PURCHASE AND SALE AGREEMENT


                                     between



                          ATLAS PIPELINE PARTNERS, L.P.


                                       and


                               SEMCO ENERGY, INC.





                         Dated as of September 16, 2003

                                     <PAGE>



                                TABLE OF CONTENTS


ARTICLE I             Definitions..............................................1
  Section 1.1.         Defined terms...........................................1
  Section 1.2.         Construction............................................9

ARTICLE II            Sale and Purchase........................................9
  Section 2.1.         Sale and Purchase of Company Equity Interests...........9
  Section 2.2.         Conversion of Company to Limited Liability Company.....10

ARTICLE III           Purchase Price..........................................10
  Section 3.1.         Purchase Price.........................................10
  Section 3.2.         Purchase Price Adjustment..............................10

ARTICLE IV            Representations and Warranties of Seller................11
  Section 4.1.         Corporate Status; Power and Authority..................11
  Section 4.2.         Duly Executed..........................................12
  Section 4.3.         Qualification..........................................12
  Section 4.4.         Consent................................................13
  Section 4.5.         Capitalization of the Company; Title to Company
                                        Equity Interests......................13
  Section 4.6.         Sufficiency of Company Assets; Title to Company
                                        Assets................................13
  Section 4.7.         No Breach, Etc.........................................14
  Section 4.8.         Financial Statements; Material Liabilities;
                                    Undisclosed Liabilities...................14
  Section 4.9.         Changes, etc...........................................15
  Section 4.10.        Environmental Laws.....................................15
  Section 4.11.        Personal Property......................................16
  Section 4.12.        Certain Regulatory Matters.............................16
  Section 4.13.        Material Contracts.....................................17
  Section 4.14.        Litigation.............................................17
  Section 4.15.        Rights-of-Way..........................................18
  Section 4.16.        Employee Matters.......................................18
  Section 4.17.        Insurance..............................................18
  Section 4.18.        Patents; Trademarks; Etc...............................18
  Section 4.19.        Indemnity Claim........................................19
  Section 4.20.        Books and Records; Other Information...................19
  Section 4.21.        Brokers................................................19

ARTICLE V             Representations and Warranties of Purchaser.............19
  Section 5.1.         Corporate Status; Power and Authority..................19
  Section 5.2.         Power; Duly Executed...................................19
  Section 5.3.         Qualification..........................................19
  Section 5.4.         Governmental Consent...................................20
  Section 5.5.         Brokers................................................20
  Section 5.6.         Financial Arrangements of Purchaser....................20
  Section 5.7.         Purchaser Qualification................................20

<PAGE>

ARTICLE VI            Covenants and Certain Actions of the Parties............20
  Section 6.1.         Obligations of Seller..................................20
  Section 6.2.         Obligations of Purchaser...............................25
  Section 6.3.         Insurance..............................................26
  Section 6.4.         Cooperation by Seller..................................26
  Section 6.5.         Certain Title Curative Work............................27

ARTICLE VII           Approvals; Commercially Reasonable Efforts..............27
  Section 7.1.         Approvals; Commercially Reasonable Efforts.............27

ARTICLE VIII          Conditions Precedent....................................28
  Section 8.1.         Closing Conditions.....................................28
  Section 8.2.         Hart-Scott-Rodino Compliance...........................28
  Section 8.3.         Conditions to Obligations of Seller....................28
  Section 8.4.         Conditions to Obligations of Purchaser.................30

ARTICLE IX            Closing.................................................32
  Section 9.1.         Closing................................................32

ARTICLE X             Termination.............................................32
  Section 10.1.        Termination............................................32
  Section 10.2.        Limitation on Right to Terminate; Effect of
                                                       Termination............33

ARTICLE XI            Taxes...................................................34
  Section 11.1.        Seller Tax Representations and Warranties..............34
  Section 11.2.        Tax Covenants and Indemnification......................35

ARTICLE XII           Indemnification.........................................37
  Section 12.1.        Indemnification........................................37
  Section 12.2.        Disclaimer Regarding Transmission Business.............41

ARTICLE XIII          Miscellaneous...........................................42
  Section 13.1.        Modification...........................................42
  Section 13.2.        Entire Agreement.......................................42
  Section 13.3.        Expenses...............................................42
  Section 13.4.        Extension and Waiver...................................42
  Section 13.5.        Further Actions........................................42
  Section 13.6.        Notices................................................42
  Section 13.7.        Assignment.............................................44
  Section 13.8.        No Third Party Beneficiaries...........................44
  Section 13.9.        Severability...........................................44
  Section 13.10.       Counterparts...........................................44
  Section 13.11.       Applicable Law; Alternative Dispute Resolution.........44
  Section 13.12.       Publicity..............................................45


                                       ii
<PAGE>



EXHIBITS

Exhibit A......Operation and Maintenance and Administrative Services Agreement
Exhibit B......Special Contract for Gas Transportation
Exhibit C......Gas Transmission Agreement
Exhibit D......Bill of Sale and Assignment Agreement
Exhibit E......Limited Liability Company Agreement
Exhibit F......Gas Control Agreement
Exhibit G......Tower License
Exhibit H......Reciprocal Easement and Joint Use Agreement





                                      iii




<PAGE>


                           PURCHASE AND SALE AGREEMENT

         THIS PURCHASE AND SALE AGREEMENT (this "Agreement"), effective as of
September 16, 2003 is by and between SEMCO Energy, Inc., a Michigan corporation,
and Atlas Pipeline Partners, L.P., a Delaware limited partnership.

                                   WITNESSETH:

         WHEREAS, Seller owns the Company Common Stock that will be converted
into the Company Equity Interests immediately prior to the Closing; and

         WHEREAS, Purchaser desires to purchase, and Seller desires to sell, the
Company Equity Interests subject in all respects to the provisions of this
Agreement.

         NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereby agree as follows:

                                    ARTICLE I

                                   Definitions

         Section 1.1     Defined terms. As used herein, the following terms have
the following meanings:

         "AAA" is defined in Section 13.11(b)(ii).

         "Affiliate" means, with respect to any Person, any other Person that
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with the specified Person. For the
purpose of this definition, "control," when used with respect to any specified
Person, means the possession of the power to direct the management or policies
of the specified Person, directly or indirectly, whether through the ownership
of voting securities, partnership or limited liability company interests, by
contract or otherwise.

         "Agreement" means this Purchase and Sale Agreement, as the same may be
amended or modified in writing by the Parties from time to time.

         "Base Financial Statements" is defined in Section 4.8(a).

         "Bill of Sale and Assignment Agreement" is defined in Section 8.4(k).

         "Board of Directors" means the board of directors of Seller or
Purchaser's General Partner, as the case may be, or any duly authorized
committee of that board.

         "Business Day" means any day except Saturday, Sunday and any other day
on which banking institutions located in the City of New York, New York are
required or authorized to close.

<PAGE>

         "Claim Notice" means a written notice of claim given by a Party seeking
indemnification pursuant to the terms of this Agreement that specifies in
reasonable detail the specific nature of the Losses and the estimated amount of
such Losses.

         "Closing" is defined in Section 9.1.

         "Closing Date" is defined in Section 9.1.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Company" means, prior to the LLC Conversion, Alaska Pipeline Company,
an Alaska corporation, and after the LLC Conversion, Alaska Pipeline Company,
LLC, a Delaware limited liability company.

         "Company Assets" means all assets, properties and rights of the
Company.

         "Company Common Stock" is defined in Section 4.5.

         "Company Equity Interests" means all the outstanding limited liability
company interests of the Company.

         "Company Regulatory Financial Statements" is defined in Section 4.8(a).

         "Company's Charter Documents" is defined in Section 4.1(b).

         "Confidentiality Agreement" is defined in Section 6.1(b)(i).

         "Contracts" means all agreements, contracts, subcontracts, leases,
notes, bonds, guarantees, letters of credit, indentures and other legally
binding commitments, whether written or oral, and each amendment, supplement or
modification, whether written or oral, in respect of any of the foregoing to
which (i) the Company is a party, or (ii) by which the Company Assets are bound.

         "Data Room" means the presentation materials prepared by Seller to
assist Purchaser in its investigation of the Company and the Transmission
Business and made available to Purchaser in Anchorage, Alaska, together with the
materials included on the CD-ROM provided by Seller to Purchaser and any
materials provided by Seller to Purchaser in response to written supplemental
requests.

         "Encumbrance" means any mortgage, pledge, restriction on transfer
(other than any such restriction under applicable law and regulations or as may
be specified in the Company's Charter Documents), proxy or voting or other
similar agreement (other than as may be specified in the Company's Charter
Documents), assessment, security interest, lien, adverse claim, levy, charge or
other legal or equitable encumbrance of any kind.

         "Environmental Laws" means any and all Legal Requirements (including
common law) pertaining to the protection of human health (as it relates to
exposure to Hazardous Materials), the environment (including, without
limitation, any generation, use, storage, treatment, Release, or threatened


                                       2
<PAGE>

Release of Hazardous Materials into the indoor or outdoor environment), wildlife
or natural resources that is in effect in any and all jurisdictions in which the
Company is conducting or at any time has conducted business or where the Company
Assets are located, and any binding judicial or administrative interpretation
(including, but not limited to, any judicial or administrative order, consent
decree, judgment or settlement) thereof, including, without limitation, the
Clean Air Act, as amended, the Federal Water Pollution Control Act, as amended,
the Rivers and Harbors Act of 1899, as amended, the Oil Pollution Act of 1990,
as amended, the Safe Drinking Water Act, as amended, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended, the
Superfund Amendments and Reauthorization Act of 1986, as amended, the Resource
Conservation and Recovery Act, as amended, the Hazardous and Solid Waste
Amendments Act of 1984, as amended, the Toxic Substances Control Act, as
amended, the Occupational Safety and Health Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Natural Gas Pipeline Safety Act of
1968, as amended, and the Hazardous Liquid Pipeline Safety Act of 1979, as
amended.

         "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.

         "Excluded Assets" means those assets of the Company set out in
Section 6.1(a)(xiii) of Seller's Disclosure Schedule under the heading "Excluded
Assets."

         "Excluded Obligations" means those obligations or liabilities of the
Company set out in Section 6.1(a)(xiii) of Seller's Disclosure Schedule under
the heading "Excluded Obligations."

         "FERC" means the Federal Energy Regulatory Commission as established by
the Department of Energy Organization Act of 1977, 42 U.S.C. ss 7171, as
amended, or its regulatory successor, as applicable.

         "Final Order" means an action by the relevant Governmental Authority
that has not been reversed, stayed, enjoined, set aside, annulled or suspended,
with respect to which any waiting period prescribed by law before the
transactions approved thereby may be consummated has expired, as to which all
conditions to the consummation of such transactions prescribed by such action
have been satisfied, and for which the time for perfecting an appeal has expired
without an appeal being perfected, or if an appeal has been perfected, such
appeal has been finally resolved.

         "GAAP" shall mean accounting principles generally accepted in the
United States of America as in effect from time to time.

         "Gas Control Agreement" is defined in Section 8.3(k).

         "Gas Transmission Agreement" is defined in Section 8.3(i).

         "Governmental Authority" means any federal, state, local, foreign or
other government, any governmental, regulatory, judicial or administrative
agency, bureau, commission, body or other authority exercising or entitled to
exercise any administrative, executive, judicial, legislative, police,
regulatory or taxing authority or power, or any court or governmental tribunal,
but does not include the Purchaser, the Seller, any Affiliates thereof, or any
of their respective successors in interest.


                                       3

<PAGE>

         "Hart-Scott-Rodino Act" is defined in Section 4.4.

         "Hazardous Material" means any substance, material or waste in such
quantity or concentration that it is regulated by any Environmental Law as
hazardous, toxic, a pollutant, contaminant, solid waste, or words of similar
meaning, including, without limitation, petroleum, petroleum products, petroleum
hydrocarbons, petroleum by-products, crude oil, and any components, fractions or
derivatives thereof, methyl tertiary butyl ether, ammonia, asbestos, urea,
formaldehyde and polychlorinated biphenyls.

         "Indebtedness" of any Person means all obligations of such Person for
borrowed money or evidenced by bonds, notes, debentures or similar instruments,
or any guarantee of any of the foregoing.

         "Indemnified Party" is defined in Section 12.1(f).

         "Indemnifying Party" is defined in Section 12.1(f).

         "Interim Period" is defined in Section 6.1(a).

         "Intellectual Property" means patents, trademarks, trade names, service
marks, service names, copyrights and other proprietary intellectual property
rights and all pending applications for the registration of any of the
foregoing.

         "Knowledge", when used in the phrases "to Seller's Knowledge," "to the
Knowledge of Seller" or similar phrases with respect to Seller, means, and shall
be limited to, the actual knowledge of the executive officer of Seller or the
senior employee of Seller who is responsible for the area of operation of the
Company to which such Person's knowledge relates, and, when used in the phrases
"to Purchaser's Knowledge," "to the Knowledge of Purchaser" or similar phrases
with respect to the Purchaser, means, and shall be limited to, the actual
knowledge of the executive officer of Purchaser or the senior employee of
Purchaser who is responsible for the area of operation of the Purchaser to which
such Person's knowledge relates.

         "Legal Requirements" means any and all applicable (i) laws (statutory
and administrative), ordinances, regulations, judgments, orders, writs,
injunctions and decrees of any Governmental Authority and (ii) contracts with
any arbitrator or Governmental Authority relating to compliance with matters
described in (i) above.

         "Limited Liability Company Agreement" is defined in Section 2.2.

         "LLC Conversion" is defined in Section 2.2.

         "Losses" is defined in Section 12.1(a).

         "Material Adverse Effect" means (i) any event, circumstance or
condition materially impairing a Party's authority, right, or ability to
consummate the transactions contemplated by this Agreement or the other
Operative Documents; or (ii) any change (or changes taken together) in, or
effect on, the indicated Person or business that is materially adverse to the
operations, business, condition (financial or otherwise), or assets of such



                                       4

<PAGE>

Person or business, taken as a whole, but excluding (a) changes in the
international or national wholesale or retail markets for natural gas; (b)
changes in the regional or local wholesale or retail markets for natural gas
which do not result in non-weather related decreases in the volume of gas
delivered through the Pipeline; (c) changes in general economic, regulatory or
political conditions, commodity prices for oil or natural gas or securities
markets in the United States or worldwide or any outbreak of hostility,
terrorist activities or war or changes that affect generally the industry in
which the indicated Person or business operates; (d) the announcement or
pendency of the transactions contemplated by this Agreement, or the consummation
of the transactions contemplated hereby; and (e) any change which is cured
(including, by the payment of money) before the earlier of the Closing or the
termination of the Agreement under Section 10.1. For purposes of clause (ii) of
the immediately preceding sentence, a change that has an effect that is
quantifiable in monetary terms is materially adverse to a Person if its negative
effect exceeds, or is reasonably expected to exceed on a present value basis,
$5,000,000. Any determination as to whether any condition or other matter has a
Material Adverse Effect shall be made only after taking into account all
effective insurance coverages and effective third party indemnifications with
respect to such condition or matter.

         "Material Contract" means any Contract (i) that calls for payments or
guarantees to or from the Company, on the one hand, and any third party, on the
other hand, of an amount in excess of $500,000 annually or $2,000,000 in the
aggregate for any 12-month period, or (ii) is a partnership, limited liability
company or joint venture agreement; or (iii) that constitutes a swap, cap,
collar, derivative or other hedging arrangement.

         "Material Liability" means, in the case of any Person, any material
liability of such Person.

         "Material Permits" means all Permits relating to the Company other than
those the absence of which do not, or, measured as the date hereof and the
Closing Date, would not, materially impair the use of the Company Assets for the
purposes for which they are held or the value of the Company's interest therein.

         "Notice Period" is defined in Section 12.1(f).

         "Operating Documents" means the Operative Documents other than this
Agreement and the Bill of Sale and Assignment Agreement.

         "Operation and Maintenance and Administrative Services Agreement" is
defined in Section 8.3(g).

         "Operative Documents" means this Agreement, the Operation and
Maintenance and Administrative Services Agreement, the Special Contract, the Gas
Transmission Agreement, the Gas Control Agreement, the Tower License, the
Reciprocal Easement and the Bill of Sale and Assignment Agreement.

         "Party" means Seller or Purchaser, as the context requires and
"Parties" means, collectively, Seller and Purchaser.


                                       5

<PAGE>

         "Permits" means any and all permits, authorizations, exemptions,
certificates, approvals, registrations, legal status, variances, franchises,
orders or other approvals and licenses (i) under any Legal Requirement or (ii)
granted by any Governmental Authority.

         "Permitted Encumbrances" means, with reference to the Company:

               (a)   liens for Taxes, assessments and governmental charges not
yet delinquent or, if delinquent, that are being contested in good faith in the
ordinary course of business and for which adequate reserves have been
established;

               (b)   carriers',  warehousemen's,  materialmen's,  mechanics',
repairmen's, employees' or other similar liens or charges for liquidated amounts
arising in the ordinary course of business (i) if securing amounts that have not
yet become due and payable or payment is being withheld as provided by law or
(ii) if their validity is being contested in good faith in the ordinary course
of business by appropriate action and for which adequate reserves have been
established;

               (c)   deposits made in the ordinary course of business to secure
the performance of leases, tenders, statutory obligations, surety and appeal
bonds, performance and return-of-money bonds and other similar obligations
(exclusive of obligations incurred in connection with any Indebtedness) or any
liens on such deposits in favor of the holder thereof;

               (d)   any judgment  lien  relating to a judgment for not more
than $100,000, unless the judgment it secures shall not, within 30 days after
the entry thereof, have been discharged or execution thereof stayed pending
appeal, or shall not have been discharged within 30 days after the expiration of
any such stay;

               (e)   leases granted in the ordinary  course of business or
leases to which any property acquired in connection with the Company in the
ordinary course of business is subject;

               (f)   any encumbrances  (including  encumbrances to secure the
payment of money) on any lands subject to any rights-of-way in favor of the
Company whether or not superior to such rights-of-way and any encumbrances
(other than to secure the payment of money), easements, rights-of-way, permits,
reservations, leases, rights in respect of gravels, minerals, oil, gases or
water or in respect of grazing, logging, mining, canals, ditches, reservoirs or
the like, conditions, covenants, and restrictions, provided that such
encumbrances, easements, rights-of-way, permits, reservations, leases, rights,
conditions, covenants, and restrictions are such that they will not either
individually or in the aggregate, if exercised or availed of, interfere
materially with the use or operation of the property of Seller or the Company or
materially detract from the value of such property;

               (g)   all Legal  Requirements  and rights  reserved  to or vested
in any Governmental Authority to control, regulate or use any property of Seller
or the Company;

               (h)   other than any consents of any  Governmental  Authority,
   any third party consents to assignment and similar agreements and obligations
with respect to which (A) waivers or consents have been obtained from the
appropriate Person prior to the Closing, or (B) the applicable period of time
for asserting such rights has expired prior to the Closing without any exercise
of such rights, or (C) no consent is required in respect of the transactions
contemplated by this Agreement; and


                                       6

<PAGE>

               (i)   any other liens, charges, encumbrances,  contracts,
agreements, instruments, obligations, defects or irregularities of any kind
whatsoever (but not including liens securing Indebtedness) affecting the Company
Assets that, individually or in the aggregate, do not and could not reasonably
be expected to materially impair the use of such assets for the purposes for
which they are held or the value of the interest therein.

         "Person" means an individual, corporation, limited liability company,
partnership, joint venture, bank, trust, unincorporated organization and/or a
government or any department or agency thereof or other entity of any kind.

         "Pipeline" means the natural gas pipeline, a map of which is set out in
Section 4.6(a) of Seller's Disclosure Schedule.

         "Post-Closing Taxes" means Taxes for any taxable period beginning after
the Closing Date, and, for any taxable period beginning before the Closing Date
and ending after the Closing Date, Taxes relating to the portion of such taxable
period after but not including, the Closing Date.

         "Pre-Closing Taxes" means Taxes for any taxable period ending on or
prior to the Closing Date, and, for any taxable period beginning before the
Closing Date and ending after the Closing Date, Taxes relating to the portion of
such taxable period up to and including the Closing Date.

         "Purchase Price" is defined in Section 3.1.

         "Purchaser" means Atlas Pipeline Partners, L.P., a Delaware limited
partnership.

         "Purchaser Indemnitees" means Purchaser and its officers, directors,
employees, agents, representatives, Affiliates, subsidiaries (including, after
the Closing, the Company), and their respective successors and assigns.

         "Purchaser Parties" is defined in Section 6.1(b)(i).

         "Purchaser's Disclosure Schedule" means the Disclosure Schedule of
Purchaser provided by Purchaser contemporaneously with this Agreement.

         "Purchaser's General Partner" means Atlas Pipeline Partners GP, LLC.

         "Purchaser's Required Governmental Consents" is defined in Section 5.4.

         "Purchaser's Required Non-Governmental Approvals" is defined in Section
5.7.

         "RCA" means the Regulatory Commission of Alaska or any successor
commission or agency.


                                       7

<PAGE>

         "Reciprocal Easement" is defined in Section 8.3(l).

         "Release" means any depositing, spilling, leaking, pouring, emitting,
discarding, abandoning, emptying, discharging, migrating, injecting, escaping,
leaching, seeping, dumping, or disposing.

         "Retained E-mail" means all electronic mail and other computer-based
communications stored on any electronic, digital, or other storage or back-up
media and retained in the ordinary course of Seller's or any of its Affiliates'
business or the Transmission Business.

         "Seller" means SEMCO Energy, Inc., a Michigan corporation.

         "Seller Division" means the ENSTAR Natural Gas Company operating
division of Seller.

         "Seller Indemnitees" means Seller and its officers, directors,
employees, agents, representatives, Affiliates, subsidiaries, and their
respective successors and assigns.

         "Seller's Charter Documents" is defined in Section 4.1(a).

         "Seller's Disclosure Schedule" means the Disclosure Schedule of Seller
provided by Seller contemporaneously with this Agreement.

         "Seller's Required Governmental Consents" is defined in Section 4.4.

         "Seller's Required Non-Governmental Approvals" is defined in Section
4.7.

         "SEMCO Material Adverse Effect" means any event, circumstance or
condition occurring or arising after the date of this Agreement that materially
and adversely affects or is reasonably likely to materially and adversely affect
Seller's ability (financial or otherwise) to perform its obligations under any
of the Operative Documents. For the avoidance of doubt, a SEMCO Material Adverse
Effect shall be deemed to have occurred if SEMCO would be in default under any
material indebtedness for borrowed money immediately after the Closing Date
after giving effect to the transactions contemplated by this Agreement.

         "Special Contract" is defined in Section 8.3(h).

         "Target Working Capital Amount" is defined in Section 3.2(a).

         "Taxes" means unclaimed property and escheat obligations, taxes,
charges, fees, levies, penalties or other assessments imposed by any
Governmental Authority, including but not limited to, income, excise, real or
personal property, sales, use, ad valorem, value added, environmental, transfer,
franchise, payroll, withholding, social security (or similar), gross receipts,
license, severance, fuel, production, transportation, stamp, occupation,
employment, payroll, unemployment, disability or other taxes, including any
interest, penalties or additions attributable thereto, whether disputed or not.


                                       8
<PAGE>

         "Tax Return" means any return, report, information return, declaration,
claim for refund or other document (including any schedule or related or
supporting information) required to be supplied to any taxing authority with
respect to Taxes, including amendments thereto.

         "Termination Date" is defined in Section 10.1(b).

         "Tower License" is defined in Section 8.4(n).

         "Transmission Business" means the operation and ownership of the
Pipeline for the intrastate transportation of natural gas.

         "Transmission Business Insurance Policies" means all insurance policies
carried by or for the benefit of Seller or the Company with respect to the
Transmission Business, including all liability, property damage, self insurance
arrangements, retrospective assessments and business interruption policies in
respect thereof.

         "Working Capital" means cash, accounts receivable and other current
assets less accounts payable, the current portion of deferred obligations and
other current liabilities, in each case, determined in accordance with GAAP
applied in a manner consistent with the Base Financial Statements. The
obligations of the Company to make the payments contemplated by the Tower
License and the Gas Control Agreement shall not be current liabilities for
purposes of determining Working Capital.

         Section 1.2     Construction. As used in this Agreement: (a) the words
"hereof," "herein," and "hereunder" and derivative or similar words shall refer
to this entire Agreement and not to any particular provision of this Agreement;
(b) the terms "Article" or "Section" refer to the specified Article or Section
of this Agreement or the applicable Disclosure Schedule; (c) the terms defined
in the singular shall have a comparable meaning when used in the plural, and
vice versa; (d) the terms "dollars" and "$" shall mean United States dollars;
(e) accounting terms which are specifically defined under GAAP and are not
otherwise defined herein shall have the respective meanings given to them under
GAAP; and (f) unless otherwise specified, all references in this Agreement to
times of the day shall be to Michigan time. No provision of this Agreement will
be interpreted in favor of, or against, any Party by reason of the extent to
which any such Party or its counsel participated in the drafting thereof or by
reason of the extent to which any such provision is inconsistent with any prior
draft hereof or thereof.

                                   ARTICLE II

                                Sale and Purchase

         Section 2.1     Sale and Purchase of Company Equity Interests. Subject
to all of the terms and conditions of this Agreement, at the Closing, Seller
shall sell, transfer and deliver the Company Equity Interests to Purchaser, and
Purchaser (or its designee) shall purchase and accept delivery from Seller of
the Company Equity Interests, free and clear of all Encumbrances and other
limitations and restrictions of any nature whatsoever (other than limitations or
restrictions under applicable laws and regulations or as may be specified in the
Company's Charter Documents).



                                       9

<PAGE>

         Section 2.2     Conversion of Company to Limited Liability Company.
Immediately prior to the Closing, Seller shall cause the Company to be converted
from a corporation to a limited liability company (the "LLC Conversion") and
adopt the limited liability company agreement attached hereto as Exhibit E as
its limited liability company agreement (the "Limited Liability Company
Agreement"), whereafter all references to the Company in this Agreement shall be
deemed to refer to such limited liability company.

                                  ARTICLE III

                                 Purchase Price

         Section 3.1     Purchase Price. The aggregate purchase price for the
Company Equity Interests shall be $94,300,000, as adjusted pursuant to Section
3.2 ("Purchase Price").

         Section 3.2     Purchase Price Adjustment.

                (a)      Working Capital Adjustment. The Purchase Price is based
on the understanding that on the Closing Date, the Company has Working Capital
of $-0- (the "Target Working Capital Amount"), and Seller agrees to use
commercially reasonable efforts to cause the Company's Working Capital to be
zero on the Closing Date. If the Company's Working Capital is not equal to the
Target Working Capital Amount, the Purchase Price shall be adjusted upwards by
the amount by which the Company's Working Capital exceeds the Target Working
Capital Amount or downwards by the amount by which the Target Working Capital
Amount exceeds the Company's Working Capital.

                (b)      Adjustment Procedures.

                         (i)      At least five Business Days prior to the
         anticipated Closing Date, Seller, with the assistance and participation
         of, and in consultation with, Purchaser, shall prepare and provide
         Purchaser with an estimate of the Company's Working Capital as of the
         Closing Date, and if such estimate is above or below the Target Working
         Capital Amount, the Purchase Price payable on the Closing Date shall be
         adjusted upward or downward, as the case may, be, as provided in
         Section 3.2(a).

                         (ii)     If, following the Closing, Purchaser believes
         that an adjustment to the Purchase Price is required in addition to the
         adjustment, if any, provided in Section 3.2(b)(i), Purchaser will cause
         to be prepared and delivered to Seller no later than 90 days after the
         Closing Date an audited balance sheet of the Company, as at the Closing
         Date, which balance sheet shall present fairly, in conformity with
         GAAP, the assets and liabilities of the Company as at the close of
         business on the Closing Date and shall set forth the Company's Working
         Capital. Subject to the dispute procedures set forth in Section 3.2(c),
         if such balance sheet shows that the actual Working Capital of the
         Company as at the Closing Date is different than that used for
         determining the adjusted Purchase Price payable on the Closing Date,
         the Purchase Price shall be adjusted downward or upward, as the case
         may be, to reflect the actual Working Capital of the Company as at the
         Closing Date, and the Purchaser or


                                       10

<PAGE>

         Seller, as the case may be, shall, as promptly as possible, pay or
         refund, as the case may be, the amount by which the Purchase Price as
         estimated pursuant to Section 3.2(a) was less than or exceeded the
         Purchase Price as finally determined pursuant to this Section 3.2(b).
         The cost of any audit performed for purposes of this Section 3.2(b)
         shall be shared equally by Purchaser and Seller.

