in CIG and have the ability to control
its operating and financial decisions and policies. Accordingly, we have
consolidated CIG and have retrospectively adjusted our historical financial
statements in all periods to reflect the change in reporting entity. For a
further discussion of this acquisition, see Note 2.





Significant
Accounting Policies





The information below
provides an update of our significant accounting policies and accounting
pronouncements as discussed in our 2008 Annual Report on Form 10-K.





Fair Value
Measurements. We adopted new accounting and reporting standards related
to our non-financial assets and liabilities that are measured at fair value on a
non-recurring basis, which primarily relates to any impairment of long-lived
assets or investments. During the nine months ended September 30, 2009, there
were no fair value measurements recorded on a non-recurring basis.





Earnings per Unit.On January 1, 2009, we adopted a new accounting standard that changes the
manner in which master limited partnerships calculate earnings per unit, and
haveretrospectively applied
this standard to all periods presented as further discussed in Note
4.





Business Combinations
and Noncontrolling Interests.On January 1, 2009, we adopted accounting
standard updates that clarify how to account for and report acquisitions of
businesses and transactions involving noncontrolling interests. These updates
require that all acquired assets, liabilities, noncontrolling interests and
certain contingencies as a result of a business combination should be measured
at fair value, and certain other acquisition-related costs be expensed rather
than capitalized. The accounting standard updates also require the presentation
of noncontrolling interests as a separate component of equity in our balance
sheets and as a separate caption in our income statements. Additionally, all
transactions with noncontrolling interest holders after adoption, including the
issuance and repurchase of noncontrolling interests, should be accounted for as
equity transactions unless a change in control of the subsidiary occurs. The
adoption of these accounting standard updates did not have an impact on our
financial statements because our acquisitions of additional interest in CIG were
accounted for as transactions between entities under common
control.








5
 Table of Contents





Transfers of
Financial Assets.In June 2009, the Financial Accounting Standards Board
(FASB) issued updates to the existing accounting standards for financial asset
transfers.Among
otheritems, these
accounting standard updates eliminate the concept of a qualifying
special-purpose entity (QSPE) for purposes of evaluating whether an entity
should be consolidated as a variable interest entity and are effective for
existing QSPEs as of January 1, 2010 and for transactions entered into on or
after January 1, 2010. We are currently assessing the impact that these
accounting standard updates may have on our financial statements, including any
impacts it may have on accounting for CIG’s accounts receivable sales program
and the related senior beneficial interests (see Note 8).





Variable Interest
Entities.In June 2009, the FASB issued updates to the existing
accounting standards for variable interest entities which revise how companies
determine their primary beneficiaries, among other changes. These updates
require companies to use a qualitative approach based on their responsibilities
and controlling power over the variable interest entities’ operations rather
than a quantitative approach in determining the primary beneficiary as
previously required. We are currently assessing the impact that these accounting
standard updates, effective January 1, 2010, may have on our financial
statements (see Note 8).





2.
Acquisitions





On July 24, 2009, we
acquired an additional 18 percent general partner interest in CIG from El
Paso for $214.5 million in cash, which we financed with the net proceeds from
our recent equity offering (see Note 3). Subsequent to this acquisition, we own
a 58 percent general partner interest in CIG and have the ability to control its
operating and financial decisions and policies. Because the transaction was
accounted for as a reorganization of entities under common control, we have
consolidated CIG and have retrospectively adjusted our historical financial
statements in all periods to reflect the change in reporting entity.
Accordingly, the condensed consolidated balance sheets reflect the historical
carrying value of CIG’s assets and liabilities. For accounting purposes, because
of the consolidation of CIG, we reflected the $214.5 million of cash paid to
acquire the additional interest in CIG as a reduction of our general partner's
capital. We have reflected El Paso’s 42 percent interest in CIG as a
noncontrolling interest in our financial statements in all periods
presented.  As a result of the retrospective consolidation of CIG, earnings
prior to the acquisition of the incremental interests in CIG (“pre-acquisition
earnings”) in historical periods have been allocated solely to our general
partner in all periods presented. Accordingly, the allocation of pre-acquisition
earnings to our general partner reflects 48 percent of CIG’s earnings prior to
September 30, 2008 and 18 percent of CIG’s earnings between September 30, 2008
and July 24, 2009. For a further discussion of our earnings per unit, see Note
4.





On September 30,
2008, we acquired an additional 30 percent general partner interest in CIG and
an additional 15 percent general partner interest in Southern Natural Gas
Company (SNG) from El Paso for $736 million. The consideration paid to El Paso
consisted of the issuance of 26,888,611 common units, 566,563 general partner
units, a $10 million note payable and $254 million of cash. We financed the $254
million cash payment through the issuance of $175 million of private placement
debt, $65 million from our revolving credit facility and the issuance of 873,000
common units to private investors for $15 million. For accounting purposes, we
recorded these additional interests in CIG and SNG at their historical cost of
$474 million and the difference between historical cost and the cash and note
payable consideration paid to El Paso as an increase to partners’ capital.
Because our financial statements have been retrospectively adjusted to reflect
the consolidation of CIG, we have eliminated the historical capital balance
related to the 30 percent interest we acquired in CIG on September 30,
2008.  Accordingly, for accounting purposes, we have reflected a $237.9
million decrease in our general partner's capital during the nine months ended
September 30, 2008 related to this elimination.  We accounted for the
acquisition of SNG prospectively beginning with the date of acquisition and will
continue to utilize the equity method of accounting for our total investment in
SNG. We reflect our proportionate share of the operating results of SNG as
earnings from unconsolidated affiliates in our financial
statements.








6
 Table of Contents


3.
Partners’ Capital


On June 15, 2009,
we publicly issued 11,000,000 common units and issued 224,828 general partner
units to El Paso for net proceeds of $188.2 million. On July 1, 2009, we
received additional net proceeds of $28.3 million in conjunction with the
underwriters’ exercise of their option to purchase an additional 1,650,000
common units and the issuance of an additional 33,674 general partner units to
El Paso. With the issuance of the additional units, El Paso’s limited partner
interest in us decreased from 72 percent to 65 percent. El Paso retained its two
percent general partner interest in us, as well as the incentive distribution
rights (IDRs). The net proceeds from this offering were used to acquire the
additional 18 percent interest in CIG. For a further discussion of this
acquisition, see Note 2.
  4.
Earnings Per Unit and Cash Distributions
 
 Earnings per unit.During the
first quarter of 2009, we adopted an accounting standard, applied
retrospectively to our earnings per unit, which changes the manner in which
master limited partnerships calculate earnings per unit. This standard requires
the calculation of earnings per unit based on actual distributions made to a
master limited partnership’s unitholders, including the holders of IDRs, for the
related reporting period. To the extent net income attributable to El Paso
Pipeline Partners, L.P. exceeds cash distributions, the excess is allocated to
unitholders based on their contractual participation rights to share in those
earnings. If cash distributions exceed net income attributable to El Paso
Pipeline Partners, L.P., the excess distributions are allocated proportionately
to all participating units outstanding based on their respective ownership
percentages. Additionally, under this standard, the calculation of earnings per
unit does not reflect an allocation of undistributed earnings to the IDR holders
beyond amounts distributable under the terms of the partnership agreement. Net
income attributable to El Paso Pipeline Partners, L.P. per limited partner unit
reported prior to the adoption of this standard was $0.86 per common unit and
$0.75 per subordinated unit for the nine months ended September 30, 2008. The
adoption of this standard did not have an impact on our net income attributable
to El Paso Pipeline Partners, L.P. per limited partner unit for the quarter
ended September 30, 2008. Payments made to our unitholders are determined in
relation to actual declared distributions, and are not based on the net income
allocations used in the calculation of earnings per unit.
 
 As discussed in
Note 2, we have retrospectively adjusted our historical financial statements for
the consolidation of CIG following the acquisition of an additional 18 percent
interest in CIG from El Paso on July 24, 2009. As a result of the retrospective
consolidation of CIG, earnings prior to the acquisition of the incremental
interests in CIG (“pre-acquisition earnings”) in historical periods have been
allocated solely to our general partner in all periods presented. Accordingly,
our allocation of pre-acquisition earnings to our general partner reflects 48
percent of CIG’s earnings prior to September 30, 2008 and 18 percent of CIG’s
earnings between September 30, 2008 and July 24, 2009.
 
 Net income
attributable to El Paso Pipeline Partners, L.P. per limited partner unit is
computed by dividing the limited partners’ interest in net income attributable
to El Paso Pipeline Partners, L.P. by the weighted average number of limited
partner units outstanding. Diluted earnings per limited partner unit reflects
the potential dilution that could occur if securities or other agreements to
issue common units were exercised, settled or converted into common units. As of
September 30, 2009 and 2008, we had 13,717 and 8,425 restricted units
outstanding, a portion of which were dilutive for the quarters and nine months
ended September 30, 2009 and 2008.
 
