In 2008, we are busy showing communities and regulators that the Palomar Pipeline can be built safely, with utmost respect for the environment, agricultural land and communities along the transmission line route. We expect to file for a siting permit with the Federal Energy Regulatory Commission in 2008.

The Gill Ranch project will require an environmental assessment, a permit from the California Public Utilities Commission and other regulatory approvals. We will also follow up on our successful open season by pursuing agreements with parties that expressed interest in the project.

This will be a busy regulatory year for our core utility as well. First, we have filed a general rate case in Washington, where we serve about 10 percent of our customers.

In Oregon, the commission will be reviewing the gas cost sharing mechanisms for utilities across the state. As part of that proceeding, the commissioners will be looking at how well NW Natural’s gas cost sharing mechanism performs for customers and the company. Our current sharing mechanism is more than a decade old and was created at a time when natural gas prices were more stable. Given the volatility of prices today, we believe updating the mechanism to create a more appropriate risk/reward balance for customers and shareholders makes sense.

We will also continue to be active in issues that affect our shareholders on the national front. Federal legislation passed in 2006 that reduced the tax rate on dividends and capital gains to 15 percent for individual taxpayers is due to expire in 2010. We have been working with the American Gas Association and other member companies to advocate this tax relief be made permanent. We believe this legislation addressed an inequitable double taxation on dividends. Maintaining a lower tax on dividends has been one of our industry’s top priorities for years, and we will continue to work to make this provision permanent.

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