                (c)      Dispute Procedures. During the 30-day period following
Seller's receipt of the audited balance sheet for the Company delivered pursuant
to Section 3.2(b), Seller and its independent auditors will be permitted to
review the working papers of the auditors relating to the audited balance sheet.
The audited balance sheet shall become final and binding upon the Parties on the
thirtieth day following receipt thereof by Seller unless Seller gives Purchaser
written notice of its disagreement therewith prior to such date. Any notice of
disagreement shall specify in reasonable detail the nature of any disagreement
so asserted. If a notice of disagreement is received by Purchaser in a timely
manner, then the audited balance sheet (as revised in accordance with clauses
(i) or (ii) below) shall become final and binding upon the Parties on the
earlier of (i) the date the Parties resolve in writing any differences they have
with respect to any matter specified in the notice of disagreement or (ii) the
date any disputed matters are finally resolved in writing by the arbitrator
referred to below. During the 30-day period following the delivery of a notice
of disagreement, or such longer period as may be agreed upon by Seller and
Purchaser, Seller and Purchaser shall seek in good faith to resolve in writing
any differences that they may have with respect to any matter specified in the
notice of disagreement. At the end of such 30-day period, or such longer period
as may have been agreed upon, Seller and Purchaser shall submit to an arbitrator
for review and resolution any and all matters arising under this Section 3.2(c)
which remain in dispute. The arbitrator shall be a nationally recognized
independent public accounting firm as shall be agreed upon by the Parties in
writing. The arbitrator shall render a decision resolving the matters submitted
to the arbitrator within 30 days following submission thereto. The cost of any
arbitration (including the fees of the arbitrator) pursuant to this Section
3.2(c) shall be borne 50% by Purchaser and 50% by Seller. The fees and
disbursements of Seller's independent auditors incurred in connection with their
review of the audited balance sheet shall be borne by Seller.

                                   ARTICLE IV

                    Representations and Warranties of Seller

Except as expressly set forth or disclosed with particularity in the
corresponding Section of Seller's Disclosure Schedule, Seller represents and
warrants to Purchaser on the date of this Agreement and on the Closing Date
(unless a representation and warranty speaks as of a specified date) that:

         Section 4.1.    Corporate Status; Power and Authority.

                (a)      Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan. Seller
has all the requisite corporate power and authority to carry on its business as
it is now being conducted and to own or lease and operate its properties as, and
in the places where, such business is now conducted and where such properties
are now owned or leased and operated. Seller has all the requisite corporate
power and corporate authority to execute and deliver this Agreement and the
other Operative Documents and to perform its obligations hereunder and

                                       11

<PAGE>

thereunder, and the execution, delivery and performance of this Agreement and
the other Operative Documents have been duly authorized by all necessary
corporate action on the part of Seller. Section 4.1(a) of Seller's Disclosure
Schedule lists all charter documents that, as of the date hereof, constitute the
Articles of Incorporation and by-laws, as amended, of Seller ("Seller's Charter
Documents"). True, correct and complete copies of Seller's Charter Documents
were contained in the Data Room.

                (b)      The Company is a corporation  duly  organized,  validly
existing and in good standing under the laws of the State of Alaska. The Company
has all the requisite corporate power and corporate authority to carry on its
business as it is now being conducted and to own or lease and operate its
properties as, and in the places where, such business is now conducted and where
such properties are now owned or leased and operated. The Company has the
corporate power to own the Company Assets and to operate the Transmission
Business as such business is now conducted. The Company does not own, directly
or indirectly, any equity security, voting rights or investment rights in any
other Person which is not an Excluded Asset. Section 4.1(b) of Seller's
Disclosure Schedule lists all charter documents that, as of the date hereof,
constitute the Articles of Incorporation and by-laws, as amended, of the Company
("Company's Charter Documents"). True, correct and complete copies of the
Company's Charter Documents were contained in the Data Room.

                (c)      Upon the LLC Conversion pursuant to Section 2.2, the
Company will be a limited liability company duly organized, validly existing and
in good standing under the laws of the State of Delaware. Upon the LLC
Conversion pursuant to Section 2.2, the Company will have all the requisite
limited liability company power and limited liability company authority to carry
on its business as it is now being conducted and to own or lease and operate its
properties as, and in the places where, such business is now conducted and where
such properties are now owned or leased and operated. Upon the LLC Conversion
pursuant to Section 2.2, the Company will have the limited liability company
power to own the Company Assets and to operate the Transmission Business as such
business is now conducted. Following the completion of the LLC Conversion, no
consent, waiver, approval, order, license, permit or authorization of any
Governmental Authority must be obtained solely as a result of the LLC Conversion
for the Company to own the Company Assets and operate the Transmission Business
as such business is now conducted, other than Seller's Required Governmental
Consents.

         Section 4.2.    Duly Executed. This Agreement has been duly executed
and delivered on behalf of Seller and constitutes, and, when executed and
delivered in accordance with this Agreement, each of the other Operative
Documents shall constitute, a legal, valid and binding obligation of each of
Seller and the Company, as applicable, enforceable against Seller or the
Company, as applicable, in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws affecting
creditors' rights generally and general principles of equity.

         Section 4.3.    Qualification. The Seller and the Company are duly
qualified and in good standing, and are authorized to do business as foreign
corporations (or, in the case of the Company, following the LLC Conversion, as a
foreign limited liability company) in all jurisdictions where the character of
the properties owned or leased by it or the nature of the business conducted by
it makes such qualification necessary. Prior to the LLC Conversion, the Company
is qualified to do business only in Alaska, and after the LLC Conversion, the
Company will be qualified to do business only in Delaware and Alaska.


                                       12

<PAGE>

         Section 4.4.    Consent. No material consent, waiver, approval, order
or authorization of, or registration, designation, declaration or filing with,
or notification to, any Governmental Authority or any other Person is, has been
or will be required on the part of Seller or the Company in connection with the
execution or delivery of this Agreement, the other Operative Documents or the
consummation of the transactions contemplated by this Agreement or the other
Operative Documents, except (a) for those consents or approvals set forth in
Section 4.4 of Seller's Disclosure Schedule (the "Seller's Required Governmental
Consents"), (b) for the filing of a premerger notification and report form under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
("Hart-Scott-Rodino Act"), and (c) as may be necessary as a result of any facts
or circumstances relating solely to Purchaser.

         Section 4.5.    Capitalization of the Company; Title to Company Equity
Interests. The authorized capital stock of the Company consists of 2,850,000
shares of common stock, par value $1.00 per share ("Company Common Stock"), of
which 1,900,500 shares are duly authorized, validly issued and outstanding,
fully paid and nonassessable, and 150,000 shares of preferred stock, of which no
shares are outstanding. All such outstanding Company Common Stock is owned by
Seller. Seller has good and valid title to the Company Common Stock, free and
clear of any Encumbrances and other limitations and restrictions of any nature
whatsoever (other than limitations or restrictions under applicable laws and
regulations or as may be specified in the Company's Charter Documents). Upon
completion of the LLC Conversion pursuant to Section 2.2, all outstanding
Company Equity Interests will be held by Seller and will be validly issued in
accordance with the Limited Liability Company Agreement of the Company, fully
paid and nonassessable. By delivery by Purchaser of payment for the Company
Equity Interests and by execution and delivery by Seller of the Bill of Sale and
Assignment Agreement, as provided in this Agreement, Purchaser shall acquire
good title to the Company Equity Interests, free and clear of all Encumbrances.
There are no outstanding subscriptions, options, warrants, conversion rights,
outstanding convertible securities, preemptive rights, preferential rights, or
other rights (contractual or otherwise) or agreements of any kind for the
purchase, acquisition or subscription from (or the purchase, sale or issuance
by) Seller of any equity or ownership interest in the Company, and no
outstanding authorization therefor has been given. There are no restrictions
upon the voting or transfer of the Company Equity Interests pursuant to any
Contract to which any of Seller or the Company is a party or to which any of
them may be bound.

         Section 4.6.    Sufficiency of Company Assets; Title to Company Assets.

                (a)      The Company Assets and the Excluded Assets described in
Section 4.6(a) of the Seller's Disclosure Schedule are all of the assets,
properties and rights used by Seller or the Company to conduct the Transmission
Business. A true and correct map of the Pipeline is set out in Section 4.6(a) of
Seller's Disclosure Schedule.

                (b)      The Company has good title to the Company Assets, which
Company Assets are not subject to any Encumbrances except (i) Permitted
Encumbrances, (ii) Encumbrances that will be removed by obtaining Seller's
Required Non-Governmental Approvals, and (iii) other Encumbrances described in


                                       13

<PAGE>

Section 4.6(b) of Seller's Disclosure Schedule. The Company enjoys peaceful and
undisturbed possession under all material leases of real property on which the
facilities operated by it or Seller (as they relate to the Transmission
Business) are situated, and all such leases are valid and subsisting and in full
force and effect.

         Section 4.7.    No Breach, Etc.

                (a)      The execution, delivery and performance of this
Agreement and the other Operative Documents by Seller and the Company, as
applicable, and the consummation by Seller and the Company, as applicable, of
the transactions contemplated hereby and thereby do not and will not result in
(i) any conflict with or breach or violation of or default under the Seller's
Charter Documents or the Company's Charter Documents, (ii) subject to obtaining
the Seller's Required Governmental Consents, any violation of any applicable
provision of Legal Requirements, (iii) subject to obtaining the Seller's
Required Governmental Consents and those additional consents or approvals
described in Section 4.7 of Seller's Disclosure Schedule (the "Seller's Required
Non-Governmental Approvals"), any material conflict with or breach or violation
of or (with due notice or lapse of time or both) default under or right to
terminate, cancel or accelerate under, or cause any obligation, penalty or
premium to arise under, any Contract, (iv) the creation or imposition of any
material Encumbrance on any of the Company Assets whatsoever, or (v) the
cancellation, modification, revocation or suspension of any Material Permits.

                (b)      No Material Permits are required or necessary under
applicable Legal Requirements in connection with its and the Company's ownership
of the Company Assets and operation of the Transmission Business as currently
conducted other than those that have been obtained, or which, in the ordinary
course of business, the Company or Seller is in the process of obtaining.
Section 4.7(b) of the Seller's Disclosure Schedule sets forth the Material
Permits for which either the Company or Seller has filed an application that is
pending as of the date of this Agreement. The Company Assets and the
Transmission Business are being operated in compliance with the provisions of
Seller's and the Company's Material Permits and applicable Legal Requirements.

         Section 4.8.    Financial Statements; Material Liabilities; Undisclosed
Liabilities.

                (a)      The Data Room contained the unaudited, consolidated
balance sheets and income statements of the Company and the Seller Division for
each of the last three fiscal years of Seller, ending with the fiscal year ended
December 31, 2002 and for the four months ended April 30, 2003 (the "Base
Financial Statements"), and the balance sheets and income statements for the
Company as filed in the Annual Report to the RCA (including the FERC Form 2) for
each of the last three fiscal years of the Company, ending with the fiscal year
ending December 31, 2002 (the "Company Regulatory Financial Statements"). The
Base Financial Statements were prepared in accordance with GAAP applied on a
consistent basis, except for the method of allocation of certain expenses
between the Company and Seller's Alaska gas distribution operations. The Company
and the Seller Division are subject to the provisions of The Statement of
Financial Accounting Standard ("SFAS") 71, "Accounting for the Effects of
'

                                       14

<PAGE>

Certain Types of Regulation". The Company Regulatory Financial Statements
reflect certain regulatory adjustments that have been required of the Company
and the Seller Division by the RCA and its predecessor agency. The liabilities
shown on the balance sheet included in the Company Regulatory Financial
Statement as at December 31, 2002 include all of the liabilities of the Company
that would be required to be reflected on a balance sheet of the Company that
was prepared in accordance with GAAP applied in a manner consistent with the
application of such principles in the preparation of the Base Company Financial
Statements.

                (b)      Since the date of the Base Financial Statements, the
Company has not incurred any liabilities required under GAAP to be disclosed in
the Company's financial statements, except for liabilities that have arisen in
the ordinary course of business, consistent with past practice.

                (c)      The budget and projections presented to Purchaser were
prepared in good faith based on assumptions that, taken as a whole, are
reasonable.

         Section 4.9.    Changes, etc. Since April 30, 2003:

                (a)      except for those actions taken in compliance with this
Agreement, the Transmission Business has been conducted in the ordinary course
of business consistent with past practice;

                (b)      no Indebtedness has been incurred or committed to be
incurred by the Company, except (i) such Indebtedness to Seller that will be
satisfied at or before Closing, (ii) Indebtedness that has been incurred in the
ordinary course of business (but in no event in excess of $250,000), and (iii)
Indebtedness described in Section 4.9(b) of Seller's Disclosure Schedule;

                (c)      there has not been any amendment, cancellation or
termination of any Material Contract;

                (d)      there has not been any cancellation of any Indebtedness
or waiver of any rights of substantial value to the Company, whether or not in
the ordinary course of business;

                (e)      there has not been any revaluation by the Company of
the Company Assets, including, without limitation, writing off notes or accounts
receivable;

                (f)      there has not been any change in the accounting methods
or practices by the Company;

                (g)      there has not been any damage, destruction or loss
(whether or not covered by insurance) adversely affecting the properties,
business or prospects of the Company; and

                (h)      no event or circumstance has occurred or condition has
arisen that has had or is reasonably likely to have a Material Adverse Effect on
the Company.

         Section 4.10.   Environmental Laws.

                (a)      The Company and the Company Assets have been and are
being operated by Seller and the Company in compliance in all material respects
with Environmental Laws and Seller has disclosed to Purchaser in Section 4.10(a)


                                       15
<PAGE>

of the Seller's Disclosure Schedule all past or present conditions of the real
property, and all matters and issues in any way pertinent or related to the
Company or the acquisition, ownership, operation or management of the Company
Assets Known to it which, individually or in the aggregate, could reasonably be
expected to lead to imposition of a Material Liability on the Company.

                (b)      There are no present or past conditions arising from or
relating to the Company or the Company Assets involving or resulting from a past
or present Release of Hazardous Materials to any medium, including, but not
limited to, air, land, surface waters or underground waters, or from any past or
present generation, transportation, treatment, storage or disposal of any
Hazardous Materials or from the storage, use or handling of any such Hazardous
Materials that may lead to imposition of a Material Liability on the Company;

                (c)      There are no material writs, injunctions, decrees,
orders or judgments outstanding, or any claims, notices of violations of
Environmental Laws, requests for information from a Governmental Authority,
actions, suits, proceedings or investigations pending, or to Seller's Knowledge,
threatened, involving the Company or the Company Assets relating to (A) its
compliance with any Environmental Law or (B) the existence, Release, disposal,
discharge, spill, treatment, storage or recycling of Hazardous Materials upon or
into the environment at any on-site or off-site location;

                (d)      There has been no exposure of any person or property to
any Hazardous Material in connection with the Company's ownership or operation
of the Company Assets that could reasonably be expected to form the basis for
tort claims by third parties for damages or compensation;

                (e)      The Seller has made available to Buyer all internal and
external audits, studies, substantive correspondence, Permits, and related
documents that are in Seller's or the Company's possession or custody on
environmental matters and compliance with Environmental Laws relating to the
Company and the Company Assets.

         Section 4.11. Personal Property. All material items of personal
property and fixtures constituting a part of the Company Assets that are used or
useful in the normal operations of the Transmission Business have been
maintained in all material respects in an operating condition and state of
repair (normal wear and tear excepted) adequate for the current use of such item
in the ordinary conduct of the Transmission Business.

         Section 4.12.   Certain Regulatory Matters.

                (a)      Section 4.12(a) of Seller's Disclosure Schedule lists
all certificates and Permits heretofore issued by the RCA to the Company or
Seller in connection with the Transmission Business on the date hereof.

                (b)      Section 4.12(b) of Seller's Disclosure Schedule
reflects all of the operative tariffs heretofore authorized and approved by the
RCA that are in effect and specifically applicable to the Transmission Business
on the date hereof and all of the pending rate, certificate or other filings
heretofore made by Seller or the Company before the RCA and the status of each
such filing on the date hereof.



                                       16

<PAGE>


                (c)      Section 4.12(c) of Seller's Disclosure Schedule
reflects all of the regulatory filings (other than those periodic filings that
Seller or the Company is required to file in the ordinary course of business as
a regulated utility) that Seller has been ordered by the RCA to make in the
future which are or will be applicable to the Transmission Business (including
but not limited those relating to all operative tariffs or rates charged, or to
be charged, by the Company in the Transmission Business, including under special
contracts), the subject matter of each such filing, and the date (if any) by
which Seller intends to make, or is ordered to make such filings.

                (d)      All currently effective material filings heretofore
made by Seller or the Company with the RCA were made in material compliance with
Legal Requirements then applicable thereto and the information contained therein
was true and correct in all material respects as of the respective dates of such
filings.

                (e)      The Company is not (i) a "public utility company", a
"holding company" or a "subsidiary company" of a "holding company" or (ii) to
the Knowledge of the Seller, an "affiliate" of a "holding company", in each
case, within the meaning of the Public Utility Holding Company Act of 1935, as
amended.

         Section 4.13.   Material Contracts.

                (a)      Section 4.13(a) of Seller's Disclosure Schedule
contains a complete and correct list of all Material Contracts as of the date
hereof to the extent not included in the Excluded Assets. There are no defaults
by Seller or the Company under any such contracts that, individually or in the
aggregate, will materially and adversely impair the Transmission Business. To
Seller's Knowledge, there are no defaults by any other party to any such
contracts that, individually or in the aggregate, will materially and adversely
impair the Transmission Business. Each Material Contract is valid, binding and
enforceable against Seller or the Company, as applicable, and, to Seller's
Knowledge, each of the other parties thereto in accordance with its terms, and
in full force and effect on the date hereof, except where a failure to be so
valid, binding and enforceable or in full force and effect would not materially
and adversely impair the Transmission Business.

                (b)      Section 4.14(b) of Seller's Disclosure Schedule sets
forth each Material Contract requiring a consent as a result of the execution,
delivery and performance of this Agreement, the Operative Documents or the
consummation of the transactions contemplated hereby.

         Section 4.14.   Litigation. Section 4.14 of Seller's Disclosure
Schedule lists all actions, suits, proceedings or governmental investigations
pending or, to the Knowledge of Seller, threatened against the Company which if
adversely decided, could reasonably be expected to have a Material Adverse
Effect on the Company, challenge or may challenge the validity of this Agreement
or any of the Operative Documents or seek to enjoin or otherwise restrain the
transactions contemplated herein and therein. Except as set forth in Section
4.14 of Seller's Disclosure Schedule, as of the date hereof, there is no order,
judgment, injunction or decree of any Governmental Authority outstanding against
the Company or against Seller (as it pertains to the Company or the Transmission
Business), that, individually or in the aggregate, would have any effect

                                       17

<PAGE>


referred to in the foregoing clauses (a), (b) or (c). Notwithstanding the
foregoing, but except as specifically pertains to the Company or the
Transmission Business, Seller makes no representation or warranty in this
Section 4.14 as to any actions, suits, proceedings or governmental
investigations which are, or contain issues, of broad applicability to, or which
affect broadly, the natural gas, natural gas liquids or pipeline industry,
including any state or federal rulemaking or similar proceeding of general
applicability and any petition for review or appeal thereof.

         Section 4.15.   Rights-of-Way. The Company owns or has a legal right to
possess all material rights-of-way or easements through all real property used
or necessary for the conduct of the Transmission Business, as it is now being
conducted without any known material conflict with the rights of others.

         Section 4.16.   Employee Matters. The Company does not now have, and,
from the date hereof to the Closing Date, will not have, any employees. The
Company is not a party to any employment, personal services or consulting
agreements or arrangements, and does not currently sponsor, maintain or have an
obligation to contribute to any employee benefit plan within the meaning of
Section 3(3) of ERISA, or any other bonus, pension, stock option, stock
purchase, benefit, welfare, profit-sharing, retirement, disability, vacation,
severance, change in control, hospitalization, insurance, incentive, deferred
compensation and other similar fringe or employee benefit plans, fund, programs
or arrangements, whether written or oral. The Company has not, at any time
within the six years prior to the Closing Date sponsored, maintained or had any
obligation to contribute to any employee pension benefit plan within the meaning
of Section 3(3) of ERISA.

         Section 4.17.   Insurance.

                (a)      Section 4.17 of Seller's Disclosure Schedule lists of
all Transmission Business Insurance Policies and all such policies are in full
force and effect on the date hereof.

                (b)      All premiums payable under such Transmission Business
Insurance Policies have been paid in a timely manner and each of the Company and
Seller has complied fully with the terms and conditions of such Transmission
Business Insurance Policies. Neither Seller nor the Company is in default under
any provisions of such Transmission Business Insurance Policies.

         Section 4.18.   Patents; Trademarks; Etc.

                (a)      The Transmission Business is conducted without conflict
with or infringement of asserted patent, trade names, trademark, servicemark,
copyright, trade secret, industrial model, utility model, know-how or other
industrial property rights of others.

                (b)      Except as set forth in Section 4.18(b) of Seller's
Disclosure Schedules, to Seller's Knowledge, the Company or Seller owns all
right, title and interest in and to, or has a valid and enforceable license or
other right to use lawfully all the Intellectual Property used by Seller or the
Company in connection with the Transmission Business free and clear of all
Encumbrances.


                                       18

<PAGE>


         Section 4.19.   Indemnity Claim. Seller and the Company have taken all
necessary and appropriate actions to preserve any and all rights to
indemnification in their favor pursuant to clause (ii) of Section 12.2 of the
purchase and sale agreement dated July 15, 1999 between Ocean Energy, Inc. and
Seller, as amended. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not adversely affect
the entitlement of the Company to receive indemnification under such agreement.

         Section 4.20.   Books and Records; Other Information. The minute books
and other similar records of the Company contain true and complete records of
all actions taken at any meetings of the stockholders of the Company, the Board
of Directors of the Company or any committee thereof and all written consents
executed in lieu of any such meetings. Complete copies of all such minute books
and other similar records have been provided to Purchaser.

         Section 4.21.   Brokers. No investment banker, financial advisor,
broker or finder has acted for or on behalf of Seller or any Affiliate of Seller
in connection with this Agreement or the transactions contemplated by this
Agreement other than McDonald Investments, Inc. No investment banker, financial
advisor, broker or finder is entitled to any brokerage or finder's fee, or to
any commission, based in any way on agreements, arrangements or understandings
made by or on behalf of Seller or any Affiliate of Seller for which Purchaser or
the Company has or will have any liabilities or obligations (contingent or
otherwise).

                                   ARTICLE V

                   Representations and Warranties of Purchaser

         Except as set forth or disclosed in the corresponding section of
Purchaser's Disclosure Schedule, Purchaser represents and warrants to Seller on
the date of this Agreement and on the Closing Date (unless a representation and
warranty speaks as of a specified date) that:

         Section 5.1.    Corporate Status; Power and Authority. Purchaser is a
limited partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware. Purchaser has all the requisite partnership
power and partnership authority to execute and deliver this Agreement and the
other Operative Documents and to perform its obligations hereunder and
thereunder, and the execution, delivery and performance of this Agreement and
the other Operative Documents has been duly authorized by the Board of Directors
of Purchaser's General Partner, which constitutes all necessary partnership
action required on the part of the Purchaser for such authorization. Purchaser
has heretofore delivered to Seller true and complete copies of its Agreement of
Limited Partnership, as amended.

         Section 5.2.    Power; Duly Executed. This Agreement has been duly
executed and delivered by Purchaser's General Partner on behalf of Purchaser and
constitutes the legal, valid and binding obligation of Purchaser enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium and other laws affecting creditors' rights generally
and general principles of equity.

         Section 5.3.    Qualification. Purchaser is duly qualified and in good
standing as a foreign partnership authorized to do business in all jurisdictions
where the failure to so qualify would have a Material Adverse Effect on
Purchaser. Prior to the Closing, Purchaser's designee that will acquire the
Company Equity Interests shall become duly qualified and in good standing to do
business in the State of Alaska.



                                       19

<PAGE>

         Section 5.4.    Governmental Consent. No material consent, waiver,
approval, order or authorization of, or registration, designation, declaration
or filing with, or notification to, any Governmental Authority is, has been or
will be required on the part of Purchaser in connection with the execution and
delivery of this Agreement or the other Operative Documents or the consummation
of the transactions contemplated hereby or thereby, except (i) for those
consents or approvals set forth in Section 5.4 of Purchaser's Disclosure
Schedule (the "Purchaser's Required Government Consents"), (ii) for the filing
of a premerger notification and report form under the Hart-Scott-Rodino Act, and
(iii) where the failure to obtain such consents, waivers, approvals, order,
authorizations, or to make such registration, designations, declarations,
filings or notifications, would not, individually or in the aggregate, prevent
or materially impair or delay the ability of Purchaser to perform its
obligations under this Agreement or the other Operative Documents or to
consummate the transactions contemplated hereby or thereby.

         Section 5.5.    Brokers. No investment banker, financial advisor,
broker or finder is entitled to any investment banker, financial advisor,
brokerage or finder's fee, or to any commission, based in any way on agreements,
arrangements or understandings made by or on behalf of Purchaser or any
Affiliate of Purchaser for which Seller or any Affiliate thereof (including,
prior to the Closing, the Company) has or will have any liabilities or
obligations (contingent or otherwise).

         Section 5.6.    Financial Arrangements of Purchaser. Purchaser will
have at the Closing adequate sources of funds to enable it to pay the full
Purchase Price when required hereunder and any adjustments thereto and to effect
the transactions contemplated hereby.

         Section 5.7.    Purchaser Qualification. To Purchaser's Knowledge,
Purchaser is qualified to obtain, and there are no conditions in existence which
could reasonably be expected to delay, impede or condition the receipt by
Purchaser of Purchaser's Required Governmental Consents or those additional
consents or approvals described in Section 5.7 of Purchaser's Disclosure
Schedule (the "Purchaser's Required Non-Governmental Approvals").

                                   ARTICLE VI

                  Covenants and Certain Actions of the Parties

         Section 6.1.    Obligations of Seller.

                (a)      Conduct of Business, Etc. From the date of this
Agreement and until the Closing ("Interim Period"), except as is otherwise
approved by Purchaser in writing (which approval shall not be unreasonably
withheld or delayed), Seller shall:

                         (i)      except as permitted or contemplated by this
         Agreement, cause the Company to carry on the Transmission Business in
         the ordinary course of business consistent with past practice and, to
         the extent consistent with such business, use all reasonable efforts to
         preserve intact the present business organization and to preserve its
         relationships with customers, suppliers and others having business
         dealings with the Company;



                                       20

<PAGE>

                         (ii)     except as required for the LLC Conversion,
         cause the Company to maintain its corporate existence and, to the
         extent within the control of Seller, cause the Company to maintain all
         qualifications of the Company that are required for it to carry on the
         Transmission Business as set forth in clause (i) above;

                         (iii)    except as required for the LLC Conversion, not
         permit the Company to amend its Articles of Incorporation or by-laws;

                         (iv)     not permit the Company to (A) create, incur,
         assume, guarantee or otherwise become liable with respect to any
         indebtedness for money borrowed, issue or cause to be issued any notes,
         bonds, debentures, letters of credit or grant any option, warrant or
         right to purchase any thereof or (B) issue any securities convertible
         or exchangeable for debt securities of the Company other than
         indebtedness payable to the Seller which shall be satisfied prior to
         the Closing as provided in Section 6.1(a)(xiv);

                         (v)      except for the distribution of the Excluded
         Assets to Seller pursuant to Section 6.1(a)(xiii), refrain from
         disposing of any material Company Assets and from selling any Company
         Assets, other than sales of worn-out or obsolete equipment for fair or
         reasonable value in the ordinary course of business consistent with
         past practice;

                         (vi)     not subject any of its assets, or any part
         thereof, to any Encumbrance except Permitted Encumbrances;

                         (vii)    not permit the Company to merge or consolidate
         with any other corporation or acquire any stock, securities, property
         or assets of any other Person; provided, however, that the foregoing
         restriction shall not prohibit any acquisition of property or assets to
         be used by the Transmission Business in the ordinary course of business
         or for capital expenditures permitted by Section 6.1(a)(xi);

                         (viii)   except as required for the LLC Conversion, not
         permit the Company to issue any equity securities, or enter into any
         contract, or grant any option, warrant or right, calling for the
         issuance of any such securities, or create or issue any securities
         convertible into any such equity securities or convertible into
         securities in turn so convertible, or enter into any contract, or grant
         any option, warrant or right, calling for the issuance of any such
         convertible securities;

                         (ix)     not permit the Company to redeem, retire,
         purchase or otherwise acquire, directly or indirectly, any of its
         equity interests or declare, set aside or pay any dividends or other
         distributions in respect of its equity interests;

                         (x)      advise and consult, and cause the Company to
         advise and consult, with Purchaser in advance of any material actions
         (including, without limitation, rate filings) to be taken with respect
         to regulatory matters or other contested matters;



                                       21

<PAGE>

                         (xi)     continue to implement the Company's capital
         expenditure program consistent with the Company's 2003 and (if
         applicable) 2004 capital expenditure budgets and, except as provided in
         such budgets, Seller will not, and will not permit the Company, to
         commit to make any capital expenditures, capital additions or capital
         improvements with respect to the Transmission Business which would be
         binding on the Company following the Closing Date;

                         (xii)    other than in the ordinary course of business,
         enter into or amend any Material Contract, in each case except to the
         extent related to any capital expenditure permitted by Section
         6.1(a)(xi);

                         (xiii)   immediately prior to the Closing, cause the
         Company to distribute the Excluded Assets to Seller and obtain the
         release of the Company from further liabilities or obligations in
         respect of the Excluded Obligations;

                         (xiv)    immediately prior to the Closing, satisfy all
         intercompany obligations between the Company and Seller as follows: (A)
         if the aggregate intercompany accounts shows a net liability owed by
         the Company to Seller, such obligation shall be satisfied by Seller
         being deemed to make a contribution to the Company's capital in the
         amount of such obligation, or (B) if the aggregate intercompany
         accounts show a net liability owed by Seller to the Company, such
         obligation shall be paid in full by Seller in cash;

                         (xv)     continue to maintain all material items of
         personal property and fixtures constituting a part of the Company
         Assets that are used or useful in the normal operations of the
         Transmission Business in all material respects in an operating
         condition and state of repair (normal wear and tear excepted) adequate
         for the current use of such item in the ordinary conduct of the
         Transmission Business;

                         (xvi)    maintain in full force and effect all Permits
         held by the Company and Seller (as such Permits relate to the
         Transmission Business), except for those Permits the failure of which
         to maintain in full force and effect would not materially impair the
         use of the Company Assets for the purposes for which they are held or
         the value of the interest therein;

                         (xvii)   duly and timely file or cause to be filed all
         reports and returns required to be filed with any Governmental
         Authority and promptly pay or cause to be paid when due all Taxes,
         assessments and governmental charges, including interest and penalties
         levied or assessed, unless diligently contested in good faith by
         appropriate proceedings;

                         (xviii)  not change its methods of accounting that were
         in effect on December 31, 2002, except as required by GAAP or
         applicable law as recommended by its independent auditors;

                         (xix)    not make any material Tax election or settle
         any material Tax controversy;



                                       22

<PAGE>

                         (xx)     not permit any material insurance policy
         naming the Company as a beneficiary or loss-payable to expire or be
         canceled or terminated, unless a comparable insurance policy reasonably
         acceptable to Purchaser is obtained and in effect;

                         (xxi) immediately prior to the Closing, terminate or
         cause the Company to terminate all contracts or service agreements
         between the Company and Seller or Seller's other Affiliates except for
         the Operative Documents and any other agreement contemplated by this
         Agreement;

                         (xxii) provide Purchaser with updated financial
         statements each calendar quarter ending September 30, 2003 and
         thereafter, prepared in a manner consistent with the Base Financial
         Statements, within 45 days after the end of such calendar quarter;

                         (xxiii) obtain prior to the Closing any air permits
         required for the operation of its Gudenrath and Kalifonski compressor
         stations; and

                         (xxiv) Prior to the Closing, perform at Seller's cost
         and expense, the land curative work described in Section 6.1(a)(xxiv)
         of Seller's Disclosure Schedule.