 The tables below
show the (i) allocation of net income attributable to El Paso Pipeline Partners,
L.P. and the (ii) net income attributable to El Paso Pipeline Partners, L.P. per
limited partner unit based on the number of basic and diluted limited partner
units outstanding for the periods ended September 30, 2009 and
2008.
 
 Allocation
of Net Income Attributable to El Paso Pipeline Partners, L.P.
 
 Quarters Ended September
30,
              
              
              Nine Months Ended September
    30,2009
              
              
              2008
              
              
              2009
              
              
              2008(In
      millions)
              
              
              (In
      millions)Net income
      attributable to El Paso Pipeline Partners, L.P.
              
              $
              46.6
              
              
              $
              33.2
              
              
              $
              148.9
              
              
              $
              120.1Less: CIG
      preacquisition earnings allocated to general partner
              
              
              (1.4
              )
              
              
              (12.4
              )
              
              
              (14.6
              )
              
              
              (48.7
              )Income subject
      to 2% allocation of general partner interest
              
              
              45.2
              
              
              
              20.8
              
              
              
              134.3
              
              
              
              71.4Less: General
      partner’s interest in net income attributable to El Paso Pipeline
      Partners, L.P.
              
              
              (0.9
              )
              
              
              (0.4
              )
              
              
              (2.7
              )
              
              
              (1.4
              )General partner’s incentive
      distribution
              
              
              (0.4
              )
              
              
              —
              
              
              
              (0.4
              )
              
              
              —Limited
      partners’ interest in net income attributable to El Paso Pipeline
      Partners, L.P. — common and subordinated
              
              $
              43.9
              
              
              $
              20.4
              
              
              $
              131.2
              
              
              $
              70.0








7
 Table of Contents


Net
Income Attributable to El Paso Pipeline Partners, L.P. per Limited Partner
Unit





2009
            
            
            2008Common
            
            
            Subordinated
            
            
            Common
            
            
            SubordinatedQuarters
      Ended September 30
            
            (In
      millions, except for per unit amounts)Distributions
      (1)
            
            $
            34.2
            
            
            $
            9.7
            
            
            $
            25.5
            
            
            $
            8.3Undistributed
      earnings (losses)
            
            
            —
            
            
            
            —
            
            
            
            (9.0
            )
            
            
            (4.4
            )Limited
      partners’ interest in net income attributable to El Paso Pipeline
      Partners, L.P.
            
            $
            34.2
            
            
            $
            9.7
            
            
            $
            16.5
            
            
            $
            3.9Weighted
      average limited partner units outstanding — Basic and
    Diluted
            
            
            97.6
            
            
            
            27.7
            
            
            
            57.2
            
            
            
            27.7Net income
      attributable to El Paso Pipeline Partners, L.P. per limited partner unit —
      Basic and Diluted
            
            $
            0.35
            
            
            $
            0.35
            
            
            $
            0.29
            
            
            $
            0.14





2009
            
            
            2008Common
            
            
            Subordinated
            
            
            Common
            
            
            SubordinatedNine
      Months Ended September 30
            
            (In
      millions, except for per unit amounts)Distributions
      (1)
            
            $
            94.0
            
            
            $
            27.9
            
            
            $
            58.8
            
            
            $
            24.5Undistributed
      earnings (losses)
            
            
            7.1
            
            
            
            2.2
            
            
            
            (8.9
            )
            
            
            (4.4
            )Limited
      partners’ interest in net income attributable to El Paso Pipeline
      Partners, L.P.
            
            $
            101.1
            
            
            $
            30.1
            
            
            $
            49.9
            
            
            $
            20.1Weighted
      average limited partner units outstanding — Basic and
    Diluted
            
            
            88.9
            
            
            
            27.7
            
            
            
            57.2
            
            
            
            27.7Net income
      attributable to El Paso Pipeline Partners, L.P. per limited partner unit —
      Basic and Diluted
            
            $
            1.14
            
            
            $
            1.09
            
            
            $
            0.87
            
            
            $
            0.73


__________


(1) Reflects
distributions declared to our common and subordinated unitholders of $0.3500 per
unit and $0.3000 per unit for the quarters ended September 30, 2009 and 2008 and
$1.0050 per unit and $0.8825 per unit for the nine months ended September 30,
2009 and 2008.





Cash Distributions to Unitholders.Our common and subordinated unitholders and general partner are entitled
to receive quarterly distributions of available cash as defined in our
partnership agreement.The table below shows
the distributions to our unitholders (in millions, except for per unit
amounts):





Quarters Ended
            
            Total
      Quarterly
              Distribution
      Per
              Unit
            
            
            Total
      Cash
              Distribution
            
            Date
      of
              Declaration
            
            Date
      of
              Distribution2008March 31, 2008
            
            $
            0.28750
            
            
            $
            24.9
            
            April
      2008
            
            May
      2008June 30, 2008
            
            
            0.29500
            
            
            
            25.6
            
            July
      2008
            
            August
      2008September 30, 2008
            
            
            0.30000
            
            
            
            34.5
            
            October
      2008
            
            November
      20082009March 31, 2009
            
            
            0.32500
            
            
            
            37.4
            
            April
      2009
            
            May
      2009June 30, 2009
            
            
            0.33000
            
            
            
            42.2
            
            July
      2009
            
            August
      2009September 30, 2009
            
            
            0.35000
            
            
            
            45.1
            
            October
      2009
            
            November
      2009





The distribution
for the quarter ended September 30, 2009 will be paid to all outstanding common
and subordinated units on November 13, 2009 to unitholders of record at the
close of business on October 30, 2009.





Subordinated units and incentive
distribution rights.All of our subordinated units and IDRs are held by a
wholly owned subsidiary of El Paso. Based on the quarterly distribution per unit
declared for the quarter ended September 30, 2009, our general partner will
receive incentive distributions of $0.4 million in accordance with the
partnership agreement for the quarter and nine months ended September 30, 2009.
For a further discussion of our subordinated units and IDRs, see our 2008 Annual
Report on Form 10-K.


8
 Table of Contents





5.
Long-Term Debt and Other Financing Obligations





Our long-term debt
and other financing obligations are as follows:





September
      30,
            
            
            December
      31,2009
            
            
            2008(In
      millions)El Paso
      Pipeline Partners, L.P.Revolving
      credit facility, variable due 2012
            
            $
            535.0
            
            
            $
            584.9Note payable
      to El Paso, variable due 2012, LIBOR plus 3.5%
            
            
            10.0
            
            
            
            10.0Notes,
      variable due 2012, LIBOR plus 3.5%
            
            
            35.0
            
            
            
            35.0Notes, 7.76%,
      due 2011
            
            
            37.0
            
            
            
            37.0Notes, 7.93%,
      due 2012
            
            
            15.0
            
            
            
            15.0Notes, 8.00%,
      due 2013
            
            
            88.0
            
            
            
            88.0Colorado
      Interstate Gas CompanySenior Notes,
      5.95%, due 2015
            
            
            35.0
            
            
            
            35.0Senior Notes,
      6.80%, due 2015
            
            
            339.9
            
            
            
            339.9Senior
      Debentures, 6.85%, due 2037
            
            
            100.0
            
            
            
            100.0Total
      long-term debt
            
            
            1,194.9
            
            
            
            1,244.8Other
      financing obligations
            
            
            165.2
            
            
            
            116.1Total
      long-term debt and other financing obligations
            
            
            1,360.1
            
            
            
            1,360.9Less: Current
      maturities
            
            
            4.8
            
            
            
            3.6Total
      long-term debt and other financing obligations, less current
      maturities
            
            $
            1,355.3
            
            
            $
            1,357.3





As of September 30,
2009, we had approximately $535 million and $585 million outstanding under our
revolving credit facility, and our remaining availability under this facility
was approximately $200 million. In determining our available capacity, we have
assessed our lender’s ability to fund under our various credit facilities. These
borrowings have an interest rate of LIBOR plus 0.425 based on a leverage pricing
grid. We also pay utilization and commitment fees of 0.225 percent. Our all-in
borrowing rate under this facility was 0.9 percent and 1.4 percent as of
September 30, 2009 and December 31, 2008. As of September 30, 2009, we were in
compliance with all of our debt covenants. For a further discussion of our
credit facility and other long-term financing obligations, see our 2008 Annual
Report on Form 10-K.





