Business Segments (continued)

The Natural Gas Pipelines business produced 2009 segment earnings before DD&A and certain items of $787.5 million, up 5 percent from 2008. Highlights included completing the Rockies Express, Midcontinent Express and Kinder Morgan Louisiana pipelines, purchasing approximately 290 amine-treating and dew-point control plants from Crosstex Energy for approximately $266 million, and acquiring a 40 percent interest in the GMXR midstream natural gas gathering and compression business (Endeavor) for approximately $36 million.

For 2010, the Natural Gas Pipelines budget projects $830.2 million in segment earnings before DD&A, which would be a 5 percent increase over 2009. Growth will be driven in part by a full year of contributions from the completed pipeline projects, along with expansions. In 2010, we expect to invest approximately $108 million in expansion capital projects to further grow this segment. We expect to complete storage expansions at our Huntsman, Neb., and Dayton, Texas, facilities, compression expansions that will increase capacity on the Rockies Express and Midcontinent Express pipelines, and various projects to further grow our Texas Intrastate Pipeline system. Construction is also expected to begin on the Fayetteville Express pipeline project in the first quarter. Scheduled to be in service by early 2011, Fayetteville Express will have an initial capacity of 2 billion cubic feet per day, the great majority of which has been secured by 10-year binding commitments. This project is a joint venture with Energy Transfer Partners.

The CO2 business produced 2009 segment earnings before DD&A and certain items of $796.4 million, up almost 5 percent from 2008. Highlights included an 8 percent increase in oil production at the SACROC Unit in 2009 compared to the previous year (which exceeded our expectations), a 6 percent increase in CO2 delivery volumes and a 13 percent increase in sales volumes. This performance, combined with reduced operating and capital costs, offset lower oil prices that impacted our unhedged volumes.

For 2010, the CO2 budget projects $1.01 billion in segment earnings before DD&A, a 26 percent increase over 2009. Growth is expected to be driven by projected higher oil prices on both our hedged and unhedged volumes compared to 2009 and further development at SACROC and the Yates Field. In 2010, we plan to invest $415 million in expansion capital projects to further grow this segment, the majority of which will be spent to further develop SACROC. Engineering and construction activities are also underway to expand our operations in the eastern Permian Basin of Texas. This project will involve installation of a new CO2 transportation pipeline and development of a new CO2 flood in the Katz Field. We anticipate this project will unlock an incremental 25 million barrels of oil to be produced over the next 15 to 20 years, and will also provide a platform for future enhanced oil recovery operations in the region. The company expects the pipeline will be completed and CO2 will be injected into the Katz field in early 2011.

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