         (b)    Access and Information.

                (i)      The Company and Seller have given and, during the
         Interim Period, Seller shall give, or shall cause to be given, to
         Purchaser and its employees, agents and representatives appropriate
         access, at all reasonable times and at Purchaser's expense, to the
         properties, books, files, records and officers of the Company and of
         Seller and their agents, including legal representatives and
         accountants, as such relate to the Company Assets and the Transmission
         Business, and will furnish or shall cause to be furnished, at no cost
         to Purchaser other than reasonable out-of-pocket expenses and the cost
         of copying or duplication, all information and documents relating to
         the Transmission Business as Purchaser may reasonably request, and
         permit Purchaser to contact and meet with the employees of Seller
         involved in the Transmission Business at such place or places and at
         such times as reasonably designated by Purchaser, provided that no such
         investigation shall unreasonably interfere with the Transmission
         Business, or relationships with employees or customers of Seller or
         customers of the Company. During the Interim Period, Seller shall
         permit Purchaser to make copies of information relating to the
         Transmission Business contained in the books, files and records of
         Seller and the Company. Purchaser will cause all information regarding
         Seller, the Company or the Transmission Business obtained or acquired
         by Purchaser or Purchaser's representatives, employees, consultants,
         independent contractors, attorneys and financing sources and other
         advisors (the "Purchaser Parties") pursuant to this Agreement to be
         used and maintained by the Purchaser Parties in accordance with the
         terms of the confidentiality agreement dated February 27, 2003, by and
         between McDonald Investments Inc. (as agent for Seller) and Purchaser
         (the "Confidentiality Agreement"). Notwithstanding the foregoing
         provisions of this Section 6.1(b), (1) to the extent necessary in order
         to obtain the Purchaser Required Governmental Consents, Purchaser may
         disclose such information to the appropriate Governmental Authorities
         provided Purchaser makes commercially reasonable efforts to ensure that
         the information that is so disclosed will be


                                       23

<PAGE>

         accorded confidential treatment by the Governmental Authority; (2)
         Seller shall not be required to disclose information to the extent that
         the disclosure thereof is prohibited under confidentiality agreements
         currently in effect on the date hereof, and (3) Purchaser shall be
         permitted to disclose information to the extent required by applicable
         Legal Requirements or stock exchange regulations or to the extent
         requested by its (or its designee's) lenders.

                (ii)     Seller shall have the right to have a representative
         present at all times of any inspections, interviews, and examinations
         conducted at or on the offices or other facilities or properties of
         Seller or the Company. Purchaser shall have no right of access to, and
         Seller shall have no obligation to provide to Purchaser, (1) bids
         received from others in connection with the transactions contemplated
         by this Agreement and information and analysis (including financial
         analysis) relating to such bids, or (2) any information the disclosure
         of which would jeopardize any privilege available to the Company,
         Seller or any of their Affiliates relating to such information or would
         cause Seller to breach a confidentiality obligation. Purchaser agrees
         that if Purchaser or its authorized representatives receive, or if the
         information (whether in electronic mail format, on computer hard drives
         or otherwise) held by the Company as of the Closing includes
         information that relates to the business operations or other strategic
         matters of Seller, or any of its Affiliates (other than the Company),
         such information shall be held in confidence on the terms and subject
         to the conditions contained in the Confidentiality Agreement, but the
         term of the restriction on the disclosure and use of such information
         shall continue in effect as to such information for a period of two
         years from the Closing. Purchaser further agrees that if Seller or the
         Company inadvertently furnishes to Purchaser copies of or access to
         information that is subject to clause (2) of the second preceding
         sentence, Purchaser will, upon Seller's request, promptly return same
         to Seller and Purchaser will destroy any and all extracts therefrom or
         notes pertaining thereto (whether in electronic or other format).

                (iii)    Purchaser agrees that Seller may retain (1) a copy of
         all materials included in the Data Room, together with a copy of all
         documents referred to in such materials, (2) copies of all books and
         records prepared by Seller or its Affiliates in connection with the
         transactions contemplated by this Agreement, including bids received
         from others and information relating to such bids, (3) copies of any
         books and records which may be relevant in connection with the
         assertion or defense of disputes arising hereunder, (4) all
         consolidating and consolidated financial information and all other
         accounting books and records prepared or used in connection with the
         preparation of financial statements of Seller, and (5) copies of all
         Retained E-mail. Seller agrees that all such information shall be
         treated as Confidential Information of Purchaser as within the meaning
         of the Operation and Maintenance and Administrative Services Agreement
         and shall be subject to the terms and conditions of the confidentiality
         provisions contained therein.

                (iv)     Notwithstanding anything to the contrary set forth in
         this Agreement, the obligations of confidentiality hereof, as they
         relate to the transactions contemplated hereby, shall not apply to the
         federal tax structure or federal tax treatment of such transactions,
         and each Party (and any employee,

                                       24

<PAGE>

         representative, or agent of any Party) may disclose to any and all
         Persons, without limitation of any kind, the federal tax structure and
         federal tax treatment of such transaction. The preceding sentence is
         intended to cause the transactions contemplated hereby not to be
         treated as having been offered under conditions of confidentiality for
         purposes of Section 1.6011-4(b)(3) (or any successor provision) of the
         Treasury Regulations promulgated under Section 6011 of the Code and
         shall be construed in a manner consistent with such purpose. In
         addition, each Party hereto acknowledges that it has no proprietary or
         exclusive rights to the tax structure of the transactions contemplated
         hereby or any tax matter or tax idea related to such transaction.

         (c)    Hart-Scott-Rodino.

                (i)      Seller will prepare and submit to the Federal Trade
         Commission and the Department of Justice, as promptly as practicable
         but in no event later than 120 days after the date hereof, all
         necessary filings for Seller and the Company in connection with the
         transactions contemplated by this Agreement under the Hart-Scott-Rodino
         Act.

                (ii)     In the event that a request for additional information
         is made of Seller pursuant to the Hart-Scott-Rodino Act, Seller shall
         use all reasonable efforts to comply or cause to be complied with such
         request as soon as practicable after receipt of such request. Seller
         shall use its commercially reasonable efforts to obtain early
         termination of the applicable waiting period to the extent required by
         the applicable regulatory authorities pursuant to the Hart-Scott-Rodino
         Act. Notwithstanding the foregoing, nothing contained herein shall
         require Seller or the Company to sell, transfer, divest or otherwise
         dispose of any assets or properties. Seller will coordinate and
         cooperate with Purchaser in exchanging such information and providing
         such reasonable assistance as may be requested in connection with such
         filing.

         (d)    Director Resignations. On the Closing Date, Seller shall cause
to be delivered to Purchaser duly signed resignations of each of the directors
of the Company.

         Section 6.2.    Obligations of Purchaser.

                (a)      Hart-Scott-Rodino.

                         (i)      Purchaser will prepare and submit to the
         Federal Trade Commission and the Department of Justice, as promptly as
         practicable but in no event later than 120 days after the date hereof,
         all necessary filings for Purchaser in connection with the transactions
         contemplated by this Agreement under the Hart-Scott-Rodino Act.

                         (ii)     In the event that a request for additional
         information is made of Purchaser pursuant to the Hart-Scott-Rodino Act,
         Purchaser shall use all reasonable efforts to comply or cause to be
         complied with such request as soon as practicable after receipt of such
         request. Purchaser shall use its commercially reasonable efforts to
         obtain early termination of the applicable waiting period to the extent
         required by the applicable regulatory authorities pursuant to the
         Hart-Scott-Rodino Act. Notwithstanding the foregoing, nothing contained
         herein shall require Purchaser or the Company to sell, transfer, divest
         or otherwise dispose of any assets or properties. Purchaser will
         coordinate and cooperate with Seller in exchanging such information and
         providing such reasonable assistance as may be requested in connection
         with such filing.

                                       25

<PAGE>


                (b)      Access to Information. After Closing, Purchaser will,
and will cause its counsel and independent public accountants to, afford to
representatives of Seller, including its counsel and accountants, reasonable
access at reasonable times upon prior notice and at Seller's expense to all
books, records, files and documents related to the Company or the Transmission
Business in order to permit Seller (i) to prepare and file its tax returns and
to prepare for and participate in any investigation with respect thereto, (ii)
to prepare for and participate in any other investigation and defend any
litigation relating to or involving the Seller, the Company or the Transmission
Business for which Seller may be responsible, (iii) to discharge its obligations
under this Agreement and the other Operative Documents to which it is a party
and for other reasonable purposes, and Purchaser will afford Seller reasonable
assistance in connection therewith. Purchaser will cause such records to be
maintained for not less than six years from the date of Closing (or, if longer,
any period required by applicable Legal Requirements); provided, however, that
in the event that Purchaser transfers all or a portion of the Transmission
Business to any third party during such period, Purchaser may transfer to such
third party all or a portion of the books, records, files and documents related
thereto, provided such third party transferee expressly assumes in writing the
obligations of Purchaser under this Section 6.2(b). Following the Closing Date,
and to the extent reasonably necessary to permit Seller or any of its Affiliates
to defend (including, without limitation, any related investigation, appeal or
settlement) any lawsuit, mediation, enforcement action, arbitration,
administrative hearing or other adjudicative proceeding relating to the
Transmission Business, Purchaser agrees to afford Seller and its Affiliates and
their respective accountants and counsel, during normal business hours, at no
cost to Seller other than reasonable out-of-pocket expenses, (i) reasonable
access to all employees of Purchaser or any of its Affiliates and all witnesses
subject to the control or direction of Purchaser or any of its Affiliates and
(ii) reasonable access to all documents and records within the custody or
subject to the control of Purchaser or any of its Affiliates; provided, however,
that in the event of any litigation nothing herein shall limit either party's
rights of discovery under applicable law.

         Section 6.3.    Insurance.

                (a)      Purchaser acknowledges and agrees that, effective upon
the Closing, the Transmission Business Insurance Policies may be terminated or
modified to exclude coverage of the Company and the Transmission Business.

         Section 6.4.    Cooperation by Seller.

                (a)      Seller shall, and shall cause the Company to, cooperate
with Purchaser and Purchaser's auditors in the preparation at Purchaser's
expense of such audited financial statements for the Company as Purchaser may
reasonably request to comply with applicable Legal Requirements, stock exchange
rules and requirements of Purchaser's (or its designee's) lenders, including
providing reasonable access to its and the Company's accountants, employees,
work papers, books and records and financial data relating to the Company and
the Transmission Business.



                                       26

<PAGE>

                (b)      Seller shall, and shall cause the Company to, cooperate
with Purchaser, at Purchaser's sale cost and expense, in consummating
Purchaser's (or its designee's) financing for the acquisition of the Company
Equity Interests, including (i) providing reasonable access to its and the
Company's accountants, officers, directors and representatives; provided,
however, Seller shall not be required to waive or modify any legal rights in
respect to such financing; and (ii) executing a consent to collateral assignment
of the Operative Documents in favor of the lenders that (A) provides such
lenders with notice and the right to consent to any material modifications of
such Operative Documents; (B) provides such lenders with notice of default and
an opportunity to cure any defaults under such Operative Documents; (c) adds
such lenders under Seller's applicable insurance policies; (D) consents to an
assignment of such Operative Documents upon or in lieu of foreclosure; (E)
contains appropriate attornment provisions; (F) establishes limitations of
liability and recoupment against such lenders and its assignees or purchasers;
and (G) provides for the treatment of such Operative Documents in the event of a
bankruptcy of the Company.

         Section 6.5.    Certain Title Curative Work. Within fourteen (14) days
from the date of this Agreement, Purchaser and Seller shall mutually agree on a
land consultant knowledgeable about pipeline land issues in Alaska, and which
shall be jointly retained by Purchaser and Seller to review Seller's land
records for the purpose of determining the land curative work, if any, necessary
to give the Company good title to any portion of the rights of way used or
necessary to conduct the Transmission Business, as it is now being conducted,
subject to Permitted Encumbrances and other defects or irregularities as would
be acceptable to a prudent pipeline operator, Seller shall, at its sole cost and
expense, perform any curative work identified by such consultant to bring
Seller's title to such state as soon as practicable; provided, however, that the
Closing shall not be delayed as a result of incompleted curative work provided
all of the other conditions precedent therefor have been satisfied. The costs
and expenses of the land consultant shall be shared equally between Purchaser
and Seller.

                                  ARTICLE VII

                   Approvals; Commercially Reasonable Efforts

         Section 7.1.    Approvals; Commercially Reasonable Efforts. (a) The
Parties recognize the importance of obtaining the Seller's Required Governmental
Consents, the Seller's Required Non-Governmental Approvals, the Purchaser's
Required Governmental Consents and the Purchaser's Required Non-Governmental
Approvals and, in this regard, agree to use their commercially reasonable
efforts to seek such consents and approvals and will cooperate fully with the
other party in promptly seeking to obtain such consents and approvals. The
Parties shall apply for and diligently prosecute all applications for, and shall
use commercially reasonable efforts promptly to obtain as quickly as
practicable, such consents and approvals as shall be necessary to permit the
consummation of the transactions contemplated by this Agreement. To this end,
the Parties agree to make available the personnel and other resources of their
respective organizations in order to accomplish actions reasonably required by
them to obtain all such approvals or consents. Prior to making such
applications, the Parties shall agree to the capital expenditure budget for
calendar year 2004.




                                       27

<PAGE>

                (b)      Seller and Purchaser agree that Seller shall have
primary responsibility for the preparation and filing of the application and
related material with the RCA seeking approval of required permit transfers for
the transactions contemplated herein and approval of any jurisdictional
contracts between the parties contemplated hereby, subject to Purchaser's
compliance with the terms of paragraph (a) above. Each party shall pay its own
costs and expenses associated with the RCA approval process.

                                  ARTICLE VIII

                              Conditions Precedent

         Section 8.1.    Closing Conditions. The respective obligations set
forth herein of Seller and Purchaser to consummate the transactions contemplated
hereby shall be subject to the fulfillment, on or before the Closing Date, in
the case of Seller, of the conditions set forth in Sections 8.2 and 8.3, and in
the case of Purchaser, of the conditions set forth in Sections 8.2 and 8.4. Any
of the following conditions may be waived in whole or in part by the Party whose
obligation to perform at Closing is subject to such condition.

         Section 8.2.    Hart-Scott-Rodino Compliance. The applicable waiting
period, together with any extensions thereof, under the Hart-Scott Rodino Act
shall have expired or terminated without any action being taken, or any
agreement having been entered into by Seller, the Company or Purchaser or any
consent decree or order having been issued by any Governmental Authority, to
sell, transfer, divest or otherwise dispose of any assets or properties of the
Company or Purchaser.

         Section 8.3.    Conditions to Obligations of Seller.

                (a)      Representations and Warranties of Purchaser. The
representations and warranties of Purchaser contained in Article V of this
Agreement shall be true and correct in all respects as of the date hereof and as
of the Closing Date (except to the extent that any representation or warranty
speaks as of a specified date, in which case such representation or warranty
shall be true and correct only as of such specified date), except for (i)
changes permitted or contemplated by this Agreement and (ii) failures of such
representations and warranties to be true and correct that would not,
individually or in the aggregate, prevent or materially impair or delay the
ability of Purchaser to perform its obligations under this Agreement or to
consummate the transactions contemplated by this Agreement. Purchaser shall have
duly performed and complied in all material respects with all covenants and
agreements contained herein required to be performed or complied with by it at
or before the Closing.

                (b) Officers' Certificate. Purchaser shall have delivered to
Seller a certificate, dated the Closing Date and signed by the President and the
Chief Financial Officer of Purchaser's General Partner, certifying, in form
reasonably satisfactory to Seller and its counsel that, to such officers' best
knowledge and belief, after due inquiry, the conditions set forth in Section
8.3(a) hereof have been fulfilled.


                                       28

<PAGE>


                (c)      Required Governmental Consents. All of Seller's
Required Governmental Consents shall have been obtained by Final Order, and such
consents shall, among other matters, (i) approve without being subject to refund
the rates contained in the Special Contract, (ii) approve without being subject
to refund the pass-through of such rates to the customers of Seller Division,
and (iii) not otherwise contain any condition which will, or is reasonably
expected to, have a Material Adverse Effect on Seller's gas distribution
business in the State of Alaska. The condition contained in this Section 8.3(c)
shall not be satisfied if any Required Governmental Consent (1) disallows or
makes subject to refund the inclusion of a federal income tax component in rates
of the Company, (2) sets a procedural schedule for review of the rates of the
Company or Seller Division (but may expressly reserve jurisdiction over such
rates), or (3) disapproves the 10 year term of the Special Contract or requires
that term to be shortened.

                (d)      Required Non-Governmental Approvals. All of Seller's
Required Non-Governmental Approvals, the absence of which would have a Material
Adverse Effect on Seller after the Closing, and all of Purchaser's Required
Non-Governmental Approvals, the absence of which would have a Material Adverse
Effect on Seller, in each case other than those consents and approvals that are
customarily obtained after the Closing of a transaction of the nature of the
transaction contemplated by this Agreement, have been obtained and are in full
force and effect.

                (e)      Actions at Closing. Purchaser shall have taken the
respective actions to be taken by it at the Closing pursuant to Section 9.1
hereof.

                (f)      Absence of Proceedings. No action, suit or proceeding
shall be pending and no statute, rule or regulation and no injunction, order,
decree or judgment of any court or Governmental Authority of competent
jurisdiction shall be in effect that could reasonably be expected to prohibit,
restrain, enjoin or restrict the consummation of the transactions contemplated
by this Agreement.

                (g)      Operation and Maintenance and Administrative Services
Agreement. The Company shall have duly executed and delivered the Operation and
Maintenance and Administrative Services Agreement between Seller and the Company
substantially in the form of Exhibit A hereto (the "Operation and Maintenance
and Administrative Services Agreement").

                (h)      Special Agreement for Gas Transportation. The Company
shall have executed and delivered the Special Contract for Gas Transportation
between Seller Division and the Company substantially in the form of Exhibit B
hereto (the "Special Contract").

                (i)      Gas Transmission Agreement. The Company shall have
executed and delivered the Gas Transmission Agreement between Seller and the
Company substantially in the form of Exhibit C hereto (the "Gas Transmission
Agreement").

                (j)      Tower License. The Company shall (i) have duly executed
and delivered the Tower License and (ii) have paid in full to Seller the license
fee for the Tower License.

                (k)      Gas Control Agreement. The Company shall (i) have duly
executed and delivered an agreement substantially in the form of Exhibit F
hereto (the "Gas Control Agreement") providing for Seller to perform control
room services for the Company for a period of 10 years from the Closing Date and
(ii) have paid in full to Seller the service fee under the Gas Control
Agreement.



                                       29

<PAGE>

                (l)      The Company shall have executed and delivered the
Reciprocal Easement and Joint Use Agreement between Seller and the Company in
substantially the form of Exhibit H hereto (the "Reciprocal Easement") with
Schedule 2.1 thereto properly completed.

         Section 8.4.    Conditions to Obligations of Purchaser.

                (a)      Representations and Warranties of Seller. The
representations and warranties of Seller contained in Article IV and Section
11.1 of this Agreement shall be true and correct in all respects as of the date
hereof and as of the Closing Date (except to the extent that any representation
or warranty speaks as of a specified date, in which case such representation or
warranty shall be true and correct only as of a specified date), except for (i)
changes permitted or contemplated by this Agreement and (ii) failures of such
representations and warranties (other than the representations and warranties
set forth in the second sentence of Section 4.1(a), the first two sentences of
Section 4.1(b), Section 4.1(c), Section 4.2 and, Section 4.5 hereof) to be true
and correct that would not, individually or in the aggregate, have a Material
Adverse Effect on the Company. Seller shall have duly performed and complied in
all material respects with all covenants and agreements contained herein
required to be performed or complied with by it at or before the Closing.

                (b)      Officers' Certificate. Seller shall have delivered to
Purchaser a certificate, dated the Closing Date and signed by its President and
Chief Financial Officer, certifying, in form reasonably satisfactory to
Purchaser and its counsel that, to such officers' best knowledge and belief,
after due inquiry, the conditions set forth in Section 8.4(a) hereof have been
fulfilled.

                (c)      Required Governmental Consents. All of Seller's
Required Governmental Consents and Purchaser's Required Governmental Consents
shall have been obtained by Final Orders, and such Final Orders shall, among
other matters, approve without being subject to refund the rates contained in
the Special Contract and not otherwise contain any condition that will, or is
reasonably expected to, have a Material Adverse Effect on the Company or
Purchaser. The condition contained in this Section 8.4(c) shall not be satisfied
if any Required Governmental Consent (i) disallows or makes subject to refund
the inclusion of a federal income tax component in the rates of the Company,
(ii) sets a procedural schedule for review of the rates of the Company (but may
expressly retain jurisdiction over such rates), or (iii) disapproves the 10 year
term of the Special Contract or requires that term to be shortened.

                (d)      Required Non-Governmental Approvals. All of Seller's
Required Non-Governmental Approvals, the absence of which would have a Material
Adverse Effect on the Company, and all of Purchaser's Required Non-Governmental
Approvals, the absence of which would have a Material Adverse Effect on
Purchaser, in each case other than consents and approvals that are customarily
obtained after the closing of a transaction of this nature, have been obtained
and are in full force and effect.

                (e)      Actions at Closing. Seller shall have taken the actions
to be taken by Seller at the Closing pursuant to Section 9.1 hereof.

                (f)      Absence of Proceedings. No action, suit or proceeding
shall be pending and no statute, rule or regulation and no injunction, order,
decree or judgment of any court or Governmental Authority of competent
jurisdiction shall be in effect that could reasonably be expected to prohibit,
restrain, enjoin or restrict the consummation of the transactions contemplated
by this Agreement.


                                       30

<PAGE>

                (g)      Material Adverse Effect. No Material Adverse Effect on
the Company or SEMCO Material Adverse Effect shall have occurred or shall be
reasonably expected to occur.

                (h)      Operation and Maintenance and Administrative Services
Agreement. Seller Division shall have duly executed and delivered the Operation
and Maintenance and Administrative Services Agreement.

                (i)      Special Contract. Seller Division shall have duly
executed and delivered the Special Contract.

                (j)      Gas Transmission Agreement. Seller shall have duly
executed and delivered the Gas Transmission Agreement.

                (k)      Bill of Sale and Assignment Agreement. Seller shall
have duly executed and delivered a Bill of Sale and Assignment Agreement in
substantially the form attached hereto as Exhibit D, transferring the Company
Equity Interests (the "Bill of Sale and Assignment Agreement").

                (l)      Directors of the Company. Seller shall deliver duly
executed resignations of the directors of the Company effective as of the
Closing Date.

                (m)      Certificate of Non Foreign Status. Seller shall deliver
to Purchaser a certificate of non foreign status of Seller which meets the
requirements of Treasury Regulation Section 1.445-2.

                (n)      Tower License. Seller shall have granted Purchaser a
non-terminable license substantially in the form of Exhibit G hereto (the "Tower
License") to use the radio tower facilities listed on Section 8.4(n) of the
Seller's Disclosure Schedule.

                (o)      Gas Control Agreement. Seller Division shall have duly
executed and delivered the Gas Control Agreement.

                (p)      Certificates of Insurance. Seller shall have delivered
to Purchaser certificates of insurance showing that Seller has in place
insurance complying with the requirements set forth in Article V of the
Operation and Maintenance and Administrative Services Agreement.

                (q)      Reciprocal Easement and Joint Use Agreement. Seller
Division shall have executed and delivered the Reciprocal Easement with Schedule
2.2 thereto properly completed.


                                       31

<PAGE>

                                   ARTICLE IX

                                     Closing

         Section 9.1.    Closing. The closing of the purchase and sale of the
Company Equity Interests (the "Closing") will take place at the offices of
LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New York, New York
10019-5389 on the later of (a) November 30, 2003 and (b) the first Business Day
that is five calendar days after all of the conditions specified in Article VIII
have been satisfied or waived (other than those conditions that by their nature
are to be satisfied at the Closing, but subject to the satisfaction or waiver of
such conditions), unless another time, date and place is agreed to in writing by
the Parties. The date of the Closing is referred to in this Agreement as the
"Closing Date." The Closing shall be effective for all purposes at 12 o'clock
midnight, Alaska Time, on the Closing Date. At the Closing, the following events
shall occur, each event being deemed to have occurred simultaneously with the
other events:

                (a)      Seller shall deliver to Purchaser (i) the Bill of Sale
and Assignment Agreement; (ii) the certificate to be delivered pursuant to
Section 8.4(b); (iii) the Operation and Maintenance and Administrative Services
Agreement; (iv) the Special Contract; (v) the Gas Transmission Agreement; (vi)
the Gas Control Agreement; (vii) the Tower License; and (viii) the Bill of Sale
and Assignment Agreement; and (ix) the Reciprocal Easement; and

                (b)      Purchaser shall deliver to Seller (i) an amount of cash
equal to the Purchase Price, as adjusted pursuant to Section 3.2(a), by wire
transferring such amount, in lawful money of the United States of America in
immediately available funds, to such account in the United States of America as
Seller shall have designated by written notice to Purchaser no less than three
business days before the Closing Date; (ii) the certificate to be delivered
pursuant to Section 8.3(b); (iii) the Operation and Maintenance and
Administrative Services Agreement, duly executed by the Company; (iv) the
Special Contract, duly executed by the Company; (v) the Gas Transmission
Agreement, duly executed by the Company; (vi) the Gas Control Agreement, duly
executed by the Company, and the related fee payment; (vii) the Tower License,
duly executed by the Company, and the related fee payment; and (viii) the
Reciprocal Easement, duly executed by the Company.