In March 2009, CIG,
Colorado Interstate Issuing Corporation (CIIC), El Paso and certain other El
Paso subsidiaries filed a registration statement on Form S-3 under which CIG and
CIIC may co-issue debt securities in the future. CIIC is a wholly owned finance
subsidiary of CIG and is the co-issuer of CIG’s outstanding debt securities.
CIIC has no material assets, operations, revenues or cash flows other than those
related to its service as a co-issuer of CIG’s debt securities. Accordingly, it
has no ability to service obligations on CIG’s debt securities.





Other Financing Obligations.
In June 2009, the Totem Gas Storage project was placed in service. Upon placing
this storage facility in service, CIG transferred its title in the storage
facility to WYCO Development LLC (WYCO), a joint venture with an affiliate of
Public Service Company of Colorado (PSCo) in which CIG has a 50 percent
ownership interest. Although CIG transferred the title in this storage facility
to WYCO, we continue to reflect the Totem Gas Storage facility as property,
plant and equipment in our financial statements as of September 30, 2009 due to
CIG’s continuing involvement with the storage facility through
WYCO.





CIG constructed the
Totem Gas Storage facility and CIG’s joint venture partner in WYCO funded 50
percent of the storage facility construction costs, which we reflected as an
other non-current liability in our balance sheet during the construction period.
Upon completion of the construction, our obligation to the affiliate of PSCo for
these construction advances was converted into a financing obligation to WYCO
and accordingly, we reclassified the amounts from other non-current
liabilities to debt and other financing obligations during the second quarter of
2009.  This obligation has a principal amount of $50 million as of
September 30, 2009 with equal monthly principal payments due through 2039. 
We also make monthly interest payments on this obligation that are based on 50
percent of the operating results of the Totem Gas Storage facility, which is at
a 15.5% rate as of September 30, 2009.








9
 Table of Contents





6.
Fair Value of Financial Instruments





September 30, 2009
            
            
            December 31, 2008Carrying
              Amount
            
            
            Fair
              Value
            
            
            Carrying
              Amount
            
            
            Fair
              Value(In
      millions)Long-term
      financing obligations, including current maturities
            
            $
            1,360.1
            
            
            $
            1,344.5
            
            
            $
            1,360.9
            
            
            $
            1,126.3





As of September 30,
2009 and December 31, 2008, the carrying amounts of cash and cash equivalents,
short-term borrowings, and trade and other receivables and payables represented
fair value because of the short-term nature of these instruments. At September
30, 2009 and December 31, 2008, we had notes receivable from El Paso of $111.5
million and $199.0 million, with a variable interest rate of 1.5% and 3.2%.
While we are exposed to changes in interest income based on changes to the
variable interest rate, the fair value of these note receivables approximates
their carrying value due to the notes being due on demand and the market-based
nature of their interest rate. We estimate the fair value of our debt based on
quoted market prices for the same or similar issues.





7.
Commitments and Contingencies





Legal
Proceedings





WIC Line 124A Rupture. On
November 11, 2006, a bulldozer driver ran into and ruptured Wyoming Interstate
Company, Ltd. (WIC) Line 124A near Cheyenne, Wyoming resulting in an explosion
and fire, and the subsequent death of the driver. The driver was working for a
construction company hired by Rockies Express Pipeline, LLC to construct its new
pipeline in a corridor substantially parallel to WIC’s Line 124A. The Department
of Transportation’s Pipeline and Hazardous Materials Safety Administration
(PHMSA) conducted an investigation into the incident, with which we fully
cooperated. In March 2008, we received from PHMSA a Notice of Probable Violation
with a proposed fine of $3.4 million. In October 2008, a hearing was held at
which we contested the proposed fine. We have completed the post-hearing
briefing and PHMSA has taken the matter under consideration.





Gas Measurement Cases.CIG
and a number of our affiliates were named defendants in actions that generally
allege mismeasurement of natural gas volumes and/or heating content resulting in
the underpayment of royalties. The first set of cases was filed in 1997 by an
individual under the False Claims Act and have been consolidated for pretrial
purposes (In re: Natural
Gas Royalties Qui Tam
Litigation,U.S. District Court for the District of Wyoming). These
complaints allege an industry-wide conspiracy to underreport the heating value
as well as the volumes of the natural gas produced from federal and Native
American lands. In October 2006, the U.S. District Judge issued an order
dismissing all claims against all defendants.  In March 2009, the
Tenth Circuit Court of Appeals affirmed the dismissals and in October 2009, the
plaintiff’s appeal to the United States Supreme Court was denied.





Similar allegations
were filed in a second set of actions initiated in 1999 in Will Price, et al. v. Gas Pipelines
and Their Predecessors, et al.,in the District Court of Stevens County,
Kansas. The plaintiffs seek certification of a class of royalty owners in wells
on non-federal and non-Native American lands in Kansas, Wyoming and Colorado.
The plaintiffs seek an unspecified amount of monetary damages in the form of
additional royalty payments (along with interest, expenses and punitive damages)
and injunctive relief with regard to future gas measurement practices. In
September 2009, the court denied the motions for class certification. The
plaintiffs have filed a motion for reconsideration. CIG’s costs and legal
exposure related to these lawsuits and claims are not currently
determinable.








10
 Table of Contents





In addition to the
above proceeding, we and our subsidiaries and affiliates are named defendants in
numerous lawsuits and governmental proceedings that arise in the ordinary course
of our business. For each of these matters, we evaluate the merits of the case,
our exposure to the matter, possible legal or settlement strategies and the
likelihood of an unfavorable outcome. If we determine that an unfavorable
outcome is probable and can be estimated, we establish the necessary accruals.
While the outcome of these matters, including those discussed above, cannot be
predicted with certainty, and there are still uncertainties related to the costs
we may incur, based upon our evaluation and experience to date, we believe we
have established appropriate reserves for these matters. It is possible that new
information or future developments could require us to reassess our potential
exposure related to these matters and adjust our accruals accordingly, and these
adjustments could be material. As of September 30, 2009,
we accrued approximately $1.2 million for our outstanding legal
matters.





Environmental
Matters





We are subject to
federal, state and local laws and regulations governing environmental quality
and pollution control. These laws and regulations require us to remove or remedy
the effect on the environment of the disposal or release of specified substances
at current and former operating sites. At September 30, 2009 and December 31,
2008, we have accrued approximately $11.4 million and $13.3 million for expected
remediation costs and associated onsite, offsite and groundwater technical
studies and for related environmental legal costs; however, we estimate that our
exposure could be as high as $38 million at September 30, 2009. Our accrual at
September 30, 2009 includes $8.3 million for environmental contingencies related
to properties CIG previously owned.





Our accrual
represents a combination of two estimation methodologies. First, where the most
likely outcome can be reasonably estimated, that cost has been accrued. Second,
where the most likely outcome cannot be estimated, a range of costs is
established and if no one amount in that range is more likely than any other,
the lower end of the expected range has been accrued. Our environmental
remediation projects are in various stages of completion. Our recorded
liabilities reflect our current estimates of amounts we will expend to remediate
these sites. However, depending on the stage of completion or assessment, the
ultimate extent of contamination or remediation required may not be known. As
additional assessments occur or remediation efforts continue, we may incur
additional liabilities.





For the remainder
of 2009, we estimate that our total remediation expenditures will be
approximately $0.9 million, which will be expended under government directed
clean-up programs.





It is possible that
new information or future developments could require us to reassess our
potential exposure related to environmental matters. We may incur significant
costs and liabilities in order to comply with existing environmental laws and
regulations. It is also possible that other developments, such as increasingly
strict environmental laws, regulations and orders of regulatory agencies, as
well as claims for damages to property and the environment or injuries to other
persons resulting from our current or past operations, could result in
substantial costs and liabilities in the future. As this information becomes
available, or other relevant developments occur, we will adjust our accrual
amounts accordingly. While there are still uncertainties related to the ultimate
costs we may incur, based upon our evaluation and experience to date, we believe
our reserves are adequate.





Regulatory
Matter





Fuel Recovery Mechanism.During the first quarter of 2008, the Federal Energy Regulatory
Commission (FERC) issued an order approving a fuel and related gas cost recovery
mechanism for CIG which was designed to recover all cost impacts, or flow
through to shippers any revenue impacts, of all fuel imbalance revaluations and
related gas balance items. Effective April 2008, WIC implemented a similar fuel
and related gas cost recovery mechanism, subject to the outcome of a FERC
proceeding. The implementation of these mechanisms was protested by a limited
number of shippers. On July 31, 2009 and October 1, 2009, the FERC issued orders
to CIG and WIC, respectively, directing us to remove the cost and revenue
components from our fuel recovery mechanisms. Due to these orders, our future
earnings may be impacted by both positive and negative fluctuations in gas
prices related to fuel imbalance revaluations, their settlement, and other gas
balance related items. We continue to explore options to minimize the price
volatility associated with these operational activities.








