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Response to SEC Comment Letter

5444 Westheimer Road

Houston, TX  77056-5306

713.989.7000

May 4, 2005

U.S. Securities and Exchange Commission

450 Fifth Street N.W.

Washington, D.C.

Attention: George Ohsiek

Branch Chief

Ref: File No. 001-02921

We have received your letter dated April 21, 2005 and appreciate your
comments on our 2004 10-K filing and the opportunity to respond, as well as
enhance the overall disclosure in our future filings. To simplify your review,
we have reproduced each of your comments below and our responses to your
comments follow:

Item 7. Management’s Discussion and Analysis of Results of
Operations and Financial Condition

Contractual Commitments, page 14

      1.

      In
      future filings please consider revising this table to include planned
      funding of employee postretirement benefit obligations. Since the table is
      aimed at increasing transparency of cash flow, we believe these payments
      should be included in the table. If you choose not to include these
      payments, a footnote to the table should clearly identify the excluded
      item and provide any additional information that is material to an
      understanding of your cash requirements. Refer to Item 303(a)(5) of
      Regulation S-K and Section IV.A and footnote 46 to the Commission’s
      MD&A Guidance issued December 19, 2003 available at
    www.sec.gov.

Company Response: In our future filings, we will, as you
suggest, revise the table to include planned funding of employee postretirement
benefit obligations. We will also include a footnote to the table to explain
that we are committed to the funding levels of $7.8MM per year as noted in
Footnote XV to the financial statements until that amount is modified by future
rate proceedings, the timing of which is uncertain.

Consolidated Financial Statements

Notes to Consolidated Financial Statements

Note II - Summary of Significant Accounting Policies and Other
Matters

Revenues, page F-10

    2.

      In future filings please revise your revenue recognition
      policy to elaborate on the timing of revenue recognition for your
      transportation, storage, and terminalling activities. In this regard, we
      find your disclosure that revenues are recognized as service is provided
      to be somewhat ambiguous. For example, it is unclear whether revenues are
      recognized at the time gas is delivered or at some time prior to delivery
      to the customer. If revenues are recognized prior to delivery, ensure your
      revised disclosure is clear in terms of your basis in GAAP for recording
      revenues prior to delivery. Please also ensure the revised disclosure is
      clear in terms of how imbalance cash out gains and losses affect recorded
      revenues. Show us supplementally how the reviewed disclosures will
      read.

Company Response: In future filings we will, as you suggest,
elaborate on our revenue recognition policy, including the timing of revenue
recognition in the footnotes to the financial statements. Approximately 80% of
Panhandle's consolidated revenues for transportation, storage and terminalling
services are based on monthly reservation charges. As is typical for a regulated
interstate pipeline, these reservation charges are based on the capacity
reserved by the customers and are earned, billed, recognized and collected on a
monthly basis whether the customer uses the capacity or not. The remainder of
Panhandle’s revenues are primarily additional usage based charges which are also
earned, billed, recognized and collected on a monthly basis for the
transportation, storage, or terminalling services provided to the customer.
Billings to the customers are based on the volumes received from or delivered to
the customer, depending on the tariff of that particular Panhandle-owned
regulated entity, with any differences in received and delivered volumes
resulting in an imbalance. These imbalances are generally settled in-kind with
no impact on revenues, except in the case of Panhandle’s regulated subsidiary
Trunkline Gas, which cashes out imbalances pursuant to its tariff, and records
gains or losses on cashout sales to the extent not owed to customers. Imbalance
cash out gains or losses are generally immaterial, however in 2003 due to an
unusual combination of circumstances gains of approximately 1% of consolidated
revenues were realized due to a rapid run-up of natural gas prices, relatively
low book inventory costs, and customer gas shortfalls.

As you requested, we have provided our planned revised revenue policy
disclosure in the enclosed attachment.

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      3.

      In
      future filings please provide Schedule II - Valuation and Qualifying
      Accounts for the activity in your sales allowance account related to
      potential rate adjustments. Alternatively, you may provide such disclosure
      in the notes to the financial statements or MD&A. See Rules 5-04 and
      12-09 of Regulation S-X. Supplementally provide us with a roll forward of
      the activity in this reserve account for each period presented. To the
      extent that changes in the reserves are material to an understanding of
      the company’s results of operations or financial condition, revise your
      Managements’ Discussion and Analysis (MD&A)
accordingly.

Company Response: Panhandle and its subsidiaries have not had any
activity related to potential rate adjustments during the 2002 - 2004 time
period due to not having any open rate proceedings with revenues collected
subject to refund. Should we have such situations in the future, as you
requested, we will include schedule II - Valuation and Qualifying Accounts, or
include disclosure in the footnotes or MD&A.

Note XIV - Commitments and Contingencies

Other Commitments and Contingencies, page F-28

      4.

      Based
      on your disclosure on page F-28, we understand that the purchase price
      allocation for your June 2003 acquisition by Southern Union has not yet
      been finalized due to your continuing assessment of a particular
      contingent liability. Please tell us more about this pre-acquisition
      contingency, including whether any liability has been recorded, why you
      have been unable to determine a final value for the pre-acquisition
      liability given that well over a year has passed since the acquisition,
      why you believe any adjustment to the value of the liability should be
      recorded as an adjustment to the purchase price allocation, and when you
      expect the purchase price allocation will be finalized. Ensure your
      response references the basis in GAAP for your accounting. Also provide us
      additional information regarding the potential effects of this issue on
      your final purchase price allocation and/or post-acquisition operating
      results. Future filings should be revised to include all of this
      information as well. We may have further comment.

Company Response: The disclosure on page F-28 related to the purchase
price allocation not being final with respect to a particular contingent
liability was an inadvertent error. As noted in Footnote I and as noted in the
Company’s Forms 10-Q for the periods ended September 30, 2004 and June 30, 2004,
the purchase price allocation was final. The sentence you refer to was
inadvertently included in the 10-K submitted and will be removed from all
subsequent filings.

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As you requested, we acknowledge that the Company is responsible for
the adequacy and accuracy of the disclosure in the filing, Commission staff
comments or changes do not foreclose the Commission from taking any action with
respect to this filing, and the company may not assert staff comments as a
defense in any proceeding initiated by the Commission or any other person under
the federal securities laws of the U.S.

If you have any other comments or questions, please call me at (570)
820-2424 or Gary Lefelar, Principal Accounting Officer at (713) 989-7710.

Respectfully,

/s/ David J.
Kvapil

David J. Kvapil

Executive Vice President and

Chief Financial Officer

Attachment

cc: Thomas F. Karam

     Gary W. Lefelar

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ATTACHMENT

Revenues: Panhandle’s revenues from transportation
and storage of natural gas and LNG terminalling are based on capacity
reservation charges and commodity usage charges. Reservation revenues are based
on contracted rates and capacity reserved by the customers and are recognized
monthly. Revenues from commodity usage charges are also recognized monthly,
based on the volumes received from or delivered to the customer, depending on
the tariff of that particular Panhandle entity, with any differences in received
and delivered volumes resulting in an imbalance. Volume imbalances are generally
settled in-kind with no impact on revenues, with the exception of Trunkline Gas,
which cashes out imbalances pursuant to its tariff, and records gains and losses
on such cashout sales as a component of revenue, to the extent not owed back to
customers.