                                   ARTICLE X

                                   Termination

         Section 10.1.   Termination. Subject to Section 10.2 hereof, this
Agreement and the transactions contemplated hereby may be terminated and
abandoned at any time prior to the Closing Date:

                (a)      by mutual consent of Purchaser and Seller; or

                (b)      by Purchaser or Seller at any time after 9 Months after
the effective date of this Agreement (the "Termination Date") if the Closing
shall not have occurred on or prior to such date; provided however, that the
right to terminate this Agreement under this Section 10.1(b) shall not be
available to any Party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Closing to
occur on or before the Termination Date; or

                                       32

<PAGE>


                (c)      by either Seller or Purchaser, if (i) there has been a
breach of any representation, warranty, covenant or agreement on the part of the
Company or Seller (in the case of termination by Purchaser) or Purchaser (in the
case of termination by Seller), which breach (A) will cause the conditions set
forth in Sections 8.2 and 8.4 (in the case of termination by Purchaser) or
Sections 8.2 and 8.3 (in the case of termination by Seller) not to be satisfied,
and (B) shall not have been cured within 20 Business Days following receipt by
the breaching party of written notice of such breach from the other party; or
(ii) any event shall have occurred which makes it impossible for the conditions
set forth in Article VIII hereof to be satisfied, provided that any termination
pursuant to this clause (ii) shall not be effective until 20 Business Days after
notice thereof is delivered by the party seeking to terminate to the other
party, and shall be automatically rescinded if (1) such condition is solely for
the benefit of the party receiving such notice and (2) such party, prior to such
20th Business Day, irrevocably waives satisfaction of such condition based on
such event; or

                (d)      by Purchaser or Seller if (i) any state or federal law,
order, rule or regulation is adopted or issued, that has the effect, as
supported by the written, reasoned opinion of outside counsel for such Party, of
prohibiting the transactions contemplated under this Agreement or causing a
Material Adverse Effect on such Party (or, in the case of the Purchaser, either
a Material Adverse Effect on the Company or a SEMCO Material Adverse Effect), or
if (ii) any court of competent jurisdiction in the United States or any state
shall have issued an order, judgment or decree permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement or causing a Material Adverse Effect on such Party (or, in the case of
the Purchaser, either a Material Adverse Effect on the Company or a SEMCO
Material Adverse Effect) or, in the case of the Purchaser, a SEMCO Material
Adverse Effect, and such order, judgment or decree shall have become final and
nonappealable.

         Section 10.2.   Limitation on Right to Terminate; Effect of
Termination.

                (a)      A Party shall not be allowed to exercise any right of
termination pursuant to Section 10.1 if the event giving rise to the termination
right shall be due to the willful failure of such Party seeking to terminate
this Agreement to perform or observe in any material respect any of the
covenants, or agreements hereof to be performed or observed by such Party.

                (b)      If this Agreement is terminated as permitted under
Section 10.1 hereof, such termination shall be without liability of or to any
Party to this Agreement, or any shareholder, unitholder, director, officer,
employee, agent, servant, consultant or representative of such Party; provided,
however, that if such termination shall result from the willful failure of any
Party to fulfill a condition to the performance of any other Party or to perform
a covenant of this Agreement or from a material breach by any Party to this
Agreement, then such Party shall (subject to the limitations set forth in
Section 12.1(c) and Section 12.1(d)) be fully liable for any and all damages
sustained or incurred by the other Party. If either Party to this Agreement
resorts to legal proceedings to enforce this Agreement, the prevailing Party in
such proceedings shall be entitled to recover all costs incurred by such Party
including reasonable attorney's fees, in addition to any other relief to which
such Party may be entitled.


                                       33


<PAGE>

                                   ARTICLE XI

                                      Taxes

         Section 11 .1.  Seller Tax Representations and Warranties.

                (a)      Seller represents and warrants with respect to the
Company that, except as set forth or disclosed in Section 11.1(a) of Seller's
Disclosure Schedule (i) all Tax Returns in respect of the Company and the
Transmission Business required to be filed have been filed or requests for
extensions have been timely filed, (ii) all such Tax Returns are true and
correct in all material respects, and (iii) all Taxes shown to be due on such
Tax Returns have been timely paid in full. Except as set forth in Section
11.1(a) of the Seller's Disclosure Schedule, all ad valorem taxes that are due
and payable have been paid, and there is not any property that has been omitted
from the assessment rolls of the applicable taxing authorities. Except as set
forth in Section 11.1(a) of Seller's Disclosure Schedule, no notice of
deficiency or assessment has been asserted, proposed or threatened from any
Governmental Authority with respect to liabilities for Taxes of the Company or
relating to the Company Assets that have not been fully paid or finally settled,
and any such deficiency shown in Section 11.1(a) of Seller's Disclosure Schedule
is being contested in good faith through appropriate proceedings. Except as set
in Section 11.1(a) of Seller's Disclosure Schedule, there is not in force any
extension of time with respect to the due date for the filing of any Tax Return
and there are no outstanding agreements or waivers extending the applicable
statutory periods of limitation for Taxes of the Company for any period of time.
Except as set forth in Section 11.1(a) of Seller's Disclosure Schedule, no
audits or other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of the Company, and neither the
Seller nor the Company has any knowledge of any threatened action, audit, or
administrative or court proceeding with respect to any Taxes or Tax Returns of
the Company. Except as set forth in Section 11.1(a) of the Seller's Disclosure
Schedule, no claim has ever been made by a Governmental Authority in a
jurisdiction where the Company does not file Tax Returns that it is or may be
subject to Taxes in that jurisdiction, and the Company has not entered into any
agreement or arrangement with any Governmental Authority that requires the
Company to take any action or refrain from taking any action.

                (b)      Seller and the Company are and will be members of an
"affiliated group" within the meaning of Section 1504 of the Code as of the
Closing Date. Except as set forth in Section 11.1(b) of the Seller's Disclosure
Schedule, the Company has no liability for the Taxes of any Person (other than
the Seller and the Company) under Treasury Regulation Section 1.1502-6 (or any
similar provision of state, local or foreign law), as a transferee or successor,
by contract, or otherwise.

                (c)      Except as set forth in Section 11.1(c) of Seller's
Disclosure Schedule, neither Seller nor the Company is a party to any
allocation, indemnification or sharing agreement, whether written or unwritten,
regarding Taxes with any Person.


                                       34

<PAGE>

                (d)      Seller is not a nonresident alien individual or foreign
corporation within the meaning of Section 897 of the Code and Purchaser is not
required to withhold Tax on the Purchase Price by reason of Section 1445 of the
Code or any other provision.

                (e) Except as set forth in Section 11.1(e) of Seller's
Disclosure Schedule, there are no powers of attorney in effect relating to Taxes
of the Company.

                (f) Except as set forth in Section 11.1(f) of Seller's
Disclosure Schedule, there is no dispute or claim as to the Tax liability of any
other person as to which the Company has an indemnification obligation.

                (g) The Company has not participated in any transaction required
to be reported under Treasury Regulation Section 1.6011-4T or a successor or
predecessor thereto.

         Section 11.2.   Tax Covenants and Indemnification.

                (a)      Transfer Taxes. Seller shall be liable for all state
and local transfer, sales, use, documentary, recording, registration, stamp
transfer or similar Taxes, assessments or fees arising from the LLC Conversion.
Seller and Purchaser shall each be liable for 50% of all state and local
transfer Taxes arising from the transactions contemplated by this Agreement.
Except as provided in the foregoing sentences, Purchaser shall be liable for all
state and local, sales, use, documentary, recording, registration, stamp
transfer or similar Taxes, assessments or fees arising from the transactions
contemplated by this Agreement.

                (b)      Information. Seller and Purchaser will make available
to each other, and to any Governmental Authority, all information, records, or
documents relating to the liability or potential liability for Pre-Closing Taxes
that may be reasonably requested by a Party and will preserve such information,
records or documents until the expiration of any applicable statute of
limitations or extensions thereof, provided Seller and Purchaser shall reserve
the confidentiality of any such information, records or documents.

                (c)      Seller Indemnification. Seller shall be responsible for
and shall indemnify and hold harmless Purchaser, its subsidiaries and the
Company from and against any and all Tax claims, including any reasonable
out-of-pocket costs and expenses ("Tax losses"), resulting from, arising out of
or relating to: (i) any and all Taxes imposed on or incurred by Purchaser or the
Company as a result of a breach of the representations and warranties made in
Section 11.1 of this Article; (ii) any and all Pre-Closing Taxes imposed on,
incurred by or attributed to the Company, including Taxes arising from Section
2.2, except to the extent any such Taxes are taken into account in determining
the adjustment to the Purchase Price pursuant to Section 3.2 and (iii) any
liability imposed on the Company or any of its Subsidiaries as a result of its
membership in an affiliated, consolidated, combined or unitary group for Tax
purposes, other than a group the common parent of which was the Company
(pursuant to Treas. Reg. ss. 1.1502-6 or any analogous state, local or foreign
law or regulation) for any taxable period or portion thereof ending on or prior
to the Closing Date.


                                       35

<PAGE>

                (d)      Purchaser Indemnification. Purchaser shall be
responsible for and shall indemnify and hold harmless Seller from and against
any and all Tax claims or Tax losses resulting from, arising out of or relating
to any and all Post-Closing Taxes imposed on or incurred by the Company.

                (e)      Procedures for Indemnification. The procedures for
indemnification pursuant to this Article XI shall be conducted in a manner
consistent with Section 12.1 hereof.

                (f)      Proration of Tax Items. The Parties agree that for
purposes of allocating Tax items of the Company between Seller and Purchaser for
the Tax year that includes the Closing Date, such Tax items for such Tax year
shall be apportioned between Seller and Purchaser based upon the actual
operations of the Company during the portion of such period ending on the
Closing Date and the portion of such period beginning on the day following the
Closing Date, and each portion of such period shall be deemed to be a taxable
period (whether or not it is in fact a taxable period); provided, that ad
valorem Taxes shall be prorated on a daily basis.

                (g)      Filing Responsibility. Purchaser and the Company shall
be responsible for filing all Tax Returns and paying all Taxes due with respect
to periods ending after the Closing Date. To the extent the law permits or
requires a short period return for the period or portion thereof ending on or
before the Closing Date, Seller shall be responsible for filing such returns and
paying all Taxes due with respect to such period. Purchaser will take such steps
as are reasonably requested by Seller so that Seller will have the authority
necessary for Seller to be able to execute and timely file the Tax Returns
required to be filed by Seller.

                (h)      Tax Refunds and Tax Benefits. Any Tax refunds that are
received by Purchaser or the Company, and any amounts credited against Tax to
which Purchaser or the Company become entitled, that relate to Tax periods or
portions thereof ending on or before the Closing Date shall be for the account
of Seller, and Purchaser shall pay over to Seller any such refund or the amount
of any such credit within fifteen (15) days after receipt or entitlement
thereto. In addition, to the extent that a claim for refund or a proceeding
results in a payment or credit against any Tax by a Governmental Authority to
the Purchaser or the Company of any amount accrued as of the Closing Date,
Purchaser shall pay such amount to Seller within fifteen (15) days after receipt
or entitlement thereto.

                (i)      Control of Tax Audits. Seller shall have the right, at
its own expense, to control any audit or examination by any taxing authority
("Tax Audit"), initiate any claim for refund, contest, resolve and defend
against any assessment, notice of deficiency, or other adjustment or proposed
adjustment relating to any and all Taxes for any taxable period ending on or
before the Closing Date and relating to the Company. With respect to the items
described in the preceding sentence, Seller shall consult with Purchaser with
respect to the resolution of any such issue that would adversely affect
Purchaser, and with respect to Taxes other than income Taxes will not settle any
such issue, or file any amended return relating to such issue, without the
consent of Purchaser, which consent shall not be unreasonably withheld. Seller
will not enter into any binding agreement with any taxing authority with respect
to Taxes (other than income Taxes) for Tax periods ending or beginning after the
Closing Date. Purchaser shall have the right, at its own expense, to control any
other Tax Audit, initiate any other claim for refund, and contest, resolve and
defend against any other assessment, notice of deficiency, or other adjustment
or proposed adjustment relating to any Taxes for any taxable period beginning

                                       36

<PAGE>

before the Closing Date and ending after the Closing Date, provided, that
Purchaser shall consult with Seller with respect to the resolution of any issue
that would adversely affect Seller, and, with respect to Taxes, other than
income Taxes, will not settle any such issue, or file any amended return
relating to any such issue, without the consent of Seller, which consent shall
not unreasonably be withheld. Where consent to a settlement is withheld by the
other Party pursuant to this Section, such other Party may continue or initiate
any further proceedings at its own expense, provided that the liability of the
first Party, after giving effect to this Agreement, shall not exceed the
liability that would have resulted from the settlement or amended return.

         (j)    Cooperation on Tax Matters.

                (i)      Purchaser, the Company and Seller shall use reasonable
         efforts to cooperate fully, as and to the extent reasonably requested
         by the other Party, in connection with the filing of Tax Returns
         pursuant to this Agreement and any audit, litigation or other
         proceeding with respect to Taxes. Such cooperation shall include the
         retention and (upon the other Party's request) the preservation of
         records and information which are reasonably relevant to any such
         audit, litigation or other proceeding and making employees available on
         a mutually convenient basis to provide additional information and
         explanation of any material provided hereunder. The Seller agrees (A)
         to retain all books and records in its possession with respect to Tax
         matters pertinent to the Company relating to any taxable period
         beginning before the Closing Date until the expiration of the statute
         of limitations (and, to the extent notified by Purchaser or Seller, any
         extensions thereof) of the respective taxable periods, and to abide by
         all record retention requirements or agreements entered into with any
         taxing authority, and (B) to give the other Party reasonable written
         notice prior to transferring, destroying or discarding any such books
         and records and, if the other Party so requests, Seller shall allow
         Purchaser to take possession of such books and records.

                (ii)     Purchaser and Seller further agree,  upon request,  to
         provide the other Party with all information that either Party may be
         required to report pursuant to Section 6043 of the Code and all
         Treasury Regulations promulgated thereunder with respect to the
         transactions contemplated by this Agreement.

         (k)    Survival of Obligations. The obligations of the Parties set
forth in this Article XI shall be unconditional and absolute and shall remain in
effect until 30 days after the expiration of the applicable statute(s) of
limitations.

                                  ARTICLE XII

                                 Indemnification

         Section 12.1.   Indemnification.

                (a)      Subject to Section 12.1(c), and except for those
matters (i) set forth in Article XI which shall be governed by the terms of
Article XI and (ii) set forth in Section 13.3 which shall be governed by the
terms of Section 13.3, Purchaser shall indemnify, defend and hold harmless the
Seller Indemnitees from and against any and all claims, liabilities, losses,

                                       37

<PAGE>

causes of actions, costs and expenses (including, without limitation, involving
theories of negligence or strict liability and including court costs and
attorneys' fees) ("Losses") asserted against, resulting from, imposed upon or
incurred by any of the Seller Indemnitees as a result of, or arising out of, the
breach of any of the representations and warranties (without giving effect to
any qualifications as to materiality contained therein), covenants or agreements
of Purchaser contained in this Agreement, including any failure of the
certificate delivered pursuant to Section 8.3(b) to be true and correct.

                (b)      (i) Subject to Section 12.1(d), and except for those
         matters (A) set forth in Article XI which shall be governed by the
         terms of Article XI and (B) set forth in Section 13.3, Seller shall
         indemnify, defend and hold harmless the Purchaser Indemnitees from and
         against all Losses asserted against, resulting from, imposed upon or
         incurred by any of the Purchaser Indemnitees as a result of, or arising
         out of the breach of any of the representations and warranties (without
         giving effect to any qualifications as to materiality contained therein
         other than the "Material Adverse Effect" qualification contained in
         Section 4.9(h)), covenants or agreements of Seller contained in this
         Agreement, including any failure of the certificate delivered pursuant
         to Section 8.4(b) to be true and correct.

                         (ii) Seller shall indemnify, defend and hold harmless
         the Purchaser Indemnitees from and against all Losses asserted against,
         resulting from, imposed upon or incurred by any of the Purchaser
         Indemnitees as a result of, or arising out of assets or liabilities,
         including the Excluded Assets and Excluded Obligations, which are not
         Company Assets or which are not being transferred to Purchaser
         indirectly through the purchase of the Company Equity Interests.
         Seller's indemnity obligations set forth in this Section 12.1(b)(ii)
         shall not be subject to any thresholds, de minimus amounts, deductibles
         or caps pursuant to Section 12.1(d).

                (c)      Notwithstanding anything to the contrary in this
Agreement, the liability of Purchaser under this Agreement and any documents
delivered in connection herewith or contemplated hereby (other than the
Operating Documents) shall be limited as follows:

                         (i)      In no event shall any amounts be recovered
         from Purchaser under Section 12.1(a) or otherwise for any matter for
         which a Claim Notice is not delivered to Purchaser, in the case of
         indemnity for breach of a representation, warranty, covenant or
         agreement, prior to the close of business on the date of termination of
         such representation, warranty, covenant or agreement pursuant to
         Section 12.1(c)(ii).

                         (ii)     Except as otherwise specified, the
         representations, warranties, covenants and agreements of Purchaser set
         forth in this Agreement shall survive the Closing for a period of two
         years and shall terminate at 5:00 p.m., local time in Alaska, on the
         second anniversary of the Closing Date; provided, however, that any
         such representation, warranty, covenant or agreement that is the
         subject of a proper Claim Notice delivered in good faith shall survive
         with respect only to the specific matter described in such Claim Notice
         until the earlier to occur of (A) the date on which a final
         nonappealable resolution of the matter described in such Claim Notice
         has been reached or (B) the date on which the matter described in such
         Claim Notice has otherwise reached final resolution.


                                       38

<PAGE>

                         (iii)    Notwithstanding anything to the contrary in
         this Agreement other than Section 12.1(b)(ii), Article XI and Section
         13.3, in no event shall Purchaser indemnify the Seller Indemnitees, or
         be otherwise liable in any way whatsoever to the Seller Indemnitees,
         for any Losses until the Seller Indemnitees have suffered Losses in the
         aggregate in excess of a threshold in an amount equal to $500,000,
         after which point Purchaser will be obligated to indemnify the Seller
         Indemnitees from and against all Losses; provided that the Seller
         Indemnitees shall not submit to Purchaser a claim for any Loss, the
         value of which is below $25,000.

                         (iv)     Notwithstanding anything to the contrary
         herein, in no event shall Purchaser indemnify the Seller Indemnitees,
         or be otherwise liable in any way whatsoever to the Seller Indemnitees,
         for any Losses in excess of an amount equal to $10,000,000.

                (d)      Notwithstanding anything to the contrary in this
Agreement other than Section 12.1(b)(ii) and Article XI, the liability of Seller
under this Agreement and any documents delivered in connection herewith or
contemplated hereby (other than the Operating Documents) shall be limited as
follows:

                         (i)      In no event shall any amounts be recovered
         from Seller under Section 12.1(b) or otherwise for any matter for which
         a Claim Notice is not delivered to Seller in the case of indemnity for
         breach of a representation, warranty, covenant or agreement, prior to
         the close of business on the date of termination of such
         representation, warranty covenant or agreement pursuant to Section
         12.1(d)(ii).

                         (ii)     The representations, warranties and covenants
         of Seller set forth in this Agreement shall survive the Closing for a
         period of two years and shall terminate at 5:00 p.m., local time in
         Alaska, on the second anniversary of the Closing Date; provided,
         however, that any such representation, warranty, covenant or agreement
         that is the subject of a proper Claim Notice delivered in good faith
         shall survive with respect only to the specific matter described in
         such Claim Notice until the earlier to occur of (A) the date on which a
         final nonappealable resolution of the matter described in such Claim
         Notice has been reached or (B) the date on which the matter described
         in such Claim Notice has otherwise reached final resolution.

                         (iii)    Notwithstanding anything to the contrary in
         this Agreement other than Section 12.1(b)(ii), Article XI and Section
         13.3, in no event shall Seller indemnify the Purchaser Indemnitees, or
         be otherwise liable in any way whatsoever to the Purchaser Indemnitees,
         for any Losses until the Purchaser Indemnitees have suffered Losses in
         the aggregate in excess of a threshold in an amount equal to $500,000,
         after which point Seller will be obligated to indemnify the Purchaser
         Indemnitees from and against all Losses; provided that the Purchaser
         Indemnitees shall not submit to Seller a claim for any Loss, the value
         of which is below $25,000.


                                       39


<PAGE>

                         (iv)     Notwithstanding anything to the contrary
         herein other than Section 12.1(b)(ii), Article XI and Section 13.3, in
         no event shall Seller indemnify the Purchaser Indemnitees, or be
         otherwise liable in any way whatsoever to the Purchaser Indemnitees,
         for any Losses in excess of an amount equal to the Purchase Price
         (before giving effect to any adjustments provided for pursuant to this
         Agreement).

                         (v)      Seller shall have no liability for any claim
         to the extent that such claim is covered by insurance maintained by or
         for the benefit of Seller (including any such insurance coverage
         applicable to the Transmission Business, the benefit of which the
         Company will realize) and Purchaser or the Company actually receive the
         proceeds of such insurance.

                         (vi)     Seller shall have no liability in respect of
         its representation or warranty contained in Section 4.9(h) in respect
         of any event, circumstance or condition known to Purchaser or disclosed
         by Seller to Purchaser in writing prior to the Closing.

                (e)      NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS
AGREEMENT, IN NO EVENT SHALL A PARTY BE LIABLE FOR ANY EXEMPLARY, PUNITIVE,
SPECIAL, INDIRECT, CONSEQUENTIAL, REMOTE OR SPECULATIVE DAMAGES; provided,
however, that if an Indemnified Party is held liable to a third party for any of
such damages and Purchaser or Seller, as the case may be, is obligated to
indemnify such Indemnified Party for the matter that gave rise to such damages,
then Purchaser or Seller, as the case may be, shall be liable for, and obligated
to reimburse such Indemnified Party for such damages.

                (f)      All claims for indemnification under Sections 12.1(a)
or 12.1(b) shall be asserted and resolved pursuant to this Section 12.1(f). Any
Person claiming indemnification hereunder is hereinafter referred to as the
"Indemnified Party" and any Person against whom such claims are asserted
hereunder is hereinafter referred to as the "Indemnifying Party." In the event
that any Losses are asserted against or sought to be collected from an
Indemnified Party by a third party, said Indemnified Party shall with reasonable
promptness provide to the Indemnifying Party a Claim Notice. The Indemnifying
Party shall not be obligated to indemnify the Indemnified Party with respect to
any such Losses if the Indemnified Party fails to notify the Indemnifying Party
thereof in accordance with the provisions of this Agreement in reasonably
sufficient time so that the Indemnifying Party's ability to defend against the
Losses is not prejudiced. The Indemnifying Party shall have 30 calendar days
from the personal delivery or receipt of the Claim Notice (the "Notice Period")
to notify the Indemnified Party (i) whether or not it disputes the liability of
the Indemnifying Party to the Indemnified Party hereunder with respect to such
Losses and/or (ii) whether or not it desires, at the sole cost and expense of
the Indemnifying Party, to defend the Indemnified Party against such Losses;
provided, however, that any Indemnified Party is hereby authorized prior to and
during the Notice Period to file any motion, answer or other pleading that it
shall deem necessary or appropriate to protect its interests or those of the
Indemnifying Party (and of which it shall have given notice and opportunity to
comment to the Indemnifying Party) and not prejudicial to the Indemnifying

                                       40

<PAGE>

Party. In the event that the Indemnifying Party notifies the Indemnified Party
within the Notice Period that it desires to defend the Indemnified Party against
such Losses, the Indemnifying Party shall have the right to defend all
appropriate proceedings, and with counsel of its own choosing, which proceedings
shall be promptly settled or prosecuted by them to a final conclusion. If the
Indemnified Party desires to participate in, but not control, any such defense
or settlement it may do so at its sole cost and expense. If requested by the
Indemnifying Party, the Indemnified Party agrees to use reasonable efforts to
cooperate with the Indemnifying Party and its counsel in contesting any Losses
that the Indemnifying Party elects to contest or, if appropriate and related to
the claim in question, in making any counterclaim against the Person asserting
the third party Losses, or any cross-complaint against any Person. No claim may
be settled or otherwise compromised without the prior written consent of the
Indemnifying Party, and no claim may be settled or otherwise compromised without
the prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld, conditioned or delayed) unless the sole relief provided
is monetary damages that are paid in full by the Indemnifying Party.

                (g)      The rights, remedies and obligations of the Purchaser
Indemnitees and the Seller Indemnitees set forth in this Section 12.1 and
Article XI will be the exclusive rights, remedies and obligations of such
Persons after the Closing with respect to this Agreement, the events giving rise
to this Agreement and the transactions provided for herein or contemplated
hereby or thereby.

                (h)      WITHOUT LIMITING OR ENLARGING THE SCOPE OF THE
INDEMNIFICATION OBLIGATIONS SET FORTH IN THIS AGREEMENT, AN INDEMNIFIED PARTY
SHALL BE ENTITLED TO INDEMNIFICATION HEREUNDER IN ACCORDANCE WITH THE TERMS
HEREOF, REGARDLESS OF WHETHER THE LOSS OR CLAIM GIVING RISE TO SUCH
INDEMNIFICATION OBLIGATION IS THE RESULT OF THE SOLE, CONCURRENT OR COMPARATIVE
NEGLIGENCE, STRICT LIABILITY, VIOLATION OF ANY LAW OR OTHER LEGAL FAULT OF OR BY
SUCH INDEMNIFIED PARTY. THE PARTIES AGREE THAT THIS PARAGRAPH CONSTITUTES A
CONSPICUOUS LEGEND.

         Section 12.2.   Disclaimer Regarding Transmission Business. Except as
otherwise expressly provided in this Agreement, Purchaser ACKNOWLEDGES THAT
SELLER HAS NOT MADE, AND SELLER HEREBY EXPRESSLY DISCLAIMS AND NEGATES, ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, RELATING TO THE CONDITION OF ANY
REAL PROPERTY, EQUIPMENT, INVENTORY, MACHINERY, FIXTURES AND PERSONAL PROPERTY
CONSTITUTING PART OF THE COMPANY ASSETS INCLUDING, WITHOUT LIMITATION, (A) ANY
IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY, (B) ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (C) ANY IMPLIED OR EXPRESS
WARRANTY OF CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, (D) ANY RIGHTS OF
PURCHASER UNDER APPROPRIATE STATUTES TO CLAIM DIMINUTION OF CONSIDERATION OR
RETURN OF THE PURCHASE PRICE, (E) ANY IMPLIED OR EXPRESS WARRANTY OF FREEDOM
FROM VICES OR DEFECTS, WHETHER KNOWN OR UNKNOWN, (F) ANY IMPLIED OR EXPRESS
WARRANTY OF FREEDOM FROM PATENT OR TRADEMARK INFRINGEMENT, (G) ANY AND ALL
IMPLIED WARRANTIES EXISTING UNDER APPLICABLE LAW NOW OR HEREAFTER IN EFFECT, AND
(H) ANY IMPLIED OR EXPRESS WARRANTY REGARDING ENVIRONMENTAL LAWS, THE RELEASE OF


                                       41

<PAGE>

MATERIALS INTO THE ENVIRONMENT OR PROTECTION OF THE ENVIRONMENT OR HEALTH, IT
BEING THE EXPRESS INTENTION OF PURCHASER AND SELLER THAT (EXCEPT TO THE EXTENT
EXPRESSLY PROVIDED IN ARTICLES IV AND XI) THE COMPANY ASSETS SHALL BE INDIRECTLY
CONVEYED TO PURCHASER "AS IS," "WHERE IS" AND IN THEIR PRESENT CONDITION AND
STATE OF REPAIR AND PURCHASER REPRESENTS TO SELLER THAT PURCHASER HAS MADE OR
CAUSED TO BE MADE SUCH INSPECTIONS WITH RESPECT TO THE COMPANY ASSETS AS
PURCHASER DEEMS APPROPRIATE AND PURCHASER WILL ACCEPT THE COMPANY ASSETS "AS
IS," "WHERE IS" AND IN THEIR PRESENT CONDITION AND STATE OF REPAIR.

                                  ARTICLE XIII

                                  Miscellaneous

         Section 13.1.   Modification. This Agreement may be modified, amended
or supplemented in any manner and at any time only by a written instrument
executed by Purchaser and Seller.

         Section 13.2.   Entire Agreement. This Agreement supersedes any and all
other agreements, oral or written, among the Parties in respect of the subject
matter of this Agreement.

         Section 13.3.   Expenses. Whether or not the transactions contemplated
herein shall be consummated, each Party shall (except as otherwise specifically
provided herein) pay its own expenses incident to the preparation and
performance of this Agreement, including broker's and finder's fees and
commissions; and each Party shall indemnify and hold harmless the other Party
with respect to broker's and finder's fees and commissions incurred by the
indemnifying party in connection with the transactions contemplated by this
Agreement.

         Section 13.4.   Extension and Waiver. The Parties may, to the extent
legally allowed (a) extend the time for the performance of any of the
obligations or other acts of the other Parties; (b) waive any inaccuracies by
the other Party in the representations and warranties contained herein or in any
document delivered pursuant hereto; and (c) waive compliance by the other Party
with any of the agreements or conditions contained herein. Any agreement on the
part of a Party to any such extension or waiver shall be valid only if set forth
in a written instrument signed by the Party or Parties to be bound thereby, but
such extension, waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure. The failure of any
Party to assert any of its rights hereunder shall not constitute a waiver of
such rights.

         Section 13.5.   Further Actions. From time to time after the Closing
Date, each Party shall execute and deliver such other certificates, agreements,
conveyances, certificates of title, and other documents and take such other
actions as may reasonably be requested by the other Parties in order to
consummate or implement the transactions contemplated by this Agreement.

         Section 13.6.   Notices. Any and all notices or other communications
required or permitted under this Agreement shall be given in writing and
delivered in person or sent by United States certified or registered mail,

                                       42

<PAGE>

postage prepaid, return receipt requested, or by overnight express mail, or by
telex, facsimile or telecopy to the address of such Party set forth below. Any
such notice shall be effective upon receipt or three days after placed in the
mail, whichever is earlier.