11
 Table of Contents





8.
Investments in Unconsolidated Affiliates and Transactions with
Affiliates





Investments
in Unconsolidated Affiliates





On September 30,
2008, we acquired an additional 15 percent general partner interest in SNG from
El Paso, as further discussed in Note 2. The acquisition increased our general
partner interest in SNG to 25 percent. Our proportionate share of the operating
results SNG has been reflected as earnings from unconsolidated affiliates since
the date the respective interests were acquired.





The information
below related to our unconsolidated affiliates reflects our net investment and
earnings we recorded from these investments and summarized financial information
of our proportionate share of SNG.





Net
Investment and Earnings





Investment
            
            
            Earnings
      from Unconsolidated
      AffiliatesSeptember
      30,
            
            
            December
      31,
            
            
            Quarters
      Ended
              September 30,
            
            
            Nine
      Months Ended
              September 30,2009
            
            
            2008
            
            
            2009
            
            
            2008
            
            
            2009
            
            
            2008(In
      millions)
            
            
            (In
      millions)SNG
            
            $
            397.2
            
            
            $
            393.8
            
            
            $
            11.2
            
            
            $
            4.5
            
            
            $
            35.7
            
            
            $
            19.1Other
            
            
            15.0
            
            
            
            17.0
            
            
            
            0.7
            
            
            
            0.3
            
            
            
            1.3
            
            
            
            0.9Total
            
            $
            412.2
            
            
            $
            410.8
            
            
            $
            11.9
            
            
            $
            4.8
            
            
            $
            37.0
            
            
            $
            20.0




SNG
Summarized Financial Information
 
 Quarters
      Ended
                September 30,
              
              
              Nine
      Months Ended
                September 30,2009
              
              
              2008
              
              
              2009
              
              
              2008(In
      millions)
              
              
              (In
      millions)Operating
      results data:Operating
      revenues
              
              $
              31.0
              
              
              $
              12.3
              
              
              $
              92.3
              
              
              $
              41.1Operating
      expenses
              
              
              16.8
              
              
              
              6.9
              
              
              
              47.7
              
              
              
              19.5Income from
      continuing operations and net income
              
              
              11.2
              
              
              
              4.5
              
              
              
              35.7
              
              
              
              19.1


Transactions
with Affiliates





Distributions Received from SNG.We received cash distributions from SNG of $11.2 million and $4.8 million
during the quarters ended September 30, 2009 and 2008 and $32.3 million and
$15.9 million during the nine months ended September 30, 2009 and 2008. In
October 2009, we received distributions from SNG of $10.6 million.




CIG
Distributions to El Paso


CIG Cash Distributions to El Paso.CIG is required to make distributions of available cash as defined in
their partnership agreement on a quarterly basis to their partners, including
us. Due to the retrospective consolidation of CIG, we have reflected 42 percent
of CIG’s historical distributions paid to El Paso as distributions to its
noncontrolling interest holder in our financial statements in all periods
presented. CIG’s remaining historical distributions (excluding distributions
paid to its noncontrolling interest holder) are reflected as distributions of
pre-acquisition earnings and are allocated to our general partner. The following
table shows CIG’s cash distributions to El Paso for the periods ended September
30.
 
 Quarters
      Ended
                September 30,
              
              
              Nine
      Months Ended
                September 30,2009
              
              
              2008
              
              
              2009
              
              
              2008(In
      millions)
              
              
              (In
      millions)Distributions
      to noncontrolling interest holder
              
              $
              10.8
              
              
              $
              9.9
              
              
              $
              45.8
              
              
              $
              33.9Distributions
      of pre-acquisition earnings
              
              
              —
              
              
              
              11.4
              
              
              
              15.0
              
              
              
              38.7Cash
      distributions to El Paso
              
              $
              10.8
              
              
              $
              21.3
              
              
              $
              60.8
              
              
              $
              72.6
 
 In October 2009,
CIG paid cash distributions of $14.9 million to its noncontrolling interest
holder.







12
 Table of Contents





CIG Non-Cash Distribution to El
Paso.Prior to our acquisition of an additional 30 percent ownership
interest in CIG on September 30, 2008, CIG distributed a portion of its notes
receivable under its cash management program to its partners (including
us).  Approximately $270 million of this distribution was made to El Paso,
which is reflected as a non-cash distribution to El Paso in our financial
statements.




Affiliate Revenues and Expenses.We enter into transactions with our affiliates within the ordinary course
of business. For a further discussion of our affiliated transactions, see our
2008 Annual Report on Form 10-K. The following table shows revenues and charges
from our affiliates for the periods ended September 30:
 
 Quarters
      Ended
                September 30,
              
              
              Nine
      Months Ended
                September 30,2009
              
              
              2008
              
              
              2009
              
              
              2008(In
      millions)
              
              
              (In
      millions)Revenues from
      affiliates
              
              $
              4.1
              
              
              $
              6.0
              
              
              $
              12.0
              
              
              $
              17.4Operation and
      maintenance expense from affiliates
              
              
              20.9
              
              
              
              20.5
              
              
              
              64.4
              
              
              
              61.0Reimbursement
      of operating expenses charged to affiliates
              
              
              3.0
              
              
              
              3.0
              
              
              
              9.1
              
              
              
              8.9
 
 Notes Receivable and Payable with
Affiliates.At September 30, 2009 and December 31, 2008, we had note
receivables from El Paso of $111.5 million and $199.0 million. We
classified $90.7 million and $123.1 million of these receivables as current on
our balance sheets at September 30, 2009 and December 31, 2008, based on the net
amount we anticipate using in the next twelve months considering available cash
sources and needs. The interest rate on these variable rate notes was 1.5% at
September 30, 2009 and 3.2% at December 31, 2008. We also have a note
payable to El Paso recorded as long-term debt on our balance sheet with $10.0
million outstanding at September 30, 2009 and December 31, 2008. For a further
discussion of our notes receivable and payable with affiliates, see our 2008
Annual Report on Form 10-K.
  Accounts Receivable Sales Program.CIG sells certain accounts receivable to a QSPEwhose purpose is solely
to invest in their receivables, which are short-term assets that generally
settle within 60 days. During the quarters and nine months ended September 30,
2009, CIG received net proceeds of approximately $0.1 billion and $0.3 billion
related to sales of receivables to the QSPE and changes in our subordinated
beneficial interests and recognized losses of $0.1 million and $0.2 million on
these transactions.  As of September 30, 2009 and December 31, 2008,
CIG had approximately $35.4 million and $29.0 million of receivables outstanding
with the QSPE, for which they received cash of $17.1 million and $20.0 million
and received subordinated beneficial interests of approximately $18.1 million
and $8.4 million. The QSPE also issued senior beneficial interests on the
receivables sold to a third party financial institution, which totaled $17.3
million and $20.6 million as of September 30, 2009 and December 31, 2008. We
reflect the subordinated beneficial interest in receivables sold at their fair
value on the date they are issued. These amounts (adjusted for subsequent
collections) are recorded as accounts receivable from affiliate in our balance
sheets. Our ability to recover our carrying value of our subordinated beneficial
interests is based on the collectibility of the underlying receivables sold to
the QSPE. We reflect accounts receivable sold under this program and changes in
the subordinated beneficial interests as operating cash flows in our statement
of cash flows. Under the agreements, we earn a fee for servicing the accounts
receivable and performing all administrative duties for the QSPE which is
reflected as a reduction of operation and maintenance expense in our income
statement. The fair value of these servicing and administrative agreements as
well as the fees earned were not material to our financial statements for the
quarters and nine months ended September 30, 2009 and 2008.





Other.As of September 30,
2009 and December 31, 2008, we had net contractual, gas imbalance, and trade
payables, as well as other liabilities with our affiliates arising in the
ordinary course of business of approximately $24.3 million and $10.2 million.
Additionally, we had contractual deposits from affiliates of $6.6 million and
$6.4 million included in other current liabilities on our balance sheets as of
September 30, 2009 and December 31, 2008.





WIC leases a
compressor station from CIG’s unconsolidated affiliate, WYCO, and made lease
payments to WYCO of $0.3 million and $0.4 million for the quarters ended
September 30, 2009 and 2008 and $1.0 million and $1.1 million for the nine month
periods ended September 30, 2009 and 2008.








13
 Table of Contents





Item 2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations





The information
contained in Item 2 updates, and should be read in conjunction with, information
disclosed in our 2008 Annual Report on Form 10-K, and our financial statements
and notes presented in Item 1 of this Quarterly Report on Form
10-Q.





