SecProbe.io

CORRESP
1
filename1.htm

corresp

August 22, 2005

Mr. George F. Ohsiek, Jr.

Branch Chief

United States Securities and Exchange Commission

450 Fifth Avenue, N.W.

Washington, D.C. 20549

    Re:

    Colorado Interstate Gas Company

Registration Statement on Form S-4

Filed on June 10, 2005

File No. 333-125728

Form 10-K for Fiscal Year Ended December 31, 2004

Filed on March 29, 2005

Form 10-Q for Fiscal Quarter ended March 31, and June 30, 2005

File no. 1-4874

Dear Mr. Ohsiek:

We are in receipt of your letter dated August 8, 2005, commenting on the above referenced
documents. Below are the comments contained in your letter followed by our responses. Also
attached or your convenience is Amendment No. 2 to our Registration Statement on Form S-4. This
document has been marked to reflect changes made from the document filed July 27, 2005 (Amendment
No. 1).

Form S-4

Environmental Matters page 27

    1.

    We have read your response to prior comment 3. You indicate that you did not discuss
the change in the environmental reserve because your MD&A has focused on providing forward
looking information about known trends and future events that could have a material impact
on your results of operations. However, the Instructions to paragraph (b) of Item 303 of
Regulation S-K, in addition to encouraging forward-looking information in MD&A, require
registrants to identify any significant elements of the income or loss from continuing
operations which do not arise from or are not necessarily representative of the
registrant’s ongoing business. Please ensure that your future MD&A disclosures are
responsive to all disclosure requirements of Item 303(b) of Regulation S-K. In this
regard, we do not object to your incremental disclosure of the change in environmental
reserves in the Form 10-Q for the quarter ended June, 30, 2005.

    Response

    We note and appreciate your comment and will continue to consider all provisions of Item
303 of Regulation S-K in the preparation of MD&A disclosures in our periodic filings.

    2.

    We have read your response to prior comment 4. Please tell us if your statement “we
are not aware of anything that would reasonably be expected to result in a loss exceeding
the amounts we have already recognized” means that you do not believe it is reasonably
possible that you will incur losses exceeding amounts already recognized.

    Response

1

    We confirm that our statement means that at the present time, for the items on which we
have recorded losses, we do not believe it is reasonably possible that we will incur losses
exceeding the amounts we have already recognized. We made an accrual of $4 million during
the first quarter based on agreements we reached with Colorado and Kansas. We are
confident the $4 million will address the mercury assessment and remediation costs in
Colorado and Kansas. We are currently reviewing plans with other states in which we
operate to determine if studies and potential remediation will be required. When the
agreements are complete, if required, we will estimate the assessment and potential
remediation costs and make a disclosure for the estimated costs. We will also continue to
evaluate our overall environmental exposures in the future and make disclosures
accordingly.

    3.

    We have read your response to prior comment 6. We believe that the change from one
accounting model to another is unusual as evidenced by the FASB’s position on changes in
accounting model in paragraph 30 of SFAS 101. Accordingly, please tell us why you do not
believe that the FASB’s position on changes in accounting model applies, or tell us why
you believe that the reapplication of SFAS 71 would be infrequent under APB 30.

    Response

    Whether the net effects of the adjustments to reapply SFAS 71 should be classified as an
extraordinary item in the income statement has been widely debated. Although SFAS 101,
Regulated Enterprises — Accounting for the Discontinuation of Application of FASB Statement
No. 71, requires extraordinary item treatment for the effects of discontinuing the
application of SFAS 71 (APB 30 was specifically amended), it is silent as to the treatment
of the reapplication of SFAS 71. In fact, paragraph 43 specifically states the
reapplication of SFAS 71 is out of the scope of SFAS 101.

    Paragraph 20 of APB 30 states that “both of the following criteria should be met to
classify an event or transaction as an extraordinary item: (a) unusual nature and (b)
infrequency of occurrence.” As you have noted in your comment, in paragraph 30 of SFAS
101, “The Board concluded that the change from one accounting model to another is an
unusual accounting event.” As such, it appears that the change in circumstance that
required the reapplication of SFAS 71 would meet the “Unusual nature” criteria (a)
described above in Opinion 30.

    However, we believe that the reapplication of SFAS 71 in the regulated pipeline industry is
not an infrequent occurrence. APB 30 paragraph 22 indicates that an event or transaction
that occurs frequently in the environment in which the entity operates cannot, by
definition, be considered as extraordinary, regardless of its financial effect. By the
very nature of the industry, it is more common that regulated entities follow the
provisions of SFAS 71. As a consequence, it would be reasonable to expect that an entity
that previously discontinued the application of SFAS 71 might reapply its provisions in the
near future based on factors that occur within the industry and that are ever changing
within the marketplace. Market improvements; changes in demand which are impacted by such
factors as the demand for electricity, off system capacity, the competitive environment
from other pipelines, tariff rate filings and the allowed recovery of costs in rates by the
FERC; individual company strategic plan and cost allocations all change from period to
period and are continually evaluated by participants in the industry as to their impact on
the application or reapplication of SFAS 71. These are common occurrences in the pipeline
industry and marketplace, and we believe factors such as those described above, among
others, can, as stated in paragraph 20b of Opinion 30, “reasonably be expected to recur in
the foreseeable future, taking into account the environment in which our regulated entities
operate.”

2

    We believe our classification is appropriate. It was reviewed by and is consistent with
the view of our independent registered public accounting firm and their “whitepaper” which
includes a discussion of this topic. However, we also recognize there can be diversity in
accounting for the reapplication of SFAS 71. For those readers who might take an
alternative view, we believe our disclosures about this matter are appropriate and
transparent and allow such a reader to adjust the classification if deemed to be important.
For example:

    —

    We clearly disclosed the amount of the benefit, the line item in the
financial statements in which it was classified and the affects of the
reapplication of SFAS 71 in the notes to our financial statements;

    —

    Our tax rates approximate statutory rates and were clearly disclosed in our
footnotes; and

    —

    The amounts and the affect on our year to year income changes were clearly
disclosed in a table and discussion in our MD&A.

General

Should you have any further questions regarding our responses to your comments or need further
information to assist in your review, please contact me at (713) 420-4734, or Frank Olmsted,
Director of Financial Reporting, at (713) 420-3707.

    Sincerely,

    /s/ Greg G. Gruber

    Greg G. Gruber

    Senior Vice President, Chief Financial

Officer, Treasurer and Director
Colorado Interstate Gas Company

3