If to Purchaser:

Atlas Pipeline Partners, L.P.
311 Rouser Road
Moon Township, PA  15108
Attention: President
Telecopy Number: (215) 546-4785

with copies to:

APC Acquisition, LLC
311 Rouser Road
Moon Township, PA  15108
Telecopy Number:  (215) 546-4785

and

Vinson & Elkins L.L.P.
2300 First City Tower
1001 Fannin
Houston, TX  77002-6760
Attention: Douglas Bland
Telecopy Number: (713) 615-5649


If to Seller:

SEMCO Energy, Inc.
405 Water Street
Port Huron, MI  48060
Attention: Gene Dubay
Telecopy Number: (810) 989-4099

with copies to:

SEMCO Energy, Inc.
28470 13 Mile Road
Farmington Hills, MI 48334
Attention: Mark Prendeville
Telecopy Number: (248) 702-6304

and


                                       43

<PAGE>

LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, NY 10019-5389
Attention: Thomas J. Moore
Telecopy Number: (212) 424-8000

Any Party may, by notice so delivered, change its address for notice purposes
hereunder.

         Section 13.7.   Assignment. This Agreement and all of the provisions
hereof shall be binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned, by
operation of law or otherwise, by any Party without the prior written consent of
the other Party; provided, however, (i) Purchaser may assign its right to
purchase the Company Equity Interests to any Person in which it owns an equity
interest and with respect to which it has the right to appoint 50% or more of
the members of the board of directors, management committee or equivalent
governing body, but no such assignment shall affect Purchaser's obligations
hereunder, and (ii) in the event of any such assignment by a Party by operation
of law without the consent of the other Party as required above, such other
Party may consent to such assignment after it has occurred and, in such event,
this Agreement and all the provisions hereof shall be binding upon the Person
receiving such assignment by operation of law.

         Section 13.8.   No Third Party Beneficiaries. Nothing in this Agreement
shall provide any benefit to any third party or entitle any third party to any
claim, cause of action, remedy or right of any kind, it being the intent of the
Parties that this Agreement shall not be construed as a third party beneficiary
contract; provided, however, that the indemnification provisions in Section 12.1
shall inure to the benefit of the Purchaser Indemnitees and the Seller
Indemnitees as provided therein.

         Section 13.9.   Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any adverse
manner to either Party. Upon such determination that any term or other
provisions is invalid, illegal or incapable of being enforced, the Parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the Parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.

         Section 13.10.  Counterparts. This Agreement may be executed in
multiple counterparts, all of which shall constitute one and the same
instrument.

         Section 13.11.  Applicable Law; Alternative Dispute Resolution.

                (a)      This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York without giving effect
to any choice or conflict of law provision or rule (whether of the State of New
York or any other jurisdiction) that would cause the application of the laws of
any jurisdiction other than the State of New York.



                                       44

<PAGE>

                (b)      Any dispute arising under this Agreement or otherwise
in connection with or relating to the transactions contemplated hereby shall be
resolved pursuant to this Section 13.11(b):

                         (i)      Any Party has the right to request the other
         to meet to discuss a dispute. The Party requesting the meeting will
         give at least 10 Business Days notice in writing of the subject it
         wishes to discuss, provide a written statement of the dispute, and
         designate an officer of the Party with complete power to resolve the
         dispute to attend the meeting. Within five Business Days after receipt
         to such request, the Party receiving the request will provide a
         responsive written statement and will designate an officer of the Party
         who will attend the meeting with complete power to resolve the dispute.

                         (ii)     If the meeting fails to resolve the dispute by
         a signed agreement among the officers, either Party may submit the
         dispute for binding arbitration administered by the American
         Arbitration Association ("AAA") under its Commercial Arbitration Rules
         before a single arbitrator, and judgment on the award rendered by the
         arbitrator may be entered in any court having jurisdiction thereof.

                         (iii)    The Parties agree to make discovery and
         disclosure of all matters relevant to the dispute to the extent and in
         the manner provided by the Federal Rules of Civil Procedure. The
         arbitrator will rule on all requests for discovery and disclosure and
         discovery shall be completed within 90 days of the date of the first
         notice pursuant to Section 13.11(b)(i). The arbitrator may consider any
         matter relevant to the subject to the dispute and shall follow the
         statutes and decisions of the substantive law of New York relevant to
         the subject. The arbitrator shall not have the authority or power to
         alter, amend or modify any of the terms and conditions of this
         Agreement. The arbitrator shall issue a final ruling within 180 days of
         the date of the first notice pursuant to Section 13.11(b)(i).

                         (iv)     The ruling of the arbitrator shall be in
         writing and signed and shall be final and binding upon the Parties. The
         fees and expenses of counsel, witnesses and employees of the Parties
         and all other costs and expenses incurred exclusively for the benefit
         of the Party incurring the same shall be borne by the Party incurring
         such fees and expenses. All other fees and expenses including, without
         limitation, compensation for the judge, shall be divided equally
         between the Parties. All meetings and arbitrations held pursuant to
         this Section 13.11 shall take place in the Borough of Manhattan, New
         York, New York.

         Section 13.12.  Publicity. From the date hereof until the Closing Date,
all press releases or other public communications of any nature whatsoever
relating to the transactions contemplated by this Agreement and the Operative
Documents, and the method of the release for publication thereof, shall be
subject to the prior mutual approval of Seller and Purchaser which approval
shall not be unreasonably withheld by any Party; provided, however, that,
nothing herein shall prevent any party from publishing such press releases or
other public communications as such Party may consider necessary in order to
satisfy such Party's legal or contractual obligations after such consultation
with the other Parties hereto as is reasonable under the circumstances.


                                       45

<PAGE>

         IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the date first above written.

                        SELLER

                        SEMCO ENERGY, INC.


                        By:  ____________________________________
                        Name:  Marcus Jackson
                        Title: Chairman, President and Chief Executive Officer


                        PURCHASER

                        ATLAS PIPELINE PARTNERS, L.P.

                        By:  ATLAS PIPELINE PARTNERS GP, LLC


                             By:   __________________________
                             Name: Michael L. Staines
                             Title:President



                                       46

<PAGE>
                                                                       EXHIBIT A


                          OPERATION AND MAINTENANCE AND
                        ADMINISTRATIVE SERVICES AGREEMENT

                                 by and between

                          ALASKA PIPELINE COMPANY, LLC

                                       and

                           ENSTAR NATURAL GAS COMPANY,
                        A DIVISION OF SEMCO ENERGY, INC.



                           Dated as of _________, 2004




<PAGE>

                                TABLE OF CONTENTS


                                                                                                          
ARTICLE I             Definitions.................................................................................1
      Section 1.1          Definitions............................................................................1

ARTICLE II            Services to Be Provided.....................................................................5
      Section 2.1          Operation and Maintenance Services.....................................................5
      Section 2.2          Capital Improvements Services..........................................................6
      Section 2.3          Facilities Available to Operator.......................................................6

ARTICLE III           Operator's Covenants........................................................................6
      Section 3.1          Operator's Ability to Provide Services.................................................6
      Section 3.2          Standards for the Provision of Services................................................6
      Section 3.3          No Breach..............................................................................7
      Section 3.4          Consents...............................................................................7

ARTICLE IV            Capital Improvements........................................................................7
      Section 4.1          Capital Improvements Budget............................................................7
      Section 4.2          Emergency Capital Improvements.........................................................8
      Section 4.3          Making Capital Improvements............................................................8
      Section 4.4          Scope of Capital Improvements Services.................................................8
      Section 4.5          Status Reporting, Adjustments to Budgets...............................................9
      Section 4.6          Rights in Data and Work................................................................9
      Section 4.7          Susitna River Crossing.................................................................9

ARTICLE V             Service Term, Suspension and Early Termination..............................................9
      Section 5.1          Service Term; Extension of Service Term................................................9
      Section 5.2          Operator's and Owner's Right to Suspend Performance or to Terminate the Agreement.....10
      Section 5.3          Transfer of Parts, Supplies and Consumables...........................................10
      Section 5.4          Cooperation in Connection with Expiration or Termination..............................10

ARTICLE VI            Compensation...............................................................................11
      Section 6.1          Compensation for Operation and Maintenance Services...................................11
      Section 6.2          Adjustment of Monthly O&M Payment on Change of Law....................................12
      Section 6.3          Reimbursement for Capital Improvements Services.......................................12

ARTICLE VII           Billing and Payment of Costs Services......................................................12
      Section 7.1          Invoices for Services.................................................................12
      Section 7.2          Resolution of Disputes of Invoices....................................................12
      Section 7.3          Owner's Audit Rights..................................................................13

ARTICLE VIII          Dispute Resolution.........................................................................13
      Section 8.1          General...............................................................................13

ARTICLE IX            Administration of Agreement................................................................14
      Section 9.1          Contract Administration Officers......................................................14
      Section 9.2          Replacement of Contract Administration Officers.......................................14

<PAGE>


                                                                                                          
ARTICLE X             Confidentiality of Information.............................................................15
      Section 10.1         General...............................................................................15
      Section 10.2         Operator's Obligations................................................................15
      Section 10.3         Owner's Obligations...................................................................15
      Section 10.4         Compulsory Disclosure.................................................................15
      Section 10.5         Injunction............................................................................16

ARTICLE XI            Relationship BETWEEN the Parties...........................................................16
      Section 11.1         No Joint Venture......................................................................16
      Section 11.2         Certain Labor Matters.................................................................16

ARTICLE XII           Regulatory Matters.........................................................................17
      Section 12.1         Compliance with Regulatory Requirements...............................................17

ARTICLE XIII          Indemnification; Release; Limit on Liability...............................................17
      Section 13.1         Indemnification by Operator...........................................................17
      Section 13.2         Indemnification by Owner..............................................................17
      Section 13.3         Procedures............................................................................18
      Section 13.4         Indemnification Payments..............................................................18
      Section 13.5         Survival..............................................................................18
      Section 13.6         Release and Limit on Liability........................................................18

ARTICLE XIV           Books and records..........................................................................19
      Section 14.1         Maintenance of Books and Records......................................................19
      Section 14.2         Ownership of Books and Records........................................................19

ARTICLE XV            Required Insurance.........................................................................20
      Section 15.1         Required Insurance....................................................................20
      Section 15.2         Owner's Property Insurance............................................................21
      Section 15.3         Provision of Owner's Insurance By Operator............................................21

ARTICLE XVI           Miscellaneous Provisions...................................................................21
      Section 16.1         Agency of Operator....................................................................21
      Section 16.2         Force Majeure.........................................................................22
      Section 16.3         Notices...............................................................................22
      Section 16.4         Successors and Assigns................................................................23
      Section 16.5         Survival..............................................................................23
      Section 16.6         Signatures, Counterparts..............................................................23
      Section 16.7         Amendments............................................................................23
      Section 16.8         Governing Law.........................................................................23
      Section 16.9         Entire Agreement......................................................................24
      Section 16.10        Negotiated Agreement..................................................................24
      Section 16.11        Waiver................................................................................24
      Section 16.12        Severability..........................................................................24
      Section 16.13        No Third Party Beneficiaries..........................................................24

                                       ii


<PAGE>


Exhibits and Schedules
----------------------

Exhibit A         Description of Pipeline System
Exhibit B         Categories of O&M Services Costs and Expenses

Schedule 4.1      2003 and 2004 Capital Improvement Budget [2003 Capital
                  Improvement Budget attached, 2004 Capital Improvement Budget
                  to be attached at Closing]


                                      iii

<PAGE>
         OPERATION AND MAINTENANCE AND ADMINISTRATIVE SERVICES AGREEMENT


         This OPERATION AND MAINTENANCE AND ADMINISTRATIVE SERVICES AGREEMENT
(this "Agreement") is entered into as of ____________, 2004, by and between
Alaska Pipeline Company, LLC, a Delaware limited liability company ("Owner"),
and the ENSTAR Natural Gas Company, a Division of SEMCO Energy, Inc., a Michigan
corporation ("Operator").

                                    Recitals

         Owner owns the Pipeline System and provides natural gas transportation
and related services to Operator and may in the future provide natural gas
transmission and related services to other customers (the "Transmission ").

         Owner desires to retain Operator to provide certain services to Owner
in respect of the operation and maintenance of the Pipeline System and in
respect of the administration of the Transmission Business, and Operator is
willing to do so on the terms and subject to the conditions of this Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

                                   ARTICLE I

                                   Definitions

         Section 1.1. Definitions. The following capitalized terms when used
herein shall have the following meanings:

         "AAA" is defined in Section 8.1(b).

         "Accepted Gas Pipeline Practices" shall mean those practices, methods
and acts that (i) are generally engaged in by a significant portion of the
natural gas pipeline industry during the term of this Agreement with respect to
assets and facilities having similar characteristics to the Facilities and
reasonably accounting for local conditions and (ii) which, in the exercise of
reasonable judgment in light of the facts known or that reasonably should have
been known at the time a decision is made, would be expected to accomplish a
desired result at a reasonable cost consistent with good business practices,
reliability, safety, environmental protection and expedition. Accepted Gas
Pipeline Practices are not intended to be limited to the optimum practice,
method or act to the exclusion of others, but rather to those practices, methods
and acts generally engaged in by a significant portion of the natural gas
pipeline industry in the relevant geographic region during the term of this
Agreement and include taking reasonable steps to provide for:


<PAGE>

                  (a) adequate materials, resources and supplies being
available to meet the needs of the Pipeline System under reasonably anticipated
conditions;

                  (b) sufficient operating personnel being available,
adequately experienced and trained to operate the Pipeline System properly and
efficiently, and such maintenance and repairs being performed by knowledgeable,
trained and experienced personnel utilizing proper equipment, tools and
procedures;

                  (c) appropriate monitoring and testing being performed to
determine that equipment is functioning as designed and can reasonably be
expected to function properly under reasonably anticipated conditions; and

                  (d) equipment being operated in a manner safe to workers, the
general public, the environment, and the Facilities.

         "Annual Capital Improvements Budget" is defined in Section 4.1.

         "Business Day" shall mean any day except Saturday, Sunday and any other
day on which banking institutions located in the City of New York, New York or
the City of Anchorage, Alaska, are required or authorized to close.

         "Capital Improvements" shall mean replacements of or additions to the
Facilities that are of a nature that the cost thereof is appropriately
capitalized under applicable regulatory accounting rules.

         "Capital Improvements Services" is defined in Section 2.2.

         "Company" is defined in Section 10.1.

         "Confidential Information" is defined in Section 10.1.

         "Contract Administration Officers" is defined in Section 9.1.

         "CPI Inflator" shall mean the quotient obtained by dividing the
Inflation Index for the calendar year immediately preceding the year for which
the Monthly O&M Payment is to be determined by the Inflation Index for calendar
year 2003.

         "Direct Costs" shall mean the costs or expenses actually incurred by
Operator directly attributable to the provision of Services pursuant to this
Agreement, including, but not limited to: (i) the salary and benefits for
personnel performing Services (calculated using Operator's standard loading
methodology and in compliance with applicable Laws and Governmental Approvals),
(ii) the cost of rental of offices and related facilities occupied and used by
Operator in the performance of Services, (iii) the cost of supplies, materials
and other goods purchased and consumed by Operator in the performance of
Services, (iv) the cost to Operator of any outside vendor services provided to
it in order for Operator to perform Services, and (v) insurance and Tax costs;
provided, however, that "Direct Costs" shall not include any costs and expenses
that comprise part of the Indirect Costs.

                                       2
<PAGE>

         "Effective Date" shall mean the date of this Agreement.

         "Facilities" shall mean the pipelines, compressors, compressor
stations, metering and measurement equipment and facilities, rights of way and
real property, machinery and equipment, including trucks and automobiles and
other means of conveyance of personnel or material owned or leased by Owner for
the purposes of carrying on the Transmission Business.

         "Force Majeure Event" shall mean an act of God, fire, flood,
earthquake, storm, lightning, an act of Governmental Authority, or necessity for
compliance with any Laws, a strike, lockout or other industrial disturbance, not
directed exclusively at a Party or the Transmission Business, an act of the
public enemy, sabotage, war, act of terrorism, insurrection or blockade, riot or
other civil disturbance, epidemic, explosions, and any other similar event that,
in each such case, (i) affects and prevents, in whole or in part, the
performance of a Party's obligations under this Agreement, (ii) is not
reasonably within the control of the affected Party, (iii) which by the exercise
of commercially reasonable efforts the affected Party is unable to overcome or
prevent and (iv) is not the direct or indirect result of the affected Party's
negligence or the failure of such Party to perform any of its obligations under
this Agreement.

         "Gas" shall mean natural gas.

         "Gas Control Agreement" shall mean the Gas Control Services Agreement
of even date herewith by and between Owner and Operator, as amended or modified
from time to time.

         "Gas Control Services" shall have the meaning set forth in the Gas
Control Agreement.

         "Gas Transmission Agreement" shall mean the Gas Transmission Agreement
dated September [__], 2003 by and between Owner and SEMCO Energy, Inc, as
amended or modified from time to time.

         "Governmental Approval" shall mean any consent, authorization,
certificate, permit, right of way grant or approval of any Governmental
Authority that is necessary for the ownership and operation of the Pipeline
System or the Transmission Business in accordance with applicable Laws.

         "Governmental Authority" shall mean any court or tribunal in any
jurisdiction or any federal, state, tribal, municipal or local government or
other governmental body, agency, authority, department, commission, board,
bureau, instrumentality, arbitrator or arbitral body or any quasi-governmental
or private body lawfully exercising any regulatory or taxing authority,
including, without limitation, the Regulatory Commission of Alaska.

         "Indemnified Party" is defined in Section 13.3.

         "Indemnifying Party" is defined in Section 13.3.

         "Indirect Costs" shall mean indirect costs, such as, without
limitation, Operator's general and administrative costs. Operator's Indirect
Costs for purposes of the reimbursement contemplated in Section 6.3 shall be
deemed to equal the percentage of the Direct Costs allowed by the Alaska
Department of Transportation for overhead on construction contracts, reduced, to
the extent necessary, to reflect the fact that Indirect Costs do not include
AFUDC.

                                       3
<PAGE>

         "Inflation Index" means the Gross Domestic Product Implicit Price
Deflator Seasonally Adjusted Annual Rate (currently, 1996=100) published in
Survey of Current Business by the U.S. Department of Commerce, Bureau of
Economic Analysis (source http:/www.bea.doc.gov/bea/pubs.htm), or if publication
of that index ceases a similar index published by such other organization as
Owner and Operator may mutually agree.

         "Interest Rate" is defined in Section 7.1.

         "Laws" shall mean any applicable statute, common law, rule, regulation,
judgment, order, ordinance, writ, injunction or decree issued or promulgated by
any Governmental Authority having jurisdiction with respect to the applicable
subject matter.

         "Loss" is defined in Section 13.1.

         "Monthly O&M Payment" is defined in Section 6.1.

         "Operation and Maintenance Services" is defined in Section 2.1.

         "Operator" is defined in the introductory paragraph hereof.

         "Operator Indemnified Party" is defined in Section 13.2.

         "Operator Parties" is defined in Section 13.6.

         "Owner" is defined in the introductory paragraph hereof.

         "Owner Indemnified Party" is defined in Section 13.1.

         "Party" shall mean either Owner or Operator.

         "Pipeline System" shall mean the natural gas transmission pipeline
described on Exhibit A to this Agreement, and any Capital Improvements added or
made to the Pipeline System during the Service Term.

         "Proposed Annual Capital Improvements Budget" is defined in Section
4.1.

         "Service Term" shall mean the term beginning on midnight prevailing
Alaska time on the Effective Date and ending at 11:59:59 prevailing Alaska time
on the last day of the sixtieth (60th) succeeding full calendar month, subject
to extension or early termination in accordance with ARTICLE V.

         "Services" shall mean any or all of the Operation and Maintenance
Services and the Capital Improvements Services.

                                       4
<PAGE>

         "Special Contract" shall mean the Special Contract for Gas
Transportation dated September [___], 2003 by and between Owner and ENSTAR
Natural Gas Company, a division of SEMCO Energy, Inc., as amended or modified
from time to time.

         "Successor Operator" is defined in Section 5.4.

         "Tax" shall mean any tax, duty, imposition, levy of any nature (whether
central, territorial, federal, state or local) whatsoever and whenever charged,
levied or imposed, together with any interest and penalties in relation thereto.

         "Transmission Business" is defined in the Recitals hereto.

         "2004 Monthly Indirect Costs" is defined in Section 6.1(a).

                                   ARTICLE II

                             Services to Be Provided

         Section 2.1. Operation and Maintenance Services. Operator agrees to
provide to Owner (and its successors and assigns), at no cost to Owner other
than as provided in Article VI, all supplies, materials, personnel, assets
(tangible and intangible), insurance coverage, goods and services that are
necessary or appropriate for the physical operation and maintenance of the
Pipeline System and the administration of the Transmission Business consistent
with Owner's obligations under the Gas Transmission Agreement and the Special
Contract; and, without limiting the generality of the foregoing, Operator's
responsibilities and the Services shall include (i) nominations and scheduling
of receipts of Gas into the Pipeline System, (ii) the transportation of Gas
through the Pipeline System; (iii) the delivery of Gas to or for the account of
the customers of the Pipeline System; (iv) all inspections, routine testing,
engineering, mechanical, repair, replacement and maintenance, right of way, and
other services necessary to maintain the physical integrity and safety of the
Pipeline System and the current operating capacity of the Pipeline System to
receive, transport and deliver Gas, to the extent not requiring any Capital
Improvements; (v) the provision of all supplies, goods, equipment, spare parts,
tools, consumables, raw materials and other items and services that are
reasonably necessary for the conduct of the Transmission Business in the
ordinary course to the extent not requiring any Capital Improvements; (vi) the
administration of the Transmission Business and day to day customer services and
communications; (vii) information systems services and information technology
services relating to the administration and operation of the Transmission
Business necessary to effect or support any of the services described herein;
(viii) regulatory, pipeline safety, metering, occupational health and safety,
security, and environmental services in connection with the physical operation
of the Pipeline System and obtaining and maintaining any and all Governmental
Approvals required for the operation of the Pipeline System or the conduct of
the Transmission Business, but excluding the processing of any rate, tariff and
other similar regulatory proceedings; (ix) tax, customer billing, payments to
gas suppliers and collection, accounting, human resources, legal, claims and
other administrative services required for the operation of the Pipeline System
or the conduct of the Transmission Business; (x) arranging for the provision of
all insurance required to be maintained by Owner pursuant to Section 15.1 or
15.2, and (xi) the payment of all Taxes (other than income Taxes) incurred by
the Transmission Business or the Pipeline System (collectively the "Operation
and Maintenance Services"). Notwithstanding the foregoing, Operation and
Maintenance Services shall not include any of the Gas Control Services provided
under the Gas Control Agreement.

                                       5
<PAGE>

         Section 2.2. Capital Improvements Services. To the extent requested by
Owner, Operator agrees to provide to Owner all services requested by Owner for
the design, construction, testing and placing in service of all Capital
Improvements as more fully described in Section 4.4 ("Capital Improvements
Services"); provided, however, that Operator shall have no obligation with
respect to any Capital Improvements that Owner has not committed to fund
pursuant to Article IV. Owner may, at its election, contract with third parties
to provide Capital Improvement Services provided that use of third parties does
not unreasonably interfere with the provision of Operation and Maintenance
Services by Operator.

         Section 2.3. Facilities Available to Operator. Throughout the Service
Term, Owner shall make available to Operator for purposes of performing the
Services pursuant to this Agreement, all of the Facilities that comprise the
Pipeline System.

                                  ARTICLE III

                              Operator's Covenants

         Section 3.1. Operator's Ability to Provide Services. Operator agrees
that it shall, throughout the Service Term, (a) maintain and cause to be devoted
to the provision of Services under this Agreement, sufficient personnel and
financial resources to provide Services (i) in the same manner as during the
twelve (12) months immediately prior to the Effective Date, (ii) in accordance
with Accepted Gas Pipeline Practices and applicable Laws, (iii) as required to
satisfy Owner's contractual obligations to its customers, and (iv) in accordance
with the terms of this Agreement; (b) pay all Direct Costs and Indirect Costs
associated with the provision of Services under this Agreement, and (c) not
place or permit to be placed on the Pipeline System or any of the Facilities any
lien, security interest, mortgage, easement, license or other encumbrance, other
than inchoate liens in favor of providers of goods or services securing amounts
not yet due and payable or which are being contested by Operator in good faith.

         Section 3.2. Standards for the Provision of Services. Operator agrees
that it will perform the Services (a) in good faith on a commercially reasonable
basis; (b) in accordance with (i) Accepted Gas Pipeline Practices and applicable
Governmental Approvals and Laws, and consistent with all applicable orders,
judgments, decrees, rulings or injunctions; (ii) manufacturers' warranties for
the Pipeline System; (iii) Owner's contractual obligations to its customers;
(iv) the terms of this Agreement; and (v) the terms of Operator's and Owner's
insurance policies; and (c) using at least the same standard of care used in the
performance of such services for the Pipeline System during the twelve (12)
months immediately prior to the Effective Date. EXCEPT AS SET FORTH IN THIS
SECTION, OPERATOR MAKES NO REPRESENTATION, WARRANTY OR GUARANTY, EXPRESS OR
IMPLIED, OF ANY KIND CONCERNING THE SERVICES, OR ANY RESULTS OR WORK PRODUCT OF
SUCH SERVICES, AND SPECIFICALLY MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE, AND NONE SHALL BE IMPLIED. ALL OTHER REPRESENTATIONS,
WARRANTIES OR GUARANTEES, WRITTEN OR ORAL, EXPRESS OR IMPLIED IN FACT OR IN LAW,
AND WHETHER OR NOT BASED ON STATUTE, ARE EXCLUDED. OWNER ACKNOWLEDGES AND AGREES
THAT THE LEVEL OF COMPENSATION OPERATOR HAS AGREED TO ACCEPT FOR PERFORMANCE OF
ITS OBLIGATIONS HEREUNDER IS PREDICATED ON THIS LIMITATION OF LIABILITY AND
DISCLAIMER OF WARRANTIES.

                                       6
<PAGE>

         Section 3.3. No Breach. Notwithstanding anything to the contrary
contained herein, Operator shall not be deemed to be in breach of its
obligations hereunder to the extent such breach is caused by any of the
following: (a) the failure of Owner to grant its consent within a reasonable
time after a request by Operator therefor to any matter requiring such consent
prior to Operator's performance of its obligations with respect to such matter,
(b) the failure of Owner to provide funds that are required by the terms of this
Agreement to be provided by Owner, (c) the failure of Owner to approve any
Capital Improvements that are necessary for Operator to perform such obligations
in accordance with the terms hereof, or (d) any acts of Operator based solely in
reliance upon a direction of Owner.

         Section 3.4. Consents. In the event that Owner is entitled to grant or
withhold any consent or approval under this Agreement, such consent or approval
shall not be unreasonably withheld, delayed or conditioned.

                                   ARTICLE IV

                              Capital Improvements

         Section 4.1. Capital Improvements Budget.

                  (a) The Parties agree that the capital improvements budget
attached hereto as Schedule 4.1 is the approved capital improvements budget for
the remainder of 2003 and for calendar year 2004 and shall be the "Annual
Capital Improvements Budget" for such periods.

                  (b) On or before each October 1, beginning October 1, 2004,
Operator shall submit to Owner a written budget for any Capital Improvements to
the Pipeline System (the "Proposed Annual Capital Improvements Budget") to be
made during the next calendar year (A) that Operator deems reasonably necessary
to ensure that (i) the Pipeline System has the capability to serve its customers
in accordance with its obligations to those customers, and (ii) Operator can
continue to operate the Pipeline System in accordance with applicable Laws and
Accepted Gas Pipeline Practices, or (B) that Operator believes to be desirable
to enhance the efficiency and/or profitability of the Pipeline System. The
Proposed Annual Capital Improvements Budget shall set forth the categories of
expenditures, and the total amount of each category for all Capital Improvements
that Operator proposes to make to the Pipeline System during the calendar year
covered by the Proposed Annual Capital Improvements Budget and shall include
both Direct Costs and Indirect Costs. Owner shall approve or disapprove each
category of expenditures for Capital Improvements and the total amount of such
expenditures for each category by written notice to Operator received within
sixty (60) days after Owner's receipt of such Proposed Annual Capital
Improvements Budget, and the budget as approved by the Owner shall be the
"Annual Capital Improvements Budget" for the period covered thereby. Should
Owner desire any Capital Improvements that are not covered by the current Annual
Capital Expenditure Budget, Owner may at any time request that Operator prepare
and submit to Owner plans for such requested Capital Improvements, including a
budget for the construction thereof. Upon receipt of such plans, budget and
schedule, Owner shall approve such plans or notify Operator of Owner's decision
not to proceed with such requested Capital Improvements.

                                       7
<PAGE>

         Section 4.2. Emergency Capital Improvements. In the event that due to
an explosion, fire, storm, earthquake or other emergency, the Pipeline System
suffers damage which might threaten life or property, and emergency repairs in
the nature of Capital Improvements are required to avoid injury to life or
property, Operator may make such emergency Capital Improvements as are necessary
to prevent injury to life or property without Owner's prior approval and shall
be entitled to reimbursement by Owner for such expenditures, but shall notify
Owner of the expected scope and cost of such Capital Improvements and seek
Owner's approval as promptly as practicable.