Overview




On July 24, 2009
and September 30, 2008, we acquired additional 18 percent and 30 percent general
partner interests in CIG, respectively, from El Paso. Subsequent to the
acquisition of the 18 percent interest, we own a 58 percent general partner
interest in CIG and have the ability to control its operating and financial
decisions and policies. Accordingly, we have consolidated CIG and have
retrospectively adjusted our historical financial statements in all periods to
reflect the change in reporting entity. We have reflected El Paso’s 42 percent
interest in CIG as a noncontrolling interest in our financial statements for all
periods presented. The transaction was accounted for as a reorganization of
entities under common control.




Effective September
30, 2008, we acquired from El Paso an additional 15 percent interest in SNG. We
accounted for the acquisition of our additional equity interest in SNG
prospectively beginning on September 30, 2008. For a further discussion of our
acquisitions, see Item 1, Financial Statements, Note 2.




As of September 30,
2009, we own 100 percent of WIC, a 58 percent general partner interest in CIG
and a 25 percent general partner interest in SNG. El Paso owns the remainder of
CIG and SNG. We intend to grow our business through organic expansion
opportunities and through strategic asset acquisitions from third parties, El
Paso or both. As of September 30, 2009, each of WIC, CIG and SNG have
significant expansion projects in progress as further discussed in our 2008
Annual Report on Form 10-K and updated below:




WIC.
In July 2009 and November 2009, WIC filed applications with the FERC for
certificate authorization to construct the WIC Expansion project. In September
2009, WIC placed the Piceance Lateral expansion project in
service.




CIG.
During the first quarter of 2009, CIG agreed with its customers to defer the
targeted in-service date for the Raton 2010 project from June 2010 to December
2010. In September 2009, CIG filed an application for certificate authorization
with the FERC for this project. In June 2009, CIG placed the Totem Gas Storage
project in service.




SNG.
During the second quarter of 2009, BG LNG Services (BG) informed SNG of their
intent not to exercise their option to have SNG construct the Cypress Phase III
expansion. However, BG has made alternative commitments to subscribe to certain
other firm capacity on another of El Paso’s pipeline systems and to provide
certain rate considerations on its existing transportation contract for Cypress
Phases I and II. These alternative arrangements are pending FERC approval. In
August 2009, we received certificates of authorization from the FERC on the
South System III and the Southeast Supply Header Phase II
projects.








14
 Table of Contents





In addition to our
backlog of contracted organic growth projects, we have other projects that are
in various phases of commercial development. Many of the potential projects
involve expansion capacity to serve increased natural gas-fired generation
loads.





CIG. Along the Front Range of
CIG’s system, utilities have various projects under development that involve
constructing new natural gas-fired generation in part to provide backup capacity
required when renewable generation is not available during certain daily or
seasonal periods.





SNG. In early 2009, SNG
executed a non-binding letter of intent (LOI) with Florida Power & Light
Company (FPL) to expand SNG’s pipeline system by approximately 600 MMcf/d by
constructing approximately 375 miles of 36-inch pipeline from western Alabama to
northern Florida.  This expansion project was subject to the Florida Public
Service Commission’s (PSC) approval for FPL to build an intrastate pipeline
which would connect to our SNG system. The PSC rejected FPL’s proposal and SNG’s
LOI with FPL has expired.  The future of this project is
uncertain.





Most of these
potential expansion projects would have in-service dates for 2014 and beyond. If
we are eventually successful in contracting for these new loads, the capital
requirements could be substantial and would be incremental to our backlog of
contracted organic growth projects. Although we pursue the development of these
potential projects from time to time, there can be no assurance that we will be
successful in negotiating the definitive binding contracts necessary for such
projects to be included in our backlog of contracted organic growth projects.





For a further
discussion of the capital requirements of us and our unconsolidated affiliates,
see Liquidity and Capital
Resources.





15
 Table of Contents


Results
of Operations





Our management uses
earnings before interest expense and income taxes (EBIT) as a measure to assess
the operating results and effectiveness of our businesses, which consists of
consolidated operations as well as investments in unconsolidated affiliates. We
believe EBIT is useful to our investors to provide them with the same measure
used by El Paso to evaluate our performance. We define EBIT as net income
adjusted for items such as  (i) interest and debt expense, net, (ii)
affiliated interest income, net (iii) income taxes and (iv) net income
attributable to noncontrolling interests so that investors may evaluate our
operating results without regard to our financing methods or capital structure.
EBIT may not be comparable to measures used by other companies. Additionally,
EBIT should be considered in conjunction with net income, income before income
taxes and other performance measures such as operating income or operating cash
flows. Below is a reconciliation of our EBIT to net income, our throughput
volumes and an analysis and discussion of our results for the quarters and nine
months ended September 30, 2009 compared to the same periods in
2008.




Quarters
      Ended
            
            
            Nine
      Months EndedSeptember
      30,
            
            
            September
      30,2009
            
            
            2008
            
            
            2009
            
            
            2008(In
      millions, except for volumes)Operating
      revenues
            
            $
            128.8
            
            
            $
            103.3
            
            
            $
            386.5
            
            
            $
            331.7Operating
      expenses
            
            
            (61.8
            )
            
            
            (60.0
            )
            
            
            (182.2
            )
            
            
            (174.3
            )Operating
      income
            
            
            67.0
            
            
            
            43.3
            
            
            
            204.3
            
            
            
            157.4Earnings from
      unconsolidated affiliates
            
            
            11.9
            
            
            
            4.8
            
            
            
            37.0
            
            
            
            20.0Other income,
      net
            
            
            0.4
            
            
            
            3.4
            
            
            
            4.7
            
            
            
            6.6EBIT before
      adjustment for noncontrolling interests.
            
            
            79.3
            
            
            
            51.5
            
            
            
            246.0
            
            
            
            184.0Net income
      attributable to noncontrolling interests
            
            
            (13.7
            )
            
            
            (10.7
            )
            
            
            (44.7
            )
            
            
            (42.5
            )EBIT
            
            
            65.6
            
            
            
            40.8
            
            
            
            201.3
            
            
            
            141.5Interest and
      debt expense, net
            
            
            (19.4
            )
            
            
            (12.1
            )
            
            
            (53.9
            )
            
            
            (41.9
            )Affiliated
      interest income, net
            
            
            0.4
            
            
            
            4.5
            
            
            
            1.5
            
            
            
            20.5Net income
      attributable to El Paso Pipeline Partners, L.P.
            
            
            46.6
            
            
            
            33.2
            
            
            
            148.9
            
            
            
            120.1Net income
      attributable to noncontrolling interests
            
            
            13.7
            
            
            
            10.7
            
            
            
            44.7
            
            
            
            42.5Net
      income
            
            $
            60.3
            
            
            $
            43.9
            
            
            $
            193.6
            
            
            $
            162.6Throughput
      volumes (BBtu/d)
            
            
            4,610
            
            
            
            4,542
            
            
            
            4,824
            
            
            
            4,466







Quarters
      Ended
              September
      30, 2009
            
            
            Nine
      Months Ended
              September
      30, 2008Revenue
            
            
            Expense
            
            
            Other
            
            
            EBIT
              Impact
            
            
            Revenue
            
            
            Expense
            
            
            Other
            
            
            EBIT
              ImpactFavorable/(Unfavorable)(In
      millions)Expansions
            
            $
            26.4
            
            
            $
            (5.0
            )
            
            $
            (0.9
            )
            
            $
            20.5
            
            
            $
            64.5
            
            
            $
            (14.6
            )
            
            $
            (0.6
            )
            
            $
            49.3Operational
      gas, revaluations and processing revenues
            
            
            2.0
            
            
            
            (2.7
            )
            
            
            —
            
            
            
            (0.7
            )
            
            
            (8.3
            )
            
            
            6.5
            
            
            
            —
            
            
            
            (1.8
            )Operating and
      general and administrative expenses
            
            
            —
            
            
            
            5.4
            
            
            
            —
            
            
            
            5.4
            
            
            
            —
            
            
            
            3.0
            
            
            
            —
            
            
            
            3.0Equity
      earnings from SNG
            
            
            —
            
            
            
            —
            
            
            
            6.7
            
            
            
            6.7
            
            
            
            —
            
            
            
            —
            
            
            
            16.6
            
            
            
            16.6Net income
      attributable to noncontrolling interests
            
            
            —
            
            
            
            —
            
            
            
            (3.0
            )
            
            
            (3.0
            )
            
            
            —
            
            
            
            —
            
            
            
            (2.2
            )
            
            
            (2.2
            )Other(1)
            
            
            (2.9
            )
            
            
            0.5
            
            
            
            (1.7
            )
            
            
            (4.1
            )
            
            
            (1.4
            )
            
            
            (2.8
            )
            
            
            (0.9
            )
            
            
            (5.1
            )Total impact
      on EBIT
            
            $
            25.5
            
            
            $
            (1.8
            )
            
            $
            1.1
            
            
            $
            24.8
            
            
            $
            54.8
            
            
            $
            (7.9
            )
            
            $
            12.9
            
            
            $
            59.8


____________


(1)
            Consists
      of individually insignificant
items.