         Section 4.3. Making Capital Improvements. Except for Capital
Improvements necessitated by emergency as provided for in Section 4.2, no
Capital Improvements shall be made to the Pipeline System unless covered by the
Annual Capital Improvements Budget or approved in writing by Owner.

         Section 4.4. Scope of Capital Improvements Services. Operator shall
provide or cause to be provided all labor, services, supervision, inspection,
testing, training, systems, equipment, machinery, materials and supplies that
are necessary to (a) obtain all easements and rights of way required for the
construction and operation of each Capital Improvement, (b) obtain and maintain
in the name of Owner all Governmental Approvals required for the design,
construction, ownership and operation of each Capital Improvement, and (c)
accomplish the performance and completion of the construction of each Capital
Improvement. Operator shall use commercially reasonable efforts to perform and
complete the construction of each Capital Improvement in accordance with the
budget approved therefor by Owner, but Operator does not guarantee performance
of such activities within the approved budget. If Operator determines that an
approved Capital Improvement cannot be completed within the budget therefor,
Operator shall promptly notify Owner and propose any necessary modifications to
the budget. If Owner does not agree to increase the budget by the amount of any
estimated overage, Operator shall have the right to abandon work on the affected
Capital Improvement upon completion of all of the work that can be performed
within the original budget.

         Section 4.5. Status Reporting, Adjustments to Budgets. Operator shall
notify Owner in a reasonable amount of time of any delay in the schedule of any
approved or emergency Capital Improvement, and of any event, occurrence,
condition or circumstance that is reasonably likely to cause a material increase
in the cost of any Capital Improvement. In the event of an occurrence that
causes the costs of a Capital Improvement to materially exceed the approved
budget therefor, the Contract Administration Officers shall meet at the earliest
mutually convenient date and agree on the proper course of action and to make
any adjustments to the affected Annual Capital Improvements Budget.

         Section 4.6. Rights in Data and Work. Capital Improvements to the
Pipeline System, including all plans, drawings, specifications, calculations,
manuals and other documents and work product prepared by or for Operator in
connection with the design, engineering, construction, testing and placing in
service of any Capital Improvement, shall be owned by Owner.

                                       8
<PAGE>

         Section 4.7. Susitna River Crossing. Owner and Operator agree that an
appropriate budget for all of the Capital Improvement Services necessary in
connection with the relocation of the Beluga line where it crosses the Susitna
River, as set out in the document entitled "Scope of Work: Susitna River
Crossing" dated [date to be inserted at Closing], is $5,200,000. Notwithstanding
anything contained in this Article IV to the contrary, if the aggregate cost of
such Capital Improvement Services (including all Direct Costs and Indirect
Costs) exceeds $5,200,000, Operator shall be entitled to reimbursement for only
10% of such costs in excess of $5,200,000, and if the aggregate of such costs is
less than $5,200,000, Operator shall be entitled (and Owner shall pay to
Operator) a bonus of 90% of the difference between $5,200,000 and such costs.
The Owner acknowledges that Operator may be required to commence the work
contemplated by this Section prior to the date hereof, and Owner agrees on the
date hereof to reimburse Operator for any such amounts expended by Operator,
subject to the limitations as to an amount contained in this Section 4.7.

                                   ARTICLE V

                 Service Term, Suspension and Early Termination

         Section 5.1. Service Term; Extension of Service Term. The term of this
Agreement shall be the Service Term. The Service Term may be extended upon
mutual agreement by Owner and Operator.

         Section 5.2. Operator's and Owner's Right to Suspend Performance or to
Terminate the Agreement. Operator shall have the right to suspend the
performance of its obligations under this Agreement in the event of Owner's
failure to make payments due to Operator and not disputed in good faith pursuant
to Article VII, and such failure has not been cured within ten (10) days after
written notice of such failure to Owner. Operator shall have the right to
terminate this Agreement in the event such failure to make payment has not been
cured within thirty (30) days after written notice of such failure to Owner.
Owner shall have the right to terminate this Agreement, in addition to all other
remedies available to it under law and in equity, if Operator (a) breaches in
any material respect any of its obligations under this Agreement and such breach
has not been cured within thirty (30) days after written notice of such breach
to Operator; (b) is or becomes insolvent or bankrupt or ceases to pay its debts
as they become due or consents to or acquiesces in the appointment of a
receiver, trustee or liquidator for a substantial part of its property; (c)
institutes a voluntary bankruptcy, winding up, reorganization, insolvency or
similar proceeding; (d) has an involuntary bankruptcy, winding up,
reorganization, insolvency or similar proceeding instituted against it that is
not stayed, dismissed or terminated within ninety (90) days after commencement;
or (e) ceases to carry on its business.

         Section 5.3. Transfer of Parts, Supplies and Consumables. Upon the
expiration or earlier termination of this Agreement, Operator shall transfer and
deliver, and shall cause each of Operator's third party vendors to transfer and
deliver, all parts, supplies and consumables procured for Owner in connection
with the Services, the cost of which has been included in any invoice submitted
to, and paid by, Owner.

                                       9
<PAGE>

         Section 5.4. Cooperation in Connection with Expiration or Termination.

                  (a) During the final three (3) months prior to the expiration
of the Service Term, and during the period of three (3) months following the
termination of this Agreement under Section 5.2 hereof, Operator shall cooperate
with Owner and its representatives in (i) the appointment and training of a
successor operator ("Successor Operator") to take over the operation and
maintenance of the Pipeline System and the administration of the Transmission
Business and (ii) the turnover of the operation and maintenance of the Pipeline
System and the administration of the Transmission Business to such Successor
Operator. During such period, Operator shall provide Owner and Successor
Operator and their respective representatives full access to all information,
data and records relating to the Pipeline System and the Transmission Business,
and Operator shall comply with all reasonable requests by Owner or Successor
Operator in connection with taking over the operation and maintenance and
administration duties, including the execution and delivery of documents and
taking of other actions, in each case as shall be necessary to facilitate the
orderly transition of duties from Operator to Successor Operator.

                  (b) Promptly after the expiration or termination of this
Agreement under this Article V, Operator shall deliver to (and shall, with
effect from the expiration or termination, hold in trust for) Owner or Successor
Operator (if so directed by Owner), all work, property, recorded information and
relevant Governmental Approvals that are in Operator's possession or under
Operator's control. Operator shall use all reasonable efforts to transfer to
Owner or Successor Operator, from the expiration or termination date, its right
and obligations under all contracts entered into in connection with the
performance of its obligations under this Agreement or relating to the operation
and maintenance of the Pipeline System and the administration of the
Transmission Business and all relevant Governmental Approvals held by Operator;
provided, however, that Owner shall assume, or shall cause Successor Operator to
assume, all of Operator's rights and obligations under such contracts and
Governmental Approvals and shall indemnify, hold harmless and defend Operator
from and against any and all Losses which (i) are entirely caused subsequent to
such assumption, (ii) arise out of, result from or relate to such contracts or
Governmental Approvals and (iii) are not the direct or indirect result of acts
or omissions by Operator.

                  (c) At the request of Owner, upon the expiration or
termination of this Agreement under this Article V, Operator shall not assert
its rights, if any, to retain its personnel who spend 75% or more of their time
on matters relating to the Pipeline System or the Transmission Business and
shall otherwise permit such personnel to transfer to the employ of Successor
Operator and will offer to sell Owner any equipment and other items of personal
property used by Operator primarily to provide Services under this Agreement for
a price equal to the book value thereof on Operator's books.



                                       10
<PAGE>

                                   ARTICLE VI

                                  Compensation

         Section 6.1. Compensation for Operation and Maintenance Services.

                  (a) As compensation for all Operation and Maintenance Services
during the first three years of the Service Term, Owner shall pay Operator
$334,000 per calendar month (the "Monthly O&M Payment") (with appropriate
proration for partial months). For the fourth and fifth years of the Service
Term, the Monthly O&M Payment shall be an amount determined by multiplying the
difference between $334,000 and 1/12 of the Operator's actual Direct Costs for
Taxes and insurance for the first year of the Service Term by the CPI Inflator
for such year, and in addition, Owner shall reimburse Operator for Operator's
actual Direct Costs for Taxes and insurance in such years, appropriately pro
rated if assessed or changed for a period different than such years.

                  (b) Payment for the calendar month in which the Effective Date
occurs shall be due on the Effective Date. Payment of the Monthly O&M Payment
for each succeeding calendar month during the first three years of the Service
Term, and after the amount thereof has been determined, the fourth and fifth
years of the Service Term, shall be due, without invoice, on the first Business
Day of such month. Payment for Taxes and insurance during the fourth and fifth
years of the Service Term shall be due ten (10) days after receipt by the Owner
of an invoice therefore. The compensation payable to Operator for the provision
of Operation and Maintenance Services is intended to reimburse Operator for all
Direct Costs and Indirect Costs of providing such Services, and Operator shall
be solely responsible for payment of such costs, including, but not limited to
all of the costs related to the categories specified in Exhibit B. All past due
payments for Operation and Maintenance Services shall bear interest at the
Interest Rate from the due date until paid.

         Section 6.2. Adjustment of Monthly O&M Payment on Change of Law. The
Monthly O&M Payment is intended to remain the fixed payment specified in Section
6.1 for each year of the Service Term regardless of Operator's actual costs of
providing Operations and Maintenance Services. Notwithstanding the foregoing,
however, if as a result of a change in applicable Laws, Operator's costs are
materially increased or decreased, the Monthly O&M Payment shall be increased or
decreased, as applicable, by the amount necessary to compensate Operator for its
increased costs or reduce the compensation to Operator for its decreased costs
attributable to such change of Law.

         Section 6.3. Reimbursement for Capital Improvements Services. All
Capital Improvements Services shall be performed by Operator on a cost
reimbursement basis, and Owner shall reimburse Operator for all Direct Costs and
Indirect Costs of providing such Services.

                                  ARTICLE VII

                      Billing and Payment of Costs Services

         Section 7.1. Invoices for Services. On or before the fifteenth day of
each month, Operator shall provide to Owner one or more written invoices,
setting out the total amount due Operator for Capital Improvements Services
during the preceding month, showing a comparison of the invoiced costs for each
category to the amounts budgeted for such category, together with such
supporting documentation for all such costs as shall be reasonably requested by
Owner. Items properly invoiced and not disputed in good faith by Owner are due
and payable within ten (10) days of Owner's receipt of such invoice. Owner shall
give written notice on or before the due date of any invoice of any good faith
dispute of all or any portion of such invoice, with the particulars of such
dispute. Owner shall pay interest on any unpaid portion of the undisputed amount
of an invoice from the due date thereof up to and including the date when such
amount and interest thereon are paid in full, at the rate per annum for the
first 10 days equal to the rate published as the "prime rate" in The Wall Street
Journal for the first business day of the month in which such invoice is due,
plus 2%, and thereafter, at a rate per annum equal to 15%, but in no event at
any rate that is greater than the maximum interest rate allowed by applicable
Laws (such rate, the "Interest Rate").

                                       11
<PAGE>

         Section 7.2. Resolution of Disputes of Invoices. Owner shall provide to
the Contract Administration Officers a copy of any notice to Operator of a
dispute with respect to an Operator invoice. The Contract Administration
Officers shall promptly meet and attempt to resolve any invoice dispute by
mutual agreement. If the Parties are unable to agree upon a settlement of the
invoice dispute, the dispute shall be addressed in accordance with Article VIII.
If any invoice dispute is resolved in favor of Operator, Owner shall pay any
amount owed with interest from the date such disputed invoice was due to the
date of payment of such amount, at the Interest Rate.

         Section 7.3. Owner's Audit Rights. Owner shall have the right, at any
time within one (1) year after the date of any Operator invoice for
reimbursement of costs of Capital Improvements Services, to audit those books
and records of Operator that relate to the Capital Improvements Services covered
by such invoice, to verify the costs reflected on such invoice. Any such audit
shall be conducted by Owner or its designated auditor after ten (10) days prior
written notice to Operator, at Owner's cost and expense, during normal business
hours in the offices of Operator, or such other location as may be appropriate.
Operator shall cooperate with and provide reasonable assistance to Owner or its
auditor in connection with the performance of any such audit, at Operator's sole
cost and expense. Owner shall assert any claim for refund of the cost of Capital
Improvements Services reimbursed to Operator under the audited invoice within
sixty (60) days after the receipt of the audit report. Unless Operator notifies
Owner of any dispute to Owner's claim for refund relating to any such audit
within thirty (30) days of receipt of such refund claim, the amount of such
refund claim shall be due and payable by Operator to Owner forty (40) days after
Operator's receipt of such refund claim, together with interest at the Interest
Rate from the date of any overpayment to Operator until the date of refund of
such overpayment by Operator. Should Operator dispute the claim and refuse to
pay any refund claim by Owner resulting from the exercise of Owner's audit
rights, the dispute shall be addressed in accordance with Article VIII.

                                  ARTICLE VIII

                               Dispute Resolution

         Section 8.1. General. Any dispute arising under this Agreement or
otherwise in connection with this Agreement shall be resolved pursuant to this
Section 8.1.

                  (a) Any Party has the right to request the other to meet to
discuss a dispute. The Party requesting the meeting will give at least ten (10)
Business Days notice in writing of the subject it wishes to discuss, provide a
written statement of the dispute, and designate an officer of the Party with
complete power to resolve the dispute to attend the meeting. Within five (5)
Business Days after receipt of such request, the Party receiving the request
will provide a responsive written statement and will designate an officer of the
Party who will attend the meeting with complete power to resolve the dispute.

                                       12
<PAGE>

                  (b) If the meeting fails to resolve the dispute by a signed
agreement among the officers, either Party may submit the dispute for binding
arbitration administered by the American Arbitration Association ("AAA") under
its Commercial Arbitration Rules before a single arbitrator, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.

                  (c) The Parties agree to make discovery and disclosure of all
matters relevant to the dispute to the extent and in the manner provided by the
Federal Rules of Civil Procedure. The arbitrator will rule on all requests for
discovery and disclosure and discovery shall be completed within 60 days after
the date of appointment of the arbitrator. The arbitrator may consider any
matter relevant to the subject to the dispute and shall follow the statutes and
decisions of the substantive law of Alaska relevant to the subject. The
arbitrator shall not have the authority or power to alter, amend or modify any
of the terms and conditions of this Agreement. The arbitrator shall issue a
final ruling within 150 days after the date of appointment of the arbitrators.

                  (d) The ruling of the arbitrator shall be in writing and
signed and shall be final and binding upon the Parties. The fees and expenses of
counsel, witnesses and employees of the Parties and all other costs and expenses
incurred exclusively for the benefit of the Party incurring the same shall be
borne by the Party incurring such fees and expenses. All other fees and expenses
including, without limitation, compensation for the arbitrator, shall be divided
equally between the Parties. All meetings and arbitrations held pursuant to this
Section 8.1 shall take place in Anchorage, Alaska.

                                   ARTICLE IX

                           Administration of Agreement

         Section 9.1. Contract Administration Officers. Operator and Owner shall
each designate in writing a person or persons to act as contract administration
officers ("Contract Administration Officers"), who shall perform the following
functions under this Agreement for their respective principals:

                  (a) reporting to senior management of their respective
principals with respect to matters relating to the administration of this
Agreement, the provision of Operation and Maintenance Services and Capital
Improvements Services hereunder and any outstanding invoice disputes;

                  (b) resolving any disputes with respect to proposed Capital
Improvements; and

                  (c) monitoring the costs of Capital Improvements Services.

                                       13
<PAGE>

         Section 9.2. Replacement of Contract Administration Officers. Each
Party may replace its Contract Administration Officers from time to time upon
notice to the other Party. The Contract Administration Officers will have
authority to represent the position of, but will not have authority to bind
their respective contracting Parties with respect to, questions that may arise
during the performance of this Agreement.

                                   ARTICLE X

                         Confidentiality of Information

         Section 10.1. General. As used in this Article X (and in Section 14.2),
"Confidential Information" shall mean any information not in the public domain
or generally known in the industry, in any form relating to the business and
operations of Owner or Operator (each such entity, for purposes of this Article
X, a "Company"), including but not limited to information regarding customers,
vendors, suppliers, trade secrets, training programs, manuals or materials,
technical information, contracts, systems, procedures, mailing lists, know-how,
trade names, improvements, price lists, financial or other data (including the
revenues, costs or profits associated with any of such Company's services),
business plans, code books, invoices and other financial statements, computer
programs, software systems, databases, disks and printouts, plans (business,
technical or otherwise), customer and industry lists, correspondence, internal
reports, personnel files, sales and advertising material, telephone numbers,
names, addresses or any other compilation of information, written or unwritten,
which is or was used by such Company, regardless of whether such information was
or is owned during the term of this Agreement by such Company.

         Section 10.2. Operator's Obligations. Operator shall maintain the
confidentiality of any Confidential Information of Owner acquired by Operator
during the term of this Agreement, and except as otherwise provided in this
Agreement, shall not use such Confidential Information for any purpose other
than the performance of this Agreement; provided, however, Operator may use any
Confidential Information in the resolution of any disputes under this Agreement.
Upon termination of this Agreement, except as otherwise provided in this
Agreement, Operator agrees to turn over such Confidential Information to Owner
or to destroy such Confidential Information, but only in accordance with the
instructions of Owner; provided, however, that Operator may maintain one archive
copy of all of such Confidential Information in a secure data storage facility.

         Section 10.3. Owner's Obligations. Owner shall maintain the
confidentiality of any Confidential Information of Operator acquired by Owner
during the term of this Agreement, and except as otherwise provided in this
Agreement, shall not use such Confidential Information for any purpose other
than the performance of this Agreement; provided, however, Owner may disclose
invoices and other similar financial information concerning the cost of the
Services to any prospective purchaser of Owner or the Transmission Business, and
may use any Confidential Information in the resolution of any disputes under
this Agreement. Upon termination of this Agreement, except as otherwise provided
in this Agreement, Owner agrees to turn over such Confidential Information to
Operator or to destroy such Confidential Information in accordance with the
instructions of Operator; provided, however, that Owner may maintain one archive
copy of all of such Confidential Information in a secure data storage facility.

                                       14
<PAGE>

         Section 10.4. Compulsory Disclosure. If any Company is requested or
required to disclose Confidential Information of another unaffiliated Company
pursuant to any judicial or administrative process, law, regulation or statute,
then such receiving Company shall promptly notify the other unaffiliated Company
to this Agreement in writing of such request or requirement. The Company whose
Confidential Information is requested or required to be disclosed shall either
(i) promptly seek protective relief from such disclosure obligation or (ii)
direct the receiving Company to comply with such request or requirement. If,
after a reasonable opportunity to seek protective relief, such relief is not
obtained by the Company whose Confidential Information is subject to discovery
or disclosure, or if such Company fails to obtain such relief, the receiving
Company may disclose such portion of such Confidential Information that such
Company reasonably believes it is legally obligated to disclose.

         Section 10.5. Injunction. Each Company agrees that the breach by
another unaffiliated Company of its obligations under this Article X would cause
significant and irreparable harm to the aggrieved Company, which may be
difficult to measure with certainty or to compensate through money damages. Each
Company acknowledges that the aggrieved Company shall be entitled, without proof
of irreparable harm and without waiving any other right or remedy available to
it, to such injunctive and equitable relief as may be deemed proper by a court
of competent jurisdiction.

                                   ARTICLE XI

                        Relationship BETWEEN the Parties

         Section 11.1. No Joint Venture. It is the intent of the Parties that
with respect to the provision of the Services pursuant to this Agreement, Owner
and Operator are independent contractors. Except to the extent Operator executes
contracts or documents as the agent of Owner pursuant to the terms of Section
16.1, nothing in this Agreement shall cause the relationship between Operator
and Owner to be deemed to constitute an agency, partnership or joint venture.
The terms of this Agreement are not intended to constitute a joint employer for
any purpose between any of the Parties and their affiliates. Each of the Parties
agrees that the provisions of this Agreement as a whole are not intended to, and
do not, constitute control of the other Party (or any affiliates thereof) or
provide it with the ability to control such other Party (or any affiliates
thereof), and each Party hereto expressly disclaims any right or power under
this Agreement to exercise any power whatsoever over the management or policies
of the other (or any affiliates thereof). Nothing in this Agreement shall oblige
either Party hereto to act in breach of the requirements of applicable Laws or
Governmental Approvals.

         Section 11.2. Certain Labor Matters. The Parties recognize that
Operator is subject to collective bargaining agreements covering certain of its
employees and will perform the Services under this Agreement in compliance with
the terms of such collective bargaining agreements. Operator shall ensure that
upon the termination of the Service Term, Owner shall have no obligation or
liability in respect of such collective bargaining agreements.

                                       15
<PAGE>

                                  ARTICLE XII

                               Regulatory Matters

         Section 12.1. Compliance with Regulatory Requirements. Operator will
cooperate with Owner and any Governmental Authority that regulates Owner and/or
the Pipeline System to satisfy any regulatory requirements applicable to the
Pipeline System.

                                  ARTICLE XIII

                  Indemnification; Release; Limit on Liability

         Section 13.1. Indemnification by Operator. Operator shall indemnify,
defend and hold harmless Owner, and each of its officers, directors, employees,
agents, and affiliates (and the officers, directors, employees and agents of
such affiliates) ("Owner Indemnified Party") if any such Owner Indemnified Party
shall at any time or from time to time suffer any damage, judgment, fine,
penalty, demand, settlement, liability, loss, cost, expense (including
reasonable attorneys', consultants' and experts' fees), claim or cause of action
(each, a "Loss") arising out of, relating to or resulting from the Operator's
performance of this Agreement, to the extent such Loss results from any breach
of this Agreement or the fault, tortuous act, negligence, strict liability,
gross negligence or willful misconduct of Operator. Further, Operator shall
indemnify and hold Owner harmless and defend Owner from (i) any and all claims,
costs, damages, injuries, demands and causes of action commenced by an employee
of Operator (or his or her estate or legal representative) which arises directly
or indirectly from the performance of Services except to the extent that such
Loss directly results from the gross negligence or willful misconduct of Owner,
and (ii) any and all Losses arising out of or resulting from any collective
bargaining agreements covering employees of Operator, including, without
limitation, those collective bargaining agreements referenced in Section 11.2.

         Section 13.2. Indemnification by Owner. Owner shall indemnify, defend
and hold harmless Operator, and each of its officers, directors, employees,
agents, and affiliates (and the officers, directors, employees and agents of
such affiliates) ("Operator Indemnified Party") if any such Operator Indemnified
Party shall at any time or from time to time suffer any Loss arising out of,
relating to or resulting from Owner's performance of this Agreement, to the
extent such Loss results from any breach of this Agreement or the fault,
tortuous act, negligence, strict liability, gross negligence or willful
misconduct of Owner. Further, Owner shall indemnify and hold Operator harmless
and defend Operator from any and all claims, costs, damages, injuries, demands
and causes of action commenced by an employee of Owner (or his or her estate or
legal representative), except to the extent that (i) such Loss directly results
from the gross negligence or willful misconduct of Operator, or (ii) Owner is
entitled to indemnity from Operator under Section 13.1.



                                       16
<PAGE>

         Section 13.3. Procedures. Any Party asserting a claim for
indemnification hereunder (such Party seeking indemnification, the "Indemnified
Party") shall notify the other Party (the "Indemnifying Party") (with reasonable
specificity) promptly after it becomes aware of facts supporting a claim or
action for indemnification under this Article XIII, and shall provide to the
Indemnifying Party as soon as practicable thereafter all information and
documentation reasonably necessary to support and verify any Losses associated
with such claim or action. The failure to so notify or provide information to
the Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to any Indemnified Party, except to the extent that the
Indemnifying Party demonstrates that it has been materially prejudiced by the
Indemnified Party's failure to give such notice, in which case the Indemnifying
Party shall be relieved from its obligations hereunder to the extent of such
material prejudice. The Indemnifying Party may, and, at the request of the
Indemnified Party, shall participate in and defend, contest or otherwise protect
the Indemnified Party against any such claim or action by counsel of the
Indemnifying Party's choice at its sole cost and expense; provided, however,
that the Indemnifying Party shall not make any settlement or compromise without
the prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld, conditioned or delayed) unless the sole relief provided
is monetary damages that are paid in full by the Indemnifying Party. The
Indemnified Party shall have the right, but not the obligation, to participate
at its own expense in the defense thereof by counsel of the Indemnified Party's
choice and shall in any event use its reasonable best efforts to cooperate with
and assist the Indemnifying Party. If the Indemnifying Party fails timely to
defend, contest or otherwise protect against such suit, action, investigation,
claim or proceeding, the Indemnified Party shall have the right to do so,
including, without limitation, the right to make any compromise or settlement
thereof, and the Indemnified Party shall be entitled to recover the entire cost
thereof from the Indemnifying Party, including, without limitation, reasonable
attorneys' fees, disbursements and amounts paid as the result of such suit,
action, investigation, claim or proceeding.

         Section 13.4. Indemnification Payments. Any payment hereunder shall be
made by wire transfer of immediately available funds to such account or accounts
as the Indemnified Party shall designate to the Indemnifying Party in writing.

         Section 13.5. Survival. The provisions of this Article XIII shall
survive the termination of this Agreement for claims made within a period of
three (3) years after the expiration date of the Service Term.

         Section 13.6. Release and Limit on Liability. Operator shall not be
liable to Owner for, and Owner hereby releases Operator and its affiliates, and
each officer, director, employee and agent of Operator and/or any of its
affiliates (the "Operator Parties") from, any Loss arising from any act or
omission of Operator in connection with the Services, except to the extent any
such Loss results from an event for which Owner is entitled to indemnification
under Section 13.1. Owner shall not be liable to Operator for, and Operator
hereby releases Owner and its affiliates, and each officer, director, employee
and agent of Owner and/or any of its affiliates (the "Owner Parties") from, any
Loss arising from any act or omission of Owner in connection with the Services,
except to the extent any such Loss results from an event for which Operator is
entitled to indemnification under Section 13.2. Notwithstanding anything in this
Agreement to the contrary, the aggregate liability of the Operator Parties under
this Agreement (other than with respect to Operator's indemnity obligations set
out in clause (ii) of the last sentence of Section 13.1, which shall not be so
limited) shall not exceed the sum of (i) the aggregate amount of payments
received by Operator pursuant to Section 6.1 hereof (excluding Direct Cost
payments to vendors and other third parties), and (ii) any payments actually
received by Operator or paid to any third party on behalf of Operator in respect
to such liabilities under policies of insurance. IN NO EVENT SHALL ANY OF THE
OPERATOR PARTIES BE LIABLE TO ANY OF THE OWNER PARTIES, NOR SHALL ANY OF THE
OWNER PARTIES BE LIABLE TO ANY OF THE OPERATOR PARTIES, FOR SPECIAL, INDIRECT,
INCIDENTAL, CONSEQUENTIAL OR PUNITIVE LOSS, DAMAGES OR EXPENSES (INCLUDING LOST
PROFITS OR SAVINGS) ARISING FROM THIS AGREEMENT.

                                       17
<PAGE>

                                  ARTICLE XIV

                                Books and records

         Section 14.1. Maintenance of Books and Records.

                  (a) In addition to any reporting and record keeping
requirements set forth in this Agreement or otherwise agreed to by the Parties,
Operator shall maintain on a current basis proper, accurate and complete books,
records and accounts relating to the operation and maintenance of the Pipeline
System, the conduct of the Transmission Business and the performance of the
Services and Operator's other obligations hereunder (including all operating
data and operating logs) as shall be required to comply with any contractual
obligations of Owner and as necessary to verify the incurring and payment of all
capital and operating expenditures and Operator's performance of the Services
and its other obligations hereunder. All books, records and accounts referred to
in this Section 14.1 shall be established and maintained in accordance with
generally accepted accounting principles in the United States consistently
applied, and shall be in a format sufficient to permit the verification referred
to in the preceding sentence. Operator shall ensure that such books and records
of account are kept separate from Operator's own corporate books and records.

                  (b) Operator shall maintain all books and records it is
required to maintain hereunder for a period of at least six (6) years following
the creation thereof and in all events for however long as may be required by
applicable Law.

         Section 14.2. Ownership of Books and Records. All books, records and
accounts maintained by Operator in connection with the Transmission Business
hereunder shall at all times be the exclusive property of Owner, and Operator
shall not have any rights, title or interest therein. All books, records and
accounts of Operator that Operator maintains in its own behalf in connection
with its provision of services under this Agreement shall at all times be the
exclusive property of Operator, and Owner shall not have any right, title or
interest therein, except for Owners' right to review supporting information
related to the cost of Capital Improvements Services and the monthly invoicing
process under Article VII, with a right to retain copies thereof (subject to the
confidentiality provisions of Article X). Upon termination of the provision of
any or all Services by Operator under this Agreement, all books, records, and
accounts solely relating to the Services described in the first sentence of this
Section 14.2 shall be promptly delivered to Owner at its address set forth below
and Operator shall retain no copies thereof, except that Operator shall be
entitled to retain one copy thereof solely for archival purposes and such copy
shall be treated and protected by Operator as Confidential Information of Owner
pursuant to Article X.

                                       18
<PAGE>

                                   ARTICLE XV

                               Required Insurance

         Section 15.1. Required Insurance. Until the expiration of the Service
Term, each Party shall maintain on behalf of itself and all of its employees,
the following minimum insurance coverage, with the cost of Owner's policies
being paid by Operator:

                  (a) Workers Compensation insurance complying with all
applicable Laws, and Employer's Liability insurance with limits of not less than
the Alaskan statutory limit. Each Party and their parent, subsidiary and
affiliated companies and their respective employees shall be provided a waiver
of all rights of subrogation under this insurance. Either Party under this
Agreement shall have the right at their sole option to be a qualified
self-insurer for worker's compensation insurance.

                  (b) Commercial or comprehensive general liability insurance
with a combined single limit of not less than $1,000,000 per occurrence for
bodily injury and property damage, including coverage for premises-operations,
blanket contractual liability, broad form property damage liability, personal
injury liability, advertising injury liability, independent contractor coverage,
products/completed operations, sudden and accidental pollution liability and the
explosion, collapse and underground hazards.

                  (c) Automobile liability insurance with a combined single
limit of not less than $1,000,000 per occurrence for bodily injury and property
damage including coverage for all owned, non-owned and hired vehicles.

                  (d) Umbrella and/or excess liability insurance with a combined
single limit of not less than $25,000,000 per occurrence for bodily injury and
property damage covering excess of the employer's liability, general liability
and automobile liability insurance required above.

                  (e) Any of the above-required liability insurance that is
maintained on a claims made basis shall have a retroactive date the same as the
date of this Agreement or earlier, and shall remain in effect for at least three
years following, or shall provide for a three year discovery and reporting
period following, the termination of the Service Term.

                  (f) Operator shall be named as an additional insured and shall
be provided with a waiver of all rights of subrogation under the Owner's
insurance required in (b), (c) and (d) above to the extent of Owner's
indemnification obligations and liabilities assumed under this Agreement. Owner
and its lenders shall be named as additional insureds and shall be provided with
a waiver of all rights of subrogation under Operator's insurance required in
(b), (c) and (d) above to the extent of Operator's indemnification obligations
and liabilities assumed under this Agreement.

                  (g) Upon request of one Party under this Agreement,
certificates of insurance evidencing the above-required insurance shall be
provided to the other Party under this Agreement.

                                       19
<PAGE>

         Section 15.2. Owner's Property Insurance. Owner shall maintain, at
Operator's cost, all-risk property, builder's all-risk and time element
insurance covering the Pipeline System and the Facilities on a commercially
reasonable basis with coverages, limits, deductibles, terms and conditions as
the Owner would maintain in the prudent management of its property, or would be
maintained by others similarly situated in respect of property similar to the
Pipeline System and the Facilities. Operator shall be provided a waiver of all
rights of subrogation under such insurance, and a certificate of insurance
evidencing such insurance upon request.

         Section 15.3. Provision of Owner's Insurance By Operator. As part of
the Operations and Maintenance Services, Operator agrees to procure for Owner,
at Operator's sole cost and expense, the insurance required by Owner pursuant to
Section 15.1 and 15.2, and agrees to comply, as Owner's agent, with the
requirement of Section 7.7 of the Gas Transmission Agreement. All such policies
of insurance shall list Owner as a loss payee and a named insured and Owner's
lenders as loss payees and additional insureds, and if Operator receives any
payments in respect of such policies in respect of APC, it shall promptly remit
such payments to Owner in the form received. Operator also shall cooperate with
Owner in connection with any modifications and enhancements of the insurance
contemplated in Sections 15.1 and 15.2 requested by Owner, including any
increases in coverage or reductions in deductibles, provided that any additional
premiums resulting from such modifications and enhancements shall be paid for by
Owner.

                                  ARTICLE XVI

                            Miscellaneous Provisions

         Section 16.1. Agency of Operator. Owner hereby appoints Operator to act
as its agent for the performance of Services in accordance with, and as limited
by, the applicable terms and provisions of this Agreement; provided, however,
that Operator shall not, without the prior written approval of an Owner, have
any authority under this Agreement to:

                  (i) jointly employ any person who is employed by Owner;

                  (ii) borrow money from or on behalf of, or lend money to,
         Owner;

                  (iii) create any lien or encumbrance on the Pipeline System or
         Facilities other than inchoate liens in favor of providers of goods or
         services securing amounts not yet due and payable or which are being
         contested by Operator in good faith;

                  (iv) make any filing with any Governmental Authority or
         execute, terminate or amend any Governmental Approval relating to the
         Pipeline System or the Facilities other than with respect to
         Governmental Approvals to be obtained in the ordinary course of the
         Transmission Business or with respect to Capital Improvements;

                  (v) file or settle any litigation relating to the Pipeline
         System or the Transmission Business; or

                  (vi) retain outside legal counsel or public accountants to
         provide services to Owner; or

                                       20
<PAGE>

                  (vii) enter into any agreement binding upon Owner that exceeds
         the term of this Agreement.

         Section 16.2. Force Majeure. If by reason of a Force Majeure Event
either Party is rendered unable, in whole or in part, to perform its obligations
under this Agreement, other than the obligation to make payments of money then
due, such Party shall be excused from such performance to the extent it is
prevented by, and during the continuance of, such Force Majeure Event. The Party
whose performance is affected by an Force Majeure Event shall (i) give the other
Party notice of the occurrence of such Force Majeure Event as soon as
practicable and (ii) use all commercially reasonable efforts to remedy the
cause(s) and effect(s) of such Force Majeure Event with all reasonable dispatch;
provided, however, that the affected Party shall not be obligated to undertake
unreasonable or uneconomic costs or burdens, in order to overcome the effects of
the Force Majeure Event and reinstate full performance of its obligations under
this Agreement.

         Section 16.3. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed given if delivered
personally, by facsimile (which is confirmed) or sent by overnight courier
(providing proof of delivery), to the Parties at the following address:

         If to Operator:  [_______________________________________
                           _______________________________________
                           _______________________________________
                           _______________________________________]

         If to Owner:     [_______________________________________
                           _______________________________________
                           _______________________________________
                           _______________________________________]

         Any Party may, by notice given in accordance with this Section 16.3 to
the other Parties, designate another address or person for receipt of notices
hereunder provided that notice of such a change shall be effective upon receipt.

         Section 16.4. Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the Parties and their respective successors,
assigns and legal representatives (whether by acquisition, merger, operation of
law, other transaction constituting a change of control or otherwise). No Party
may assign this Agreement or any right or obligation hereunder without the prior
written consent of the other Party, and any assignment without such consent
shall be void; provided, however, that nothing in this Agreement shall prohibit
a transfer of a Party's rights and obligations hereunder by acquisition of
substantially all of the assets of such Party, merger or operation of law, but
if any such transfer is made by Operator without Owner's prior written consent,
Owner shall have the right to terminate this Agreement and neither Party shall
have any future obligation hereunder except for obligations to pay in respect of
services performed through the date of termination.

                                       21
<PAGE>

         Section 16.5. Survival. Any provision of this Agreement that expressly
or by implication comes into or remains in force following the termination or
expiration of this Agreement shall survive for a period of three (3) years after
the expiration of the Service Term.

         Section 16.6. Signatures, Counterparts. Facsimile transmission of any
signed original document and/or retransmission of any signed facsimile
transmission shall be the same as delivery of an original. On request, a Party
will confirm its facsimile transmission by signing a duplicate original
document. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.

         Section 16.7. Amendments. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Parties.

         Section 16.8. Governing Law. THIS AGREEMENT WILL BE GOVERNED AS TO
FORMATION, PERFORMANCE, INTERPRETATION AND ENFORCEMENT BY THE LAWS OF THE STATE
OF ALASKA WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES.

         Section 16.9. Entire Agreement. This Agreement constitutes the entire
agreement between the Parties hereto relating to the subject matter hereof and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties, and there are no
general or specific warranties, representations or other agreements by or among
the Parties in connection with the entering into of this Agreement or the
subject matter hereof except as specifically set forth or contemplated herein or
therein.

         Section 16.10. Negotiated Agreement. This Agreement has been negotiated
by the Parties and the fact that the initial and final draft will have been
prepared by either Party will not give rise to any presumption for or against
any party to this Agreement or be used in any respect or forum in the
construction or interpretation of this Agreement or any of its provisions.

         Section 16.11. Waiver. No consent or waiver, express or implied, by any
Party to or of any breach or default by any other Party in the performance by
such other Party of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance of
obligations hereunder by such other Party hereunder. Failure on the part of any
Party to complain of any act or failure to act of any other Party or to declare
any other Party in default, irrespective of how long such failure continues,
shall not constitute a waiver by such first Party of any of its rights
hereunder.

         Section 16.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each Party directs that such court interpret and
apply the remainder of this Agreement in the manner that it determines most
closely effectuates the Parties' intent in entering into this Agreement, and in
doing so particularly take into account the relative importance of the term,
provision, covenant or restriction being held invalid, void or unenforceable.

         Section 16.13. No Third Party Beneficiaries. Except as set forth in
Article XIII, nothing in this Agreement is intended or shall be construed to
give any person, other than the Parties hereto, their successors and permitted
assigns, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.


                                       22
<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.

                                       OWNER

                                       ALASKA PIPELINE COMPANY, LLC


                                       By:____________________________________
                                       Name:
                                       Title:


                                       OPERATOR

                                       ENSTAR NATURAL GAS COMPANY,
                                       A DIVISION OF SEMCO ENERGY, INC.


                                       By:____________________________________
                                       Name:
                                       Title:


                                       23
<PAGE>

                                                                       EXHIBIT A


                      DESCRIPTION OF TRANSPORTATION SYSTEM


         The APC's System consists of the following:

         Kenai Pipeline System:

         The Kenai Pipeline System consists of combined 142 miles of
looped12-inch and 16-inch diameter pipeline, including a nine mile twin crossing
of the Turnagain Arm of the Cook Inlet, plus 25 miles of 8-inch diameter
pipeline known as the Royalty Lateral and six miles of 12-inch, 6-inch, and
4-inch diameter lateral pipelines connecting to the Royalty Lateral. All lines
have a maximum allowable operating pressure (MAOP) of 300 pounds per square inch
gage (psig) or greater. The Kenai Pipeline has two compressor stations totaling
8,400 horsepower.

         Beluga Pipeline System:

         The Beluga Pipeline System consists of 102 miles of 20-inch pipeline
and 23 miles of 6-inch and 4-inch diameter lateral pipelines connecting to the
20-inch pipeline. All lines have a MAOP of 300 psig or greater. It does not have
any compression capacity.

         The Anchorage Pipeline System:

         The Anchorage Pipeline system consists of 55 miles of 12-inch, 10-inch,
8-inch, 6-inch and 4-inch diameter pipelines and lateral pipelines in the
greater Anchorage area interconnecting with the Kenai Pipeline System at Potter
Station and with the Beluga Pipeline System at East Anchorage City Gas Station.
All lines have a MAOP of 300 psig or greater.

         The locations of the Kenai Pipeline System, the Beluga Pipeline System
and the Anchorage Pipeline System are shown on the attached map.



<PAGE>
                             APC PIPELINE SUMMARY


                                                                            Milepost  Designation
----------------------------------------------------------------------------------------------------------------------------------
Sys. Pipeline Name                       Year           ER #      Pipe Size    From         To      Length     Length     Miles
                                         Installed                                                   (miles)   (feet)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
     Kenai Pipeline
----------------------------------------------------------------------------------------------------------------------------------
  K  "A" Kalifonski to Burnt Island         1960                     12"           2.3          64.5    62.12    327,977
----------------------------------------------------------------------------------------------------------------------------------
  K   "A" Turnagain Crossing                1960                     12"          64.5          73.2     8.68     45,841
----------------------------------------------------------------------------------------------------------------------------------
  K   "B" Turnagain Crossing                1960                     12"          64.5          73.2     8.58     45,289
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Kalifonski to Kenai River       1975   74-513.2       12" & 16"        2.3           6.7     4.40
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Gutenrath to MP50.5             1975   74-513.2       12" & 16"       21.4          50.5    29.10
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Kenai River to MP 21.4          1978   78-1831.03     12" & 16"        6.7          21.4    14.70
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp MP 50.5 to MP 64.5              1978   78-1831.03     12" & 16"       50.5          64.5    14.00
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Kenai Sub Total   141.58
----------------------------------------------------------------------------------------------------------------------------------
     North Kenai Lateral
----------------------------------------------------------------------------------------------------------------------------------
  K  KPL Junction to East Forelands         1966   66-3074         4" & 6"        24.6          28.5     3.90
----------------------------------------------------------------------------------------------------------------------------------
  K  CEA Bernice Power Plant S/L            1972   72-2190            4"             0          0.14     0.14
----------------------------------------------------------------------------------------------------------------------------------
  K  Nikiski (Tesoro) to KPL                1977   77-1728.00         6"          23.8          24.6     0.75      3,979
----------------------------------------------------------------------------------------------------------------------------------
  K  Robinson Lp to Nikiski (Tesoro)        1977   77-1728.04         8"             0          23.8    24.01    126,765
----------------------------------------------------------------------------------------------------------------------------------
  K  KPL to  Bernice Lake Loop              1981   81-2180.03         6"          24.6          24.8     0.20
----------------------------------------------------------------------------------------------------------------------------------
  K  Beaver Creek Line                      1982   82-2290.02        12"             0          0.15     0.15
----------------------------------------------------------------------------------------------------------------------------------
  K  HEA Lateral                            1985   85-8500.04         6"             0           0.8     0.83      4,356
----------------------------------------------------------------------------------------------------------------------------------
  K  Sterling Gas Field Lateral             1993   9320.09            4"             0          0.64     0.64      3,397
----------------------------------------------------------------------------------------------------------------------------------
  K  N. Kenai Lateral Bypass                1995   9520.02            8"                                 0.92      4,835
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       N Kenai Sub Total    31.54
----------------------------------------------------------------------------------------------------------------------------------
     Anchorage Pipeline System
----------------------------------------------------------------------------------------------------------------------------------
  A  City Gate Pipeline                     1961                     12"          73.2          82.7     9.51     50,203
----------------------------------------------------------------------------------------------------------------------------------
  A   Tudor Lateral                         1968   68-417            12"             0           3.1     3.10
----------------------------------------------------------------------------------------------------------------------------------
  A  Muldoon Loop (Muldoon)                 1968   68-416            12"             0           3.7     3.70
----------------------------------------------------------------------------------------------------------------------------------
  A  Oilwell Rd. Lateral                    1968   68-416         10" & 12"          0          3.08     3.08
----------------------------------------------------------------------------------------------------------------------------------
  A  Fort Richardson Power Plant            1968   68-416             8"             0          1.06     1.06
----------------------------------------------------------------------------------------------------------------------------------
  A  Fort Richardson  Army Base             1971   71-470             6"             0           3.3     3.30
----------------------------------------------------------------------------------------------------------------------------------
  A  Muldoon Loop (Hillside)                1971   71-451            12"             0         10.94    10.94
----------------------------------------------------------------------------------------------------------------------------------
  A  International Airport Lateral          1967   67-4021         4" & 6"           0          1.33     1.33
----------------------------------------------------------------------------------------------------------------------------------
  A  West Side Feeder (Potter to Dim)       1976   76-570             8"             0           4.1     4.10
----------------------------------------------------------------------------------------------------------------------------------
  A  West Side Feeder (Dim. to Minn.)       1978   78-827             8"             0           6.4     6.40
----------------------------------------------------------------------------------------------------------------------------------
  A  City Gate Loop (Potter Valley)         1983   83-2340.01        16"             0           2.6     2.60
----------------------------------------------------------------------------------------------------------------------------------
  A  64th Lateral                           1989   89-8940.02        12"             0          3.37     3.37     17,790
----------------------------------------------------------------------------------------------------------------------------------
  A  Raspberry Lateral                      1990   90-9080.01         6"             0          0.87     0.87      4,573
----------------------------------------------------------------------------------------------------------------------------------
  A  International Airport Lateral          2001   501167000100    6" & 8"        1.33             3     1.67      8,800
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Anch. Sub Total    55.02
----------------------------------------------------------------------------------------------------------------------------------
     Beluga Pipeline System
----------------------------------------------------------------------------------------------------------------------------------
  B  Beluga Pipeline                        1984   84-30111.01       20"             0         101.6   101.60
----------------------------------------------------------------------------------------------------------------------------------
  B  Eagle River Lateral                    1987   87-8557            6"             0          0.18     0.17        923
----------------------------------------------------------------------------------------------------------------------------------
  B  Fire Lake Lateral                      1976   76-571             4"             0          3.65     3.65     19,260
----------------------------------------------------------------------------------------------------------------------------------
  B  Hiland Dr. Lateral                     1985   77-723, 8543    4" & 6"           0           3.1     3.10     16,368
----------------------------------------------------------------------------------------------------------------------------------
  B  Palmer Lateral                         1984   84-30211.01        6"             0           6.2     6.25     32,977
----------------------------------------------------------------------------------------------------------------------------------
  B  Wasilla Lateral                        1984   84-30211.11        4"             0           1.8     1.78      9,414
----------------------------------------------------------------------------------------------------------------------------------
  B  Lewis River Lateral                    1984   84-8460.01         6"             0           2.1     2.10     11,105
----------------------------------------------------------------------------------------------------------------------------------
  B  Vine Road Lateral                      1993   93-9320.03         4"             0          3.22     3.30     17,434
----------------------------------------------------------------------------------------------------------------------------------
  B  North Palmer Lateral                   1997   97-9720.04         4"             0          1.94     1.94     10,235
----------------------------------------------------------------------------------------------------------------------------------
  B  Seward Meridian Lateral                1999   99-0420002         4"             0          1.34     1.34      7,095
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Beluga Sub Total   125.24
----------------------------------------------------------------------------------------------------------------------------------
                                                        APC   SYSTEM   TOTAL                           353.37              353.37
                                                                                                    ------------------------------

<PAGE>





                               [GRAPHIC OMITTED]




<PAGE>
                                                                       EXHIBIT B


Categories of O&M Services Costs & Expenses
-------------------------------------------

Salaries
Payroll Accrual
Dues & Subscriptions
Building Service
Telephone
Membership Dues
Office Supplies
Postage & Printing
Travel
Meals & Entertainment
Professional Services
Management Fee
Property Insurance
Injuries & Damage
Group Insurance
Pension Plans
Other Employee Benefits
Miscellaneous Employee Expenses
Postretirement Medical Benefits
Directors Fees
Membership Fees/Dues Company
Safety
Advertising & Pubic Relations
Information Systems Expense
Training
Miscellaneous
Equipment, Spare Parts and Consumable expense
Subcontractor and Supplier expense
Taxes (other than income Taxes)





<PAGE>
                                                                       EXHIBIT B






                     SPECIAL CONTRACT FOR GAS TRANSPORTATION

                                     Between

                             ALASKA PIPELINE COMPANY

                                       and

                           ENSTAR NATURAL GAS COMPANY,
                        A DIVISION OF SEMCO ENERGY, INC.







                        Dated as of September [___], 2003



<PAGE>
                                TABLE OF CONTENTS


                                                                                                                Page
                                                                                                                ----
                                                                                                       
ARTICLE I  DEFINITIONS............................................................................................1
      1.1.                 AAA....................................................................................1
      1.2.                 Alaska Clock Time......................................................................1
      1.3.                 Approval Order.........................................................................1
      1.4.                 Base Term..............................................................................1
      1.5.                 Btu....................................................................................1
      1.6.                 Business Day...........................................................................1
      1.7.                 Commencement Date......................................................................1
      1.8.                 Commodity Rate.........................................................................1
      1.9.                 Day....................................................................................1
      1.10.                Delivered Gas..........................................................................1
      1.11.                Delivery Point(s)......................................................................2
      1.12.                Force Majeure..........................................................................2
      1.13.                Gas....................................................................................2
      1.14.                Gross Heating Value....................................................................2
      1.15.                Maximum Daily Quantity.................................................................2
      1.16.                Mcf....................................................................................2
      1.17.                Month..................................................................................2
      1.18.                Purchase Agreement.....................................................................2
      1.19.                RCA....................................................................................2
      1.20.                Receipt Point(s).......................................................................2
      1.21.                Renewal Term...........................................................................2
      1.22.                Reservation Rate.......................................................................3
      1.23.                Shipper's System.......................................................................3
      1.24.                Transporter's System...................................................................3
      1.25.                Year...................................................................................3

ARTICLE II  TRANSPORTATION........................................................................................3
      2.1.                 Shipper Delivers to Receipt Point(s); Transporter Delivers to Delivery Point(s)........3

ARTICLE III  PRESSURE.............................................................................................3
      3.1.                 Receipt Point Pressure.................................................................3

ARTICLE IV  MEASURING STATIONS....................................................................................3
      4.1.                 Transporter's Obligation to Install, Maintain and Operate Measurement
                           Facilities at the Receipt Point(s).....................................................3
      4.2.                 Allocation of Gas Streams at Receipt Point(s)..........................................4
      4.3.                 Transporter's Obligation to Install, Maintain and Operate Measurement
                           Facilities at the Delivery Point(s)....................................................4
      4.4.                 Estimated Volumes When Meters Are Inaccurate or Out of Service.........................4
      4.5.                 Verification of Accuracy of Equipment..................................................4
      4.6.                 Accuracy Requirements: Correction......................................................4
      4.7.                 Preservation of Records................................................................4

<PAGE>


                                                                                                         
ARTICLE V  MEASUREMENTS...........................................................................................5
      5.1.                 Parameters of Measurement..............................................................5

ARTICLE VI  QUALITY...............................................................................................5
      6.1.                 Heating Value of Gas...................................................................5
      6.2.                 Deleterious Matter: Specification......................................................6
      6.3.                 Transporter's Right to Refuse Gas......................................................6

ARTICLE VII  CHARGES & BILLING....................................................................................6
      7.1.                 Reservation Rate and Commodity Rate....................................................6
      7.2.                 Billing and Payment....................................................................6
      7.3.                 Reimbursement for Fees and Taxes.......................................................7

ARTICLE VIII  TERM................................................................................................7
      8.1.                 Term...................................................................................7

ARTICLE IX  WARRANTY OF TITLE.....................................................................................8
      9.1.                 Title and Custody of Gas...............................................................8

ARTICLE X  DISPUTE RESOLUTION.....................................................................................8
      10.1.                General................................................................................8

ARTICLE XI  RCA APPROVAL..........................................................................................9
      11.1.                RCA Approval...........................................................................9

ARTICLE XII  FORCE MAJEURE........................................................................................9
      12.1.                Definition of Force Majeure............................................................9
      12.2.                Effect of Force Majeure................................................................9

ARTICLE XIII  ADDRESSES..........................................................................................10
      13.1.                Notices...............................................................................10

ARTICLE XIV  MISCELLANEOUS.......................................................................................10
      14.1.                Assignments...........................................................................10
      14.2.                Binding Effect........................................................................10
      14.3.                Indemnification of Transporter........................................................10
      14.4.                Waiver................................................................................10
      14.5.                Governing Law.........................................................................11
      14.6.                No Third Party Beneficiary............................................................11
      14.7.                No Incidental or Consequential Damages................................................11
      14.8.                Prior Agreements Superseded...........................................................11
      14.9.                Amendment.............................................................................11
      14.10.               Counterparts..........................................................................11
      14.11.               Agreement Not to be Construed Against Either Party as Drafter.........................11
      14.12.               Headings..............................................................................11
      14.13.               Retention of Records..................................................................11


                                      (ii)
<PAGE>

Exhibits

Exhibit A         Receipt Points
Exhibit B         Transporter's System
Exhibit C         Applicable Transportation Rates
Exhibit D         Segment Maximum Daily Quantities

                                     (iii)
<PAGE>
                     SPECIAL CONTRACT FOR GAS TRANSPORTATION

         This Special Contract for Gas Transportation (this "Agreement"), dated
September [____], 2003 is between Alaska Pipeline Company, an Alaska corporation
("Transporter"), and ENSTAR Natural Gas Company, a Division of SEMCO Energy,
Inc., a Michigan corporation ("Shipper"), each sometimes referred to herein as a
"Party," and collectively, as the "Parties."

         In consideration of the covenants and conditions in this Agreement, the
parties agree as follows:

                                   ARTICLE I
                                   DEFINITIONS

         Section 1.1. AAA. The term "AAA" shall have the meaning set forth in
Section 10.1(b) hereof.

         Section 1.2. Alaska Clock Time. The term "Alaska Clock Time" shall mean
Alaska Daylight time when daylight savings time is in effect and Alaska Standard
Time when daylight savings time is not in effect.

         Section 1.3. Approval Order. The term "Approval Order" shall mean an
order of the RCA approving this Agreement and meeting to requirements of
Sections 8.3(c) and 8.4(c) of the Purchase Agreement.

         Section 1.4. Base Term. The term "Base Term" shall have the meaning set
forth in Article 8 hereof.

         Section 1.5. Btu. The term "Btu" shall mean British Thermal Unit.

         Section 1.6. Business Day. The term "Business Day" shall mean any Day
except Saturday, Sunday or any other Day on which banking institutions in the
City of New York, New York or the City of Anchorage, Alaska, are required or
permitted to close.

         Section 1.7. Commencement Date. The term "Commencement Date" shall mean
the Day following the Day on which the closing of the purchase of Transporter
occurs pursuant to the Purchase Agreement, following the receipt of the Approval
Order.

         Section 1.8. Commodity Rate. The term "Commodity Rate" shall have the
meaning set forth in Section 7.1(b) hereof.

         Section 1.9. Day. The term "Day" shall mean a period of twenty-four
(24) consecutive hours beginning at midnight Alaska Clock Time and ending at
11:59:59 p.m. Alaska Clock Time.

         Section 1.10. Delivered Gas. The term "Delivered Gas" shall mean the
volumes of Gas (in Mcf) transported each Month on Transporter's System.
Delivered Gas for a Month shall be equal to 99% of the difference between the
volume of Gas delivered by Shipper during such Month as measured at the Receipt
Points less the volume of Gas actually consumed by Transporter during such month
as metered at the applicable meters where such Gas is consumed.


<PAGE>

         Section 1.11. Delivery Point(s). The term "Delivery Point(s)" shall
mean any of the locations of interconnection between Transporter's System and
Shipper's gas distribution system at which Transporter delivers Gas to or on
behalf of Shipper in accordance with the terms of this Agreement.

         Section 1.12. Force Majeure. The term "Force Majeure" shall have the
meaning set forth in Section 12.1 hereof.

         Section 1.13. Gas. The term "Gas" shall mean natural gas of the quality
described in Article 6.

         Section 1.14. Gross Heating Value. The term "Gross Heating Value" shall
mean the total caloric value, expressed in Btu's, obtained by the complete
combustion, at constant pressure, of the amount of Gas which would occupy a
volume of one (1) cubic foot at a temperature of sixty (60) degrees Fahrenheit
if saturated with water vapor and under a pressure equivalent to 14.7 pounds per
square inch with air of the same temperature and pressure as the Gas, when the
products of combustion are cooled to the initial temperature of the Gas and air
and when the water formed by combustion is condensed to the liquid state.

         Section 1.15. Maximum Daily Quantity. The term "Maximum Daily Quantity"
shall mean the quantity of Gas equal to the maximum design capacity of the
relevant segment of Transporter's System at the time Gas transportation is
requested but shall not exceed the amounts set out on Exhibit D.

         Section 1.16. Mcf. The term "Mcf" shall mean one thousand (1,000) cubic
feet.

         Section 1.17. Month. The term "Month" shall mean a period beginning at
midnight Alaska Clock Time on the first Day of a calendar month and ending at
11:59:59 p.m. Alaska Clock Time on the last Day of the calendar month.

         Section 1.18. Purchase Agreement. The term "Purchase Agreement" shall
mean the Purchase and Sale Agreement dated September [__], 2003 by and between
SEMCO Energy, Inc. and Atlas Pipeline Partners, L.P.

         Section 1.19. RCA. The term "RCA" shall mean the Regulatory Commission
of Alaska or its successors.

         Section 1.20. Receipt Point(s). The term "Receipt Point(s)" shall mean
the locations at which Shipper will tender Gas to Transporter for transportation
in accordance with the terms of this Agreement. The Receipt Points are described
in Exhibit A. Exhibit A may be amended from time to time as agreed by Shipper
and Transporter for additions or deletions of Receipt Points.

         Section 1.21. Renewal Term. The term "Renewal Term" shall have the
meaning set forth in Article 8 hereof.

                                       2
<PAGE>

         Section 1.22. Reservation Rate. The term "Reservation Rate" shall have
the meaning set forth in Section 7.1(a) hereof.

         Section 1.23. Shipper's System. The term "Shipper's System" shall mean
the natural gas distribution system of Shipper connected to Transporter's
System.

         Section 1.24. Transporter's System. The term "Transporter's System"
shall mean Transporter's natural gas transmission pipeline system described in
Exhibit B to this Agreement and any capital improvements added or made to the
Transporter's System during the term of this Agreement.

         Section 1.25. Year. The term "Year" shall mean a period of twelve (12)
consecutive Months beginning at midnight Alaska Clock Time on January 1 and
ending at 11:59:59 p.m. Alaska Clock Time on the following December 31.