16
 Table of Contents




Expansions.We benefited from
increased EBIT from our expansion projects during the quarter and nine months
ended September 30, 2009 when compared to the same periods in 2008 as
follows:





Quarters
      EndedSeptember
      30, 2009
            
            Nine
      Months EndedSeptember
      30, 2009(In
      millions)CIGHigh Plains
      pipeline
            
            $
            7.5
            
            $
            22.8Totem Gas
      Storage
            
            
            6.4
            
            
            9.3Other
            
            
            1.7
            
            
            4.4WICMedicine Bow
      lateral
            
            
            2.6
            
            
            7.1Piceance
      lateral
            
            
            1.7
            
            
            4.7Other
            
            
            0.6
            
            
            1.0Total impact
      on EBIT
            
            $
            20.5
            
            $
            49.3





Operational Gas, Revaluations and
Processing Revenues. Our EBIT for operational gas, revaluations, and
processing revenues was lower during the quarter and nine months ended September
30, 2009 compared with the same periods in 2008. Processing revenues were
$2.0 million higher for the quarter ended September 30, 2009 compared with the
same period in 2008 primarily due to higher volumes of natural gas liquids
processed. Processing revenues were $8.3 million lower for the nine months ended
September 30, 2009, compared with the same period in 2008, primarily due to an
unfavorable price variance for natural gas liquids.  This impact, however,
was largely offset by favorable prices for gas consumed in processing these
liquids compared with the same periods in 2008.





During the first
quarter of 2008, the FERC issued an order approving a fuel and related gas cost
recovery mechanism for CIG which was designed to recover all cost impacts, or
flow through to shippers any revenue impacts, of all fuel imbalance revaluations
and related gas balance items. For the quarter and nine months ended September
2008, we recorded cost and revenue tracker adjustments resulting from this order
and a similar order received in September 2008. Effective April 2008, WIC
implemented a similar fuel and related gas cost recovery mechanism, subject to
the outcome of a FERC proceeding. The implementation of these mechanisms was
protested by a limited number of shippers. On July 31, 2009 and October 1, 2009,
the FERC issued orders to CIG and WIC, respectively, directing us to remove the
cost and revenue components from our fuel recovery mechanisms. Due to these
orders, our future earnings may be impacted by both positive and negative
fluctuations in gas prices related to fuel imbalance revaluations, their
settlement, and other gas balance related items. We continue to explore options
to minimize the price volatility associated with these operational activities.
For a further discussion of CIG and WIC fuel recovery mechanisms, see Item 1,
Financial Statements, Note 7.





Operating
and General and Administrative Expenses During the quarter and nine
months ended September 30, 2009, our operating and general and administrative
expenses decreased primarily as a result of lower repair and maintenance
expenses.





Equity earnings from SNG.We
recorded equity earnings from SNG of $11.2 million and $4.5 million for the
quarters ended September 30, 2009 and 2008 and $35.7 million and $19.1 million
for the nine months ended September 30, 2009 and 2008. Our equity earnings
increased primarily due to the acquisition of an additional 15 percent general
partner interest in SNG from El Paso on September 30, 2008, partially offset by
proceeds received by SNG from the Calpine bankruptcy settlement in
2008.








17
 Table of Contents





In March 2009, SNG
filed a rate case with the FERC as permitted under the settlement of its
previous rate case. The filing proposed an increase in SNG’s base tariff
rates.  In April 2009, the FERC issued an order accepting the proposed
rates effective September 1, 2009, subject to refund and the outcome of a
hearing. On October 5, 2009, SNG filed with the FERC a settlement of the rate
case. The settlement resolved all issues set for hearing and was supported by
the FERC Staff and not opposed by the participants associated with the rate
case. On October 20, 2009, the Administrative Law Judge assigned to the case
certified that the settlement was uncontested. Under the terms of the
settlement, SNG (i) increased its base tariff rates, (ii) implemented a volume
tracker for gas used in operations, (iii) agreed to file its next general rate
case to be effective no earlier than September 1, 2012 and no later than
September 1, 2013, and (iv) the vast majority of SNG’s firm transportation
contracts expiring prior to September 1, 2013 will be extended until August 31,
2013. SNG expects the FERC to approve the settlement early in 2010.





Net Income Attributable to
Noncontrolling Interests. We have reflected El Paso’s 42 percent interest
in CIG as noncontrolling interest in our financial statements in all periods
presented. During the quarter and nine months ended September 30, 2009, our net
income attributable to noncontrolling interests increased as compared to the
same period in 2008 due to an increase in net income primarily related to
additional revenue generated by CIG from its High Plains pipeline and Totem Gas
Storage expansion projects.





Interest
and Debt Expense





Interest and debt
expense for the quarter and nine months ended September 30, 2009, was $7.3
million and $12.0 million higher than the same periods in 2008 primarily due to
the issuance of $185.0 million of debt to partially fund the acquisition of
additional interests in CIG and SNG in September 2008, an increase in average
balances outstanding under our credit facility, and the financing obligation to
WYCO (see Item 1, Financial Statements, Note 5). These increases were partially
offset by lower average interest rates on our credit facility borrowings and by
CIG’s repurchase of $100 million of their senior notes in June 2008. The
following table shows the average balance outstanding and the average interest
rates under our credit facility for the quarters and nine months ended September
30:





Quarters
      Ended
              September 30,
            
            
            Nine
      Months Ended
              September 30,2009
            
            
            2008
            
            
            2009
            
            
            2008(In
      millions, except for rates)Average
      credit facility balance outstanding
            
            $
            557
            
            
            $
            510
            
            
            $
            571
            
            
            $
            494Average
      interest rate on credit facility borrowings
            
            
            0.7
            %
            
            
            3.0
            %
            
            
            0.8
            %
            
            
            3.6
            %





Affiliated
Interest Income, Net





Affiliated interest
income, net for the quarter and nine months ended September 30, 2009, was $4.1
million and $19.0 million lower than the same periods in 2008 primarily due to
lower balances on CIG’s demand note receivable from El Paso and lower average
short-term interest rates. The following table shows the average demand note
receivable due from El Paso and the average short-term interest rates for the
quarters and nine months ended September 30:





Quarters
      Ended
              September 30,
            
            
            Nine
      Months Ended
              September 30,2009
            
            
            2008
            
            
            2009
            
            
            2008(In
      millions, except for rates)Average
      demand note receivable due from El Paso
            
            $
            147
            
            
            $
            502
            
            
            $
            148
            
            
            $
            624Average
      short-term interest rate
            
            
            1.6
            %
            
            
            3.7
            %
            
            
            1.8
            %
            
            
            4.5
            %








18
 Table of Contents





Distributable
Cash Flow





We use the non-GAAP
financial measure “Distributable Cash Flow” as it provides important information
relating our financial operating performance to our cash distribution
capability. Additionally, we use Distributable Cash Flow in setting forward
expectations and in communications with the board of directors of our general
partner. We define Distributable Cash Flow as Adjusted EBITDA less cash interest
expense, maintenance capital expenditures, and other income and expenses, net,
which primarily includes a non-cash allowance for equity funds used during
construction (“AFUDC equity”) and other non-cash items. Adjusted EBITDA, which
is also a non-GAAP financial measure, is defined as net income plus, (i)
depreciation and amortization expense, (ii) interest and debt expense, net of
interest income, (iii) the partnership’s share of distributions declared by
unconsolidated affiliates for the applicable period and (iv) net income
attributable to noncontrolling interests, less (i) affiliated interest income,
net of affiliated interest expense, (ii) earnings from unconsolidated
affiliates, and (iii) CIG’s declared distributions to El Paso.





We believe that the
non-GAAP financial measures described above are useful to investors because
these measures are used by many companies in the industry as measures of
operating and financial performance and are commonly employed by financial
analysts and others to evaluate the operating and financial performance of the
partnership and to compare it with the performance of other publicly traded
partnerships within the industry.





Neither
Distributable Cash Flow nor Adjusted EBITDA should be considered an alternative
to net income, earnings per unit, operating income, cash flow from operating
activities or any other measure of financial performance presented in accordance
with GAAP. These non-GAAP measures both exclude some, but not all, items that
affect net income and operating income and these measures may vary among other
companies. Therefore, Distributable Cash Flow and Adjusted EBITDA may not be
comparable to similarly titled measures of other companies. Furthermore, these
non-GAAP measures should not be viewed as indicative of the actual amount of
cash that we have available for distributions or that we plan to distribute for
a given period, nor do they equate to Available Cash as defined in our
partnership agreement.





Our distributable
cash flow was $170.8 million and $107.6 million for the nine months ended
September 30, 2009 and 2008. The increase in distributable cash flow in 2009 was
due primarily to our increased ownership interest in CIG and SNG as well as
higher expansion revenues. The tables below provide our reconciliations of
Distributable Cash Flow and Adjusted EBITDA for the nine months ended September
30, 2009 compared with the same period in 2008:





Reconciliation
of Distributable Cash Flow to Net Income.


2009
            
            
            2008(In
      millions)Net
      income
            
            $
            193.6
            
            
            $
            162.6Net income
      attributable to noncontrolling interests
            
            
            (44.7
            )
            
            
            (42.5
            )Net income
      attributable to El Paso Pipeline Partners, L.P.
            
            
            148.9
            
            
            
            120.1Add: Interest
      and debt expense, net
            
            
            53.9
            
            
            
            41.9Less:
      Affiliated interest income, net
            
            
            (1.5
            )
            
            
            (20.5
            )EBIT (1)
            
            
            201.3
            
            
            
            141.5Add:Depreciation
      and amortization
            
            
            49.8
            
            
            
            43.7Distributions
      declared by unconsolidated affiliates
            
            
            37.2
            
            
            
            24.1Net income
      attributable to noncontrolling interests
            
            
            44.7
            
            
            
            42.5Less:Earnings from
      unconsolidated affiliates
            
            
            (37.0
            )
            
            
            (20.0
            )CIG declared
      distributions to El Paso (2)
            
            
            (49.6
            )
            
            
            (75.5
            )Adjusted
      EBITDA
            
            
            246.4
            
            
            
            156.3Less:Cash interest
      expense, net
            
            
            (52.0
            )
            
            
            (21.1
            )Maintenance
      capital expenditures
            
            
            (16.7
            )
            
            
            (19.0
            )Other, net
      (3)
            
            
            (6.9
            )
            
            
            (8.6
            )Distributable
      Cash Flow
            
            $
            170.8
            
            
            $
            107.6


____________________


(1)  For a further
discussion of our use of EBIT, see Results
of
Operations.


(2)CIG declared distributions to
El Paso include distributions of pre-acquisition earnings at El Paso’s
historical ownership interest levels of $7.2 million and $36.4 million for the
nine months ended September  30, 2009 and 2008.


(3) Includes certain
non-cash items such as AFUDC equity and other
items.




19
 Table of Contents


Reconciliation
of Distributable Cash Flow to Net Cash Provided by Operating
Activities.
 
 2009
              
              
              2008(In
      millions)Net cash
      provided by operating activities
              
              $
              258.3
              
              
              $
              173.6Interest and
      debt expense, net
              
              
              53.9
              
              
              
              41.9Affiliated
      interest income, net
              
              
              (1.5
              )
              
              
              (20.5
              )CIG declared
      distributions to El Paso (1)
              
              
              (49.6
              )
              
              
              (75.5
              )Changes in
      working capital and other (2)
              
              
              (14.7
              )
              
              
              36.8Adjusted
      EBITDA
              
              
              246.4
              
              
              
              156.3Less:Cash interest
      expense, net
              
              
              (52.0
              )
              
              
              (21.1
              )Maintenance
      capital expenditures
              
              
              (16.7
              )
              
              
              (19.0
              )Other, net
      (2)
              
              
              (6.9
              )
              
              
              (8.6
              )Distributable
      Cash Flow
              
              $
              170.8
              
              
              $
              107.6
   ____________________


(1)
              CIG declared
      distributions to El Paso include distributions of pre-acquisition earnings
      at El Paso’s historical ownership interest levels of $7.2 million and
      $36.4 million for the nine months ended September 30, 2009 and
      2008.
 (2)
              Includes
      certain non-cash items such as AFUDC equity and other
      items.
   Liquidity
and Capital Resources





Our ability to
finance our operations, including our ability to make cash distributions, fund
capital expenditures, make acquisitions and satisfy any indebtedness
obligations, will depend on our ability to generate cash in the future. Our
ability to generate cash is subject to a number of factors, some of which are
beyond our control as discussed below.





Our sources of
liquidity include cash generated from our operations, quarterly cash
distributions received from SNG, notes receivable from El Paso and available
borrowing capacity under our $750 million revolving credit facility. This
facility is expandable to $1.25 billion for certain expansion projects and
acquisitions and is further described in our 2008 Annual Report on Form 10-K. As
of September 30, 2009, our remaining availability under the credit facility is
approximately $200 million. We may also generate additional sources of cash
through future issuances of partnership units and/or future debt offerings. At
September 30, 2009, we had notes receivable from El Paso of approximately $111.5
million of which $90.7 million was classified as current based on the net amount
we anticipate using in the next twelve months considering available cash sources
and needs.





Volatility in the
financial markets, the energy industry and the global economy will likely
continue through the remainder of 2009 and beyond. Although recent financial
market conditions have shown signs of improvement, continued volatility in the
financial markets could impact our longer-term access to capital for future
growth projects as well as the cost of such capital. Prolonged restricted access
to the financial markets could impact our ability to grow our distributable cash
flow through acquisitions. However, we believe that cash flows from operating
activities, including the cash distributions received from SNG, availability
under our credit facility and our note receivables from El Paso will be adequate
to meet our operating needs, our anticipated cash distributions to our partners
and our planned expansion opportunities for the foreseeable future. For a more
detailed discussion of the liquidity sources and capital needs of our
unconsolidated affiliates, see Unconsolidated Affiliates
below. For a more detailed discussion of risk factors related to our operations
and our ability to access the financial markets, refer to our 2008 Annual Report
on Form 10-K.





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 Table of Contents





Overview of Cash Flow Activities.Our cash flows for the nine months ended September 30, 2009 are
summarized as follows:





2009(In
      millions)Cash
      Flow from OperationsNet
      income
            
            $
            193.6Non-cash
      income adjustments
            
            
            39.8Change in
      other assets and liabilities
            
            
            24.9Total cash
      flow from operations
            
            $
            258.3Other
      Cash InflowsInvesting
      activitiesNet change in
      notes receivable from affiliates
            
            $
            87.5Other
            
            
            2.7Financing
      activitiesNet proceeds
      from issuance of common and general partner units
            
            
            216.4Total other
      cash inflows
            
            $
            306.6Cash
      OutflowsInvesting
      activitiesCapital
      expenditures
            
            $
            119.1Cash paid to
      acquire additional interests in CIG
            
            
            143.2Financing
      activitiesPayments on
      borrowings under credit facility
            
            
            49.9Cash
      distributions to unitholders and general partner
            
            
            116.4Cash
      distributions to El Paso
            
            
            60.8Excess of
      cash paid for CIG interests over contributed book
    value
            
            
            71.3Other
            
            
            2.9Total cash
      outflows
            
            $
            563.6Net change in
      cash
            
            $
            1.3





During the first
nine months of 2009, we generated positive operating cash flow of approximately
$258.3 million compared with $173.6 million in the same period in 2008. Our
operating cash flow in 2009 was higher primarily due to higher expansion revenue
primarily related to our High Plains pipeline, Totem Gas Storage and Medicine
Bow expansion projects, increased distributions from the acquisition of
additional ownership interest in SNG and changes in working capital. We utilized
these amounts to pay distributions, fund maintenance and growth projects, and to
make payments under our revolving credit facility, among other items. We
generated $216.5 million in net proceeds from the issuance of additional common
and general partner units, $214.5 million of which was used to acquire an
additional 18 percent general partner interest in CIG from El Paso. For a
further discussion of this acquisition, see Item 1, Financial Statements, Note
2.








21
 Table of Contents


We made cash
distributions to our unitholders and general partner of $116.4 million during
the nine months ended September 30, 2009 compared with $61.6 million in the same
period in 2008. Our cash capital expenditures for the nine months ended
September 30, 2009, and our estimated capital expenditures for the remainder of
this year to expand and maintain our system are listed below:
 
 Nine
      Months Ended September 30,
      2009
              
              
              Remaining
                2009
              
              
              Total(In
      millions)Maintenance
              
              $
              16.7
              
              
              $
              15.7
              
              
              $
              32.4Expansion
              
              
              102.4
              
              
              
              33.1
              
              
              
              135.5Total
              
              $
              119.1
              
              
              $
              48.8
              
              
              $
              167.9
 
 Our expected
remaining 2009 expansion capital expenditures of $33.1 million include amounts
primarily related to our Piceance Lateral and Totem Gas Storage expansions as
well as other growth capital expenditures. We are also evaluating additional
expansion projects. While we expect to fund our maintenance capital expenditures
through internally generated funds, we intend to fund our expansion capital
expenditures through borrowings under our credit facility and the repayment of
our notes receivable from El Paso.




Unconsolidated
Affiliates





As of September 30,
2009,SNG’s
sources of cash primarily include cash provided by operations, amounts available
from notes receivable under El Paso’s cash management program, and/or
contributions from SNG’s partners (including us), if necessary. SNG’s uses of
cash primarily include capital expenditures, debt service, and required
quarterly distributions to partners. For the remainder of 2009, we anticipate
SNG will utilize amounts recovered from their notes receivable with El Paso to
fund their capital investment needs.





Commitments
and Contingencies





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





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





It is also likely
that any federal legislation that is enacted would increase our cost of
environmental compliance by requiring us to install additional equipment to
reduce carbon emissions from our larger facilities as well as to potentially
purchase emission credits. Based on 2007 data we reported to the California
Climate Action Registry (CCAR), our operations in the United States, which
include our 58 percent interest in CIG and 25 percent interest in SNG, emitted
approximately 1.4 million tonnes of carbon dioxide equivalent emissions during
2007.  We believe that approximately 1.1 million tonnes of the GHG
emissions that we reported to CCAR would be subject to regulations under the
climate change legislation that passed in the U.S. House of Representatives in
July 2009, with approximately 43 percent of this amount being subject to the
cap-and-trade rules contained in the proposed legislation and the remainder
being subject to performance standards. As proposed, the portion of our GHG
emissions that would be subject to performance standards could require us to
install additional equipment or initiate new work practice standards to reduce
emission levels at many of our facilities, the costs of which would likely be
material. Although we believe that many of these costs should be recoverable in
the rates we charge our customers, recovery is still uncertain at this
time.








22
 Table of Contents





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





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





For a further
discussion of our commitments and contingencies, see Item 1, Financial
Statements, Note 7 which is incorporated herein by reference.





Item 3. Quantitative and Qualitative Disclosures About Market
Risk





There are no
material changes in our quantitative and qualitative disclosures about market
risks from those reported in our 2008 Annual Report on Form 10-K.





Item 4. Controls and
Procedures





Evaluation
of Disclosure Controls and Procedures





As of September 30,
2009, we carried out an evaluation under the supervision and with the
participation of our management, including the Chief Executive Officer (CEO) and
Chief Financial Officer (CFO) of our general partner, as to the effectiveness,
design and operation of our disclosure controls and procedures. This evaluation
considered the various processes carried out under the direction of El Paso’s
disclosure committee in an effort to ensure that information required to be
disclosed in the SEC reports we file or submit under the Exchange Act is
accurate, complete and timely. Our management, including the CEO and CFO of our
general partner, does not expect that our disclosure controls and procedures or
our internal controls will prevent and/or detect all errors and all fraud. A
control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system
are met. Further, the design of a control system must reflect the fact that
there are resource constraints, and the benefits of controls must be considered
relative to their costs. Because of the inherent limitations in all control
systems, no evaluation of controls can provide absolute assurance that all
control issues and instances of fraud, if any, within our company have been
detected. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving their objectives and the CEO and CFO of our
general partner have concluded that our disclosure controls and procedures (as
defined in Exchange Act Rules 13a – 15(e) and 15d – 15(e)) were effective as of
September 30, 2009.





Changes
in Internal Control over Financial Reporting





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




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 Table of Contents





PART II – OTHER INFORMATION





Item 1. Legal Proceedings





See Part I, Item 1,
Financial Statements, Note 7, which is incorporated herein by reference.
Additional information about our legal proceedings can be found in Part I, Item
3 of our 2008 Annual Report on Form 10-K.





Latigo Natural Gas Storage.
In April 2009, the Colorado Department of Public Health and
Environment issued a Compliance Advisory alleging various violations
related to the operation of an evaporation pond at the Latigo underground
natural gas storage field including failure to account for, and adequately
permit, methanol emissions. CIG has entered into a Compliance Order on Consent
and has paid the associated administrative penalty.





Natural Buttes.In May 2004,
the EPA issued a Compliance Order to CIG related to alleged violations of
a Title V air permit in effect at CIG’s Natural Buttes Compressor Station.
In September 2005, the matter was referred to the U.S. Department of Justice
(DOJ). CIG entered into a tolling agreement with the United States and conducted
settlement discussions with the DOJ and the EPA. While conducting some testing
at the facility, CIG discovered that three generators installed in 1992 may have
been emitting oxides of nitrogen at levels which suggested the facility should
have obtained a Prevention of Significant Deterioration (PSD) permit when the
generators were first installed, and CIG promptly reported those test data to
the EPA. CIG has executed a Consent Decree with the DOJ and have paid a total of
$1.02 million to settle all of these Title V and PSD issues at the Natural
Buttes Compressor Station, and in addition, they will conduct ambient air
monitoring at the Uintah Basin for a period of two years. In January 2009, CIG
filed with the FERC an application to abandon the facilities by sale which was
granted. The sale of the facilities is scheduled to occur in November
2009.





Item 1A. Risk
Factors





CAUTIONARY STATEMENT FOR PURPOSES OF
THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995





This report
contains forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are based on
assumptions or beliefs that we believe to be reasonable; however assumed facts
almost always vary from the actual results, and differences between assumed
facts and actual results can be material, depending upon the circumstances.
Where, based on assumptions, we or our management express an expectation or
belief as to future results, that expectation or belief is expressed in good
faith and is believed to have a reasonable basis. We cannot assure you, however,
that the stated expectation or belief will occur, be achieved or accomplished.
The words “believe,” “expect,” “estimate,” “anticipate” and similar expressions
will generally identify forward-looking statements. All of our forward-looking
statements, whether written or oral, are expressly qualified by these cautionary
statements and any other cautionary statements that may accompany such
forward-looking statements. In addition, we disclaim any obligation to update
any forward-looking statements to reflect events or circumstances after the date
of this report.





Important factors
that could cause actual results to differ materially from estimates or
projections contained in forward-looking statements are described in our 2008
Annual Report on Form 10-K under Part I, Item 1A, Risk Factors. There have been
no material changes in these risk factors since that report.








24
 Table of Contents





Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds





None.





Item 3. Defaults Upon Senior Securities





None.





Item 4. Submission of Matters to a Vote of Security
Holders





None.





Item 5. Other Information





None.





Item 6. Exhibits





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





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





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


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


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


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





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





25
 Table of Contents















SIGNATURES





Pursuant to the
requirements of the Securities Exchange Act of 1934, El Paso Pipeline Partners,
L.P. has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.


EL PASO
      PIPELINE PARTNERS, L.P.By:
                  El
      Paso Pipeline GP Company, L.L.C.,its General
      PartnerDate:  November
      6, 2009
                  
                  /s/ James
      C. YardleyJames C.
      YardleyPresident and
      Chief Executive Officer(Principal
      Executive Officer)
 Date:  November 6,
      2009
                
                /s/ John
      R. SultJohn R.
      SultSenior Vice
      President, Chief Financial Officer and Controller(Principal
      Accounting and Financial Officer)




26
 Table of Contents


EL
PASO PIPELINE PARTNERS, L.P.
 EXHIBIT INDEX
 
 Each exhibit
identified below is filed as a part of this report. Exhibits filed with this
report are designated by "*".  All exhibits not so designated are
incorporated herein by reference to a prior filing as indicated.
 
 Exhibit
                Number
              Description2.1
              Contribution
      Agreement, dated July 24, 2009, by and among El Paso Pipeline Partners,
      L.P., El Paso Pipeline Partners Operating Company, L.L.C., El Paso
      Corporation, El Paso Noric Investments III, L.L.C., Colorado Interstate
      Gas Company and EPPP CIG GP Holdings, L.L.C. (incorporated by reference to
      Exhibit 2.1 to our Current Report on Form 8-K filed with the SEC on July
      28, 2009)10.1
              Second
      Amendment to the General Partnership Agreement of Colorado Interstate Gas
      Company, dated July 24, 2009 (incorporated by reference to Exhibit 10.2 to
      our Current Report on Form 8-K filed with the SEC on July 28,
      2009).*
      12
              Ratio of
      Earnings to Fixed Charges*
      31.A
              Certification
      of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.*
      31.B
              Certification
      of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
      Act of 2002.*
      32.A
              Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.*
      32.B
              Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.












27