                                   ARTICLE II
                                 TRANSPORTATION

         Section 2.1. Shipper Delivers to Receipt Point(s); Transporter Delivers
to Delivery Point(s). Shipper shall tender to the Receipt Points all Gas it
wants Transporter to transport, provided, however, that Transporter shall not be
obligated to accept more than the Maximum Daily Quantity in any Day. The
Transporter will deliver the volume of Gas received from Shipper, less Gas used
for compression, lost or otherwise unaccounted for, to the Delivery Points. The
Transporter shall never be obligated to deliver during any Day more Gas than the
Shipper tenders for transport during that Day.

                                  ARTICLE III
                                    PRESSURE

         Section 3.1. Receipt Point Pressure. Shipper shall cause Gas to be
delivered to the Receipt Point(s) at a pressure at least equal to the minimum
delivery pressure for such Receipt Point(s) and not greater than the maximum
allowable pressure specified in Transporter's technical requirements for such
Receipt Point(s). Transporter from time to time may adjust the maximum allowable
pressure at a Receipt Point and if such adjustment is made, Transporter shall
promptly notify Shipper.

                                   ARTICLE IV
                               MEASURING STATIONS

         Section 4.1. Transporter's Obligation to Install, Maintain and Operate
Measurement Facilities at the Receipt Point(s). Transporter shall maintain and
operate, or cause to be operated, at Transporter's expense, measurement stations
in existence on the Commencement Date or subsequently installed pursuant to
Section 5.2.1 at or near the Receipt Point(s). Unless otherwise determined by
Transporter, a Receipt Point measurement station shall consist of (a) standard
measuring equipment conforming to the requirements of American Gas Association
Gas Measurement Committee Reports now in effect or as amended or supplemented
during the term of this Agreement, (b) appurtenant facilities, (c) hydrometers,
and (d) data telemetry equipment. Shipper shall have access to the Receipt Point
measurement station(s) at which it tenders Gas at reasonable hours, but
Transporter will make or cause to be made, all calibrations, measurements and
adjustments.

                                       3
<PAGE>

         Section 4.2. Allocation of Gas Streams at Receipt Point(s). Shipper's
Gas may be commingled and measured in common with other Gas, including
Transporter's purchased Gas, at the Receipt Points. Commingled Gas shall be
allocated on a fair and reasonable basis, among the various shippers and
Transporter, by Transporter.

         Section 4.3. Transporter's Obligation to Install, Maintain and Operate
Measurement Facilities at the Delivery Point(s). The Transporter shall maintain
and operate or cause to be operated, at Transporter's expense, the existing
measurement facilities at or near the Delivery Point(s).

         Section 4.4. Estimated Volumes When Meters Are Inaccurate or Out of
Service. The volume of Gas delivered hereunder at each Receipt Point shall be
calculated in accordance with Section 5.1 and the American Gas Association
standards applicable to the type of measurement facilities installed. In the
event a meter is out of service or registering inaccurately, the volumes of Gas
delivered shall be estimated:

                  (a) by using the registration of Shipper's check meter or
meters if installed and accurately registering, or in the absence of (a),

                  (b) by correcting the error if the percentage of error is
ascertainable by calibration, test, or mathematical calculations, or in the
absence of both (a) and (b), then,

                  (c) by estimating the quantity of deliveries based on
deliveries during comparable periods under similar conditions when the meter was
registering accurately.

         Section 4.5. Verification of Accuracy of Equipment. Transporter will
test the accuracy of the measuring equipment for Receipt Points at least once a
month. If either party notifies the other that it desires a special test of the
accuracy of any measuring equipment, the parties will test promptly. Each Party
shall bear the cost of its own transportation and related expenses involved in
the testing of meters.

         Section 4.6. Accuracy Requirements: Correction. If, upon test, any
measuring equipment is found to be not more than one percent (1%) inaccurate,
previous records of such equipment shall be considered accurate. In the event
any measuring equipment is found to be inaccurate by more than one percent (1%),
at a recording corresponding to the average hourly rate of Gas flow for the
period since the last preceding test, any previous records of the equipment will
be corrected to zero error for any period known definitely or agreed upon. If a
period of inaccuracy is not definitely known or agreed upon, the correction
shall be made for a period of the lesser of sixteen (16) Days or one-half (1/2)
of the time elapsed since the date of last test. The correction shall fully
settle all claims based on the inaccuracy. Any measuring equipment found by test
to be inaccurate will be adjusted at once to measure accurately.

         Section 4.7. Preservation of Records. The Transporter shall preserve
for a period of at least six (6) Years all test data, charts, and other similar
records.

                                       4
<PAGE>

                                   ARTICLE V
                                  MEASUREMENTS

         Section 5.1. Parameters of Measurement. The calculation of the volumes
of Gas transported hereunder shall be governed by the following:

                  (a) The unit of volume measurement shall be one (1) cubic foot
of Gas at the base temperature of sixty degrees Fahrenheit (60(degree)F.) and at
a pressure of fourteen and sixty-five hundredths (14.65) pounds per inch
absolute with correction for deviation from the Ideal Gas Law according to
ANSI/API 2530 or AGA Report No. 8, as applicable.

                  (b) The average absolute atmospheric pressure shall be assumed
to be fourteen and seven-tenths (14.7) pounds per square inch, irrespective of
actual elevation or location of the measurement point above sea level or
variations in actual atmospheric pressure.

                  (c) The specific gravity of Gas shall be determined by the use
of a spot test method or, if the parties later agree in writing, by the use of a
recording gravitometer generally accepted in the industry. If a recording
gravitometer is used, the arithmetic average of the specific gravity of Gas
flowing through the meters shall be used in computing Gas volumes. If a spot
test method is used, the specific gravity of the Gas shall be determined at
quarterly intervals, or more often if changes in specific gravity indicate that
it is necessary. Any such test shall determine the specific gravity to be used
in computation of volumes effective the first Day of the following Month and
shall be used until changed in like manner by subsequent test.

                  (d) Where determined necessary by Transporter, the actual
temperature of Gas shall be determined by a recording thermometer so installed
that it will record the temperature of the Gas flowing through the meters. The
average of the recorded temperatures to the nearest one degree Fahrenheit
(1(degree)F.) obtained while Gas is being delivered shall be used in computing
measurements for that Day.

                                   ARTICLE VI
                                     QUALITY

         Section 6.1. Heating Value of Gas.

                  (a) Gas shall have a Gross Heating Value of not less than nine
hundred fifty (950) Btu's per cubic foot nor more than one thousand fifty
(1,050) Btu's per cubic foot. Transporter shall have the right to waive such
Btu's per cubit foot content limits if Transporter is able to accept Gas outside
such limits without affecting Transporter's operations.

                  (b) The Gross Heating Value of Gas shall be determined from a
representative composite Gas sample taken at the point of measurement by
periodic tests to be conducted monthly by Transporter or at such other intervals
as the parties may mutually agree. The determination shall be made by means of a
calorimeter by calculation from the component analysis using NGPA Publication
2145, as it may be revised, entitled "Physical Constants of Paraffin
Hydrocarbons or Other Compounds of Natural Gas."

                                       5
<PAGE>

         Section 6.2. Deleterious Matter: Specification. Gas shall be
commercially free of dust, gum, gum-forming constituents, or other liquid or
solid matter which may separate from the Gas in transportation, shall not exceed
one hundred twenty degrees Fahrenheit (120(degree) F.), and shall not contain:

                  (a) more than four (4) pounds of water per million cubic feet
of Gas;

                  (b) more than one (1) grain of hydrogen sulfide per one
hundred (100) cubic feet of Gas;

                  (c) more than twenty (20) grains of sulphur per one hundred
(100) cubic feet of Gas;

                  (d) in excess of:

                      (i) three percent (3%) by volume of carbon dioxide; or

                      (ii) one percent (1%) by volume of oxygen.

         Section 6.3. Transporter's Right to Refuse Gas. Transporter shall have
the right to refuse to accept delivery of any Gas failing to meet the quality
requirements of this Article VI.

                                  ARTICLE VII
                                CHARGES & BILLING

         Section 7.1. Reservation Rate and Commodity Rate. For each Month during
the Base Term and any Renewal Term, Shipper shall pay and Transporter shall
accept as payment for Transportation service provided in accordance with this
Agreement the sum of the following amounts, each computed by use of the
applicable rates set forth on Exhibit C :

                  (a) The amount of the Reservation Rate set forth on Exhibit C
(the "Reservation Rate"); plus

                  (b) the amount, calculated by multiplying the Commodity Rate,
set forth on Exhibit C (the "Commodity Rate"), by the volumes, stated in Mcf, of
Delivered Gas during the Month.

         Section 7.2. Billing and Payment.

                  (a) Payment of the Reservation Rate for the Month in which the
Commencement Date occurs shall be due on the Commencement Date. Payment of the
Reservation Rate for each succeeding Month shall be due, without invoice, on the
first Business Day of such Month.

                  (b) With respect to amounts payable other than the Reservation
Rate, Transporter shall deliver to Shipper a monthly statement for
Transportation services for the preceding Month, which shall detail all charges
payable by Shipper during the preceding Month and the basis for the calculation
of the amount due. Shipper shall pay Transporter the full amount due by wire
transfer of immediately available funds to the account designated by Transporter
no later than ten (10) days after Shipper's receipt of such statement.

                                       6
<PAGE>

                  (c) If Shipper disagrees with any statement, it shall promptly
notify Transporter in writing of its disagreement and the facts providing the
basis therefor. If the Parties are unable to agree upon a settlement of the
contested portion of a statement, the dispute shall be addressed in accordance
with Article 10. The existence of a dispute with regard to any portion of a
payment due shall not relieve Shipper of the obligation to pay any uncontested
amounts due under this Agreement or to perform any other obligation under this
Agreement. Shipper shall pay, no later than ten (10) days after Shipper's
receipt of the statement, any disputed amount into a separate interest bearing
account at First National Bank of Alaska or its successor and shall notify
Transporter of such deposit. Any interest which may accrue in such account shall
be payable to the Party in whose favor the dispute is resolved, and any such
interest actually paid shall reduce the interest payments required to be made
pursuant to subparagraph (e) to this Section 7.2 accordingly.

                  (d) Each Party shall have the right during normal business
hours to examine the books, records and charts of the other Party to the extent
necessary to verify the accuracy of any invoice related to this Agreement.
Claims for adjustments on account of subsequently discovered errors must be made
within twelve (12) Months of the date the statement was issued. The Party
discovering such an error shall promptly notify the other Party in writing of
the errors believed in good faith to have occurred and the facts providing the
basis for such belief. Adjustment of overpayments or underpayments shall be made
within ten (10) days after resolution of such subsequently discovered errors.

                  (e) If either Party shall fail to make any payment required by
this Agreement when due, including contested portions of bills, or if any Party
makes an overpayment requiring a refund by the other Party, the amount due shall
bear interest, from the due date of the payment or the date on which the
overpayment was made until the date of payment, at a rate for the first 10 days
equal to the rate published as the "prime rate" in The Wall Street Journal for
the first Business Day of the month in which such invoice is due, plus 2%, and
thereafter, at a rate per annum equal to 15%, but in no event at any rate that
is greater than the maximum interest rate allowed by applicable Laws. If the due
date of any payment is not a Business Day, then the next Business Day shall be
the last day on which payment can be paid without interest charges being
assessed.

         Section 7.3. Reimbursement for Fees and Taxes. In addition to the
transportation charges provided for in Article 7.1, Shipper will reimburse
Transporter for all user fees, taxes (except income and ad valorem taxes), and
the like, levied upon the transportation of the Gas.

                                  ARTICLE VIII
                                      TERM

         Section 8.1. Term. Although this Agreement has been executed prior to
the Commencement Date, neither party shall have any obligation hereunder until
the Commencement Date. Unless earlier terminated, this Agreement shall remain in
full force and effect for a period of ten years from the Commencement Date (the
"Base Term"). The Base Term automatically shall be extended for successive
additional one-year periods (each, a "Renewal Term"), unless either Party gives
the other Party notice of its intention to terminate this Agreement at least one
year prior to the end of the Base Term or 180 days prior to the end of the then
current Renewal Term. If the Purchase Agreement is terminated without the
purchase of Transporter contemplated therein occurring, this Agreement shall
terminate on the same date as the Purchase Agreement terminates and no Party
shall have any liability hereunder.

                                       7
<PAGE>

                                   ARTICLE IX
                                WARRANTY OF TITLE

         Section 9.1. Title and Custody of Gas. As between Transporter and
Shipper, Shipper shall be deemed to be in exclusive possession and control of
the Gas being transported pursuant to this Agreement until such Gas is tendered
to Transporter at the Delivery Point(s) and after such Gas has been redelivered
to or for the account of Shipper at the Delivery Point(s). Shipper warrants that
it has, or will have at the time of tender of Gas to Transporter at the Receipt
Point(s), good title to such Gas. Shipper further represents and warrants that
the Gas will remain free from all liens, encumbrances and other adverse claims
while in the custody of Transporter. Custody of Shipper's Gas will pass to
Transporter at the Receipt Point(s) and custody will pass from Transporter to
Shipper at the Delivery Point(s). Title to Shipper's Gas will remain with
Shipper at all times. Transporter shall have the right to reject any Gas the
title to which is in dispute, or which is encumbered by a lien, encumbrance or
other adverse claim of any kind.

                                   ARTICLE X
                               DISPUTE RESOLUTION

         Section 10.1. General. Any dispute arising under this Agreement or
otherwise in connection with this Agreement (other than a dispute as to rates
which shall be subject to the exclusive jurisdiction of the RCA) shall be
resolved pursuant to this Section 10.1.

                  (a) Any Party has the right to request the other to meet to
discuss a dispute. The Party requesting the meeting will give at least ten (10)
Business Days notice in writing of the subject it wishes to discuss, provide a
written statement of the dispute, and designate an officer of the Party with
complete power to resolve the dispute to attend the meeting. Within five (5)
Business Days after receipt of such request, the Party receiving the request
will provide a responsive written statement and will designate an officer of the
Party who will attend the meeting with complete power to resolve the dispute.

                  (b) If the meeting fails to resolve the dispute by a signed
agreement among the officers, either Party may submit the dispute for binding
arbitration administered by the American Arbitration Association ("AAA") under
its Commercial Arbitration Rules before a single arbitrator, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.

                  (c) The Parties agree to make discovery and disclosure of all
matters relevant to the dispute to the extent and in the manner provided by the
Federal Rules of Civil Procedure. The arbitrator will rule on all requests for
discovery and disclosure and discovery shall be completed within 60 days after
the date of selection of the arbitrator. The arbitrator may consider any matter
relevant to the subject to the dispute and shall follow the statutes and
decisions of the substantive law of Alaska relevant to the subject. The
arbitrator shall not have the authority or power to alter, amend or modify any
of the terms and conditions of this Agreement. The arbitrator shall issue a
final ruling within 150 days after the date of selection of the arbitrator.

                                       8
<PAGE>

                  (d) The ruling of the arbitrator shall be in writing and
signed and shall be final and binding upon the Parties. The fees and expenses of
counsel, witnesses and employees of the Parties and all other costs and expenses
incurred exclusively for the benefit of the Party incurring the same shall be
borne by the Party incurring such fees and expenses. All other fees and expenses
including compensation for the arbitrator shall be divided equally between the
Parties. All meetings and arbitrations held pursuant to this Section 10.1 shall
take place in Anchorage, Alaska.

                                   ARTICLE XI
                                  RCA APPROVAL

         Section 11.1. RCA Approval. This Agreement is subject to approval by
the RCA by issuance of the Approval Order. This Agreement is subject to
amendment by the RCA after giving the parties notice and an opportunity to be
heard.

                                  ARTICLE XII
                                  FORCE MAJEURE

         Section 12.1. Definition of Force Majeure. The term "Force Majeure"
shall mean: (a) acts of God; (b) governmental action, acts of the public enemy,
wars, blockades, insurrections, riots or epidemics; (c) strikes, lockouts or
other industrial disturbances of third parties; (d) volcanic eruptions,
landslides, lightning, earthquakes, fires, hurricanes, tornadoes, high winds,
storms, storm warnings, floods, tsunami, or washouts; (e) arrests and restraints
of governments and people, or civil disturbances; (f) explosions, breakage or
accidents to machinery or lines of pipe; and (g) any other causes, whether of
the kind enumerated or otherwise, not reasonably within the control of the Party
and which by the exercise of due diligence the Party is unable to prevent or
overcome. "Force Majeure" shall also include: (a) in those instances where
either Party is required to obtain servitudes, right-of-way grants, permits or
licenses to enable the Party to fulfill its obligations, the inability of the
Party to acquire, or the delays encountered by the Party, despite the best
efforts, in acquiring, at reasonable cost, the servitudes, right-of-way grants,
permits or licenses; (b) in those instances where either Party is required to
furnish materials and supplies for the purpose of constructing, repairing or
maintaining facilities or is required to secure permits or permission from any
governmental agency to enable the Party to fulfill its obligations, the
inability of the Party to acquire, or the delays encountered by the Party,
despite its best efforts in acquiring at reasonable cost the materials and
supplies, permits and permissions; and (c) any "Force Majeure Event" under the
Operation and Maintenance and Administrative Services Agreement dated as of the
Commencement Date between Shipper and Transporter.

         Section 12.2. Effect of Force Majeure. If by reason of Force Majeure, a
Party is rendered unable, wholly or in part, to carry out its obligations under
this Agreement, the Party shall give the other Party notice of the Force Majeure
as soon as reasonably possible. The obligations (except the obligation to make
payments when due) which the Party cannot fulfill because of the Force Majeure
and its effects shall be suspended for the duration of the Force Majeure and its
effects, but for no longer period. A Party affected by Force Majeure shall use
due diligence to remedy its effects as quickly as possible.

                                       9
<PAGE>

                                  ARTICLE XIII
                                    ADDRESSES

         Section 13.1. Notices. Notices provided in this Agreement shall be in
writing, unless other means are specified, and shall be effective upon delivery
by hand, by U.S. mail first class postage prepaid, or facsimile or electronic
communication before 5 p.m. Alaska Clock Time at the addresses provided by such
Party prior to the Commencement Date.

         Each Party shall promptly notify the other party in writing of any
change in persons to receive notice or the addresses to which notices should be
delivered.

                                  ARTICLE XIV
                                  MISCELLANEOUS

         Section 14.1. Assignments. Any company which shall succeed by purchase,
merger or consolidation to all or substantially all of the System of a Party
shall be entitled to the rights and shall be subject to the obligations of its
predecessor in title under this Agreement. Either Party may also assign or
pledge this Agreement under the provisions of any mortgage, deed of trust,
indenture, or similar instrument which it has executed or may execute hereafter
covering substantially all of its properties. Except as permitted by this
Section 14.1, neither Party shall assign this Agreement or any of its rights
hereunder unless it first shall have obtained the consent thereto in writing of
the other Party, which consent shall not be unreasonably withheld, conditioned
or delayed; provided, further, however, that neither Party shall be released
from its obligations hereunder without the consent in writing of the other
Party.

         Section 14.2. Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the Parties and their respective permitted
successors and assigns.

         Section 14.3. Indemnification of Transporter. In the absence of gross
negligence or willful misconduct by Transporter, Shipper waives any claims that
it may have against Transporter arising out of or in any way connected with (a)
the quality, use or condition of the Gas after delivery from Transporter's
System at the Delivery Point(s) and (b) any losses or shrinkage of Gas during or
resulting from transportation hereunder. Shipper agrees to provide Transporter
with a waiver of subrogation of Shipper's insurance company for all claims
subject to the indemnification provisions of this paragraph.

         Section 14.4. Waiver. No omission or delay in the exercise of any right
under this Agreement shall impair any such right or shall be taken, construed or
considered as a waiver or relinquishment thereof, but any such right may be
exercised from time to time and as often as may be deemed expedient. In the
event that any agreement or covenant herein shall be breached and thereafter
waived, such waiver shall be limited to the particular breach so waived and
shall not operate or be construed as a waiver of any future default or defaults,
whether of a like or a different character.

                                       10
<PAGE>

         Section 14.5. Governing Law. This Agreement shall be interpreted,
performed and enforced in accordance with the laws of the State of Alaska,
without giving effect to its conflict of laws principles.

         Section 14.6. No Third Party Beneficiary. It is expressly agreed that
there is no third party beneficiary of this Agreement, and that this Agreement
does not impart enforceable rights to anyone other than a Party or a permitted
successor or assign of a Party.

         Section 14.7. No Incidental or Consequential Damages. Neither party
shall have any liability to the other for incidental or consequential damages
resulting from this Agreement.

         Section 14.8. Prior Agreements Superseded. This Agreement shall
completely and fully supersede all prior understandings or agreements, written
and oral, between the Parties relating to the subject matter hereof.

         Section 14.9. Amendment. This Agreement shall not be amended unless
such amendment is in writing and signed by the Parties.

         Section 14.10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.

         Section 14.11. Agreement Not to be Construed Against Either Party as
Drafter. The parties recognize that this Agreement is the product of the joint
efforts of the parties and agree that it shall be construed according to its
plain meaning and shall not be construed against either party as drafter.

         Section 14.12. Headings. The headings used for Articles and Sections
herein are for convenience and reference purpose only and shall in no way affect
the meaning or interpretation of this Agreement.

         Section 14.13. Retention of Records. Each Party shall maintain and
preserve all records of data and information necessary to calculate payments or
evidence of fulfillment of obligations under this Agreement or pertaining to
facilities associated with performance of obligations under this Agreement for a
period of not less than six (6) years, or such longer period as may be required
by any governmental or other regulatory authority with jurisdiction over a Party
or this Agreement.

         IN WITNESS WHEREOF, the Parties have executed this Agreement in three
(3) originals.


 Alaska Pipeline Company                      ENSTAR Natural Gas Company,
                                              A Division of SEMCO Energy, Inc.

 By:                                          By:
    ----------------------------------           -------------------------------

 Title:                                       Title:
       -------------------------------              ----------------------------

 Date:                                        Date:
      --------------------------------             -----------------------------


                                       11
<PAGE>

                                    EXHIBIT A
                                       TO
                     SPECIAL CONTRACT FOR GAS TRANSPORTATION

         The following points are the "Receipt Points" for receipt of gas
deliveries:

1. Beluga-Anchorage Pipeline

   a. Beluga Unit Area Connection (ENSTAR/APC Station B601, Meters 170 A & B) At
      the upstream flange of Alaska Pipeline Company's meter at or near the
      inlet of Alaska Pipeline Company's Beluga-Anchorage pipeline located
      within the West 1/2, Southwest 1/4, of Section 26, Township 13 North,
      Range 10 West, Kenai Peninsula Borough, Seward Meridian, State of Alaska.

   b. Beluga Pipeline Company Connection (ENSTAR/APC Station B605, Meters 700 &
      701) At the upstream flange of Alaska Pipeline Company's meter at or near
      the connection of Alaska Pipeline Company's Beluga-Anchorage pipeline and
      Beluga Pipeline Company's Granite Point-Beluga pipeline located within the
      West 1/2 of the Southwest 1/4 of Section 26, Township 13 North, Range 10
      West, Kenai Peninsula Borough, Seward Meridian, State of Alaska.

   c. Pretty Creek Unit Connection (ENSTAR/APC Station B602, Meters 189 A & B)
      At the upstream flange of Alaska Pipeline Company's meter at or near the
      connection of the pipeline from the Pretty Creek Unit and Alaska Pipeline
      Company's Beluga-Anchorage pipeline located in the South 1/2 of Section 28
      Township 14 North, Range 9 West, Matanuska-Susitna Borough, Seward
      Meridian, State of Alaska.

   d. Lewis River Unit Connection (ENSTAR/APC Station B603, Meters 168 A &B) At
      the upstream flange of Alaska Pipeline Company's meter at or near the
      connection of the pipeline from the Lewis River Unit and Alaska Pipeline
      Company's Beluga-Anchorage pipeline located in the Northwest 1/4 of
      Section 2, Township 14 North, Range 9 West, Matanuska-Susitna Borough,
      Seward Meridian, State of Alaska.

   e. Stump Lake/Ivan River Connection (ENSTAR/APC Station B604, Meters 600 &
      601) At the upstream flange of Alaska Pipeline Company's meter located at
      or near the connection of the pipeline from the Stump Lake and Ivan River
      units and Alaska Pipeline Company's Beluga-Anchorage pipeline the
      Southeast 1/4 of the Northwest 1/4 of the Northeast 1/4 of the Southwest
      1/4 of Section 22, Township 14 North, Range 9 West, Seward Meridian, State
      of Alaska.


<PAGE>

2. Kenai-Anchorage Pipeline

   a. Kenai Unit Area Connection (ENSTAR/APC Station K670, Meters 500 & 505) At
      the upstream flange of the Alaska Pipeline Company's master meter located
      at or near the inlet of the Alaska Pipeline Company's Kenai-Anchorage
      pipeline in Section 30, Township 5 North, Range 11 West, Kenai Peninsula
      Borough, Seward Meridian, State of Alaska.

   b. Beaver Creek Unit Area Connection (ENSTAR/APC Station K671, Meter 1100 A)
      At the upstream flange of the Alaska Pipeline Company's meter at or near
      the connection of the pipeline from the Beaver Creek Unit and Alaska
      Pipeline Company's Royalty Pipeline located in the Northwest 1/4 of the
      Southwest 1/4 of Section 7, Township 6 North, Range 10 West, Kenai
      Peninsula Borough, Seward Meridian, State of Alaska.

   c. CIGGS/KNPL Pipeline Connection (ENSTAR/APC Station K673, Meters 209 & 413)
      At the upstream flange of the Alaska Pipeline Company's meter at or near
      the connection of the Alaska Pipeline Company's Royalty Pipeline and the
      CIGGS and KNPL pipelines located in the Northeast 1/4 of the Northeast 1/4
      of Section 21, Township 7 North, Range 12 West, Kenai Peninsula Borough,
      Seward Meridian, State of Alaska.

   d. Kenai City Gate Connection (ENSTAR/APC Station K674, Meter 404) At the
      upstream flange of the Alaska Pipeline Company's meter at or near the
      connection of the Kenai-Nikiski pipeline located in the Northeast 1/4 of
      Section 5, Township 5 North, Range 11 West, City of Kenai, Kenai Peninsula
      Borough, Seward Meridian, State of Alaska.

   e. Wildwood Station Connection (ENSTAR/APC Station K675, Meter 412) At the
      upstream flange of the Alaska Pipeline Company's meter at or near the
      connection of the Kenai-Nikiski pipeline located in the Southeast 1/4 of
      Section 26, Township 6 North, Range 12 West, City of Kenai, Kenai
      Peninsula Borough, Seward Meridian, State of Alaska.

   f. West Fork Connection (ENSTAR/APC Station K676, Meters 924 & 925) At the
      upstream flange of Alaska Pipeline Company's meter at or near the
      connection of the pipeline from the West Fork field and Alaska Pipeline
      Company's Kenai-Anchorage pipeline located in the South 60 feet of the
      Northwest 1/4 of the Northwest 1/4 of Section 12, Township 5 North, Range
      9 West, Kenai Peninsula Borough, Seward Meridian, State of Alaska.



<PAGE>


   g. Sterling Unit Connection (ENSTAR/APC Station K677, Meter 9100) At the
      upstream flange of the Alaska Pipeline Company's meter at or near the
      connection of the pipeline from the Sterling Unit and Alaska Pipeline
      Company's Royalty Pipeline located within the Northeast 1/4 of Section 9,
      Township 5 North, Range 10 West, Kenai Peninsula Borough, Seward Meridian,
      State of Alaska.





<PAGE>


                                    EXHIBIT B
                                       TO
                     SPECIAL CONTRACT FOR GAS TRANSPORTATION


                      DESCRIPTION OF TRANSPORTATION SYSTEM


         The APC's System consists of the following:

         Kenai Pipeline System:

         The Kenai Pipeline System consists of combined 142 miles of looped
12-inch and 16-inch diameter pipeline, including a nine mile twin crossing of
the Turnagain Arm of the Cook Inlet, plus 25 miles of 8-inch diameter pipeline
known as the Royalty Lateral and six miles of 12-inch, 6-inch, and 4-inch
diameter lateral pipelines connecting to the Royalty Lateral. All lines have a
maximum allowable operating pressure (MAOP) of 300 pounds per square inch gage
(psig) or greater. The Kenai Pipeline has two compressor stations totaling 8,400
horsepower.

         Beluga Pipeline System:

         The Beluga Pipeline System consists of 102 miles of 20-inch pipeline
and 23 miles of 6-inch and 4-inch diameter lateral pipelines connecting to the
20-inch pipeline. All lines have a MAOP of 300 psig or greater. It does not have
any compression capacity.

         The Anchorage Pipeline System:

         The Anchorage Pipeline system consists of 55 miles of 12-inch, 10-inch,
8-inch, 6-inch and 4-inch diameter pipelines and lateral pipelines in the
greater Anchorage area interconnecting with the Kenai Pipeline System at Potter
Station and with the Beluga Pipeline System at East Anchorage City Gas Station.
All lines have a MAOP of 300 psig or greater.

         The locations of the Kenai Pipeline System, the Beluga Pipeline System
and the Anchorage Pipeline System are shown on the attached map.



<PAGE>
                              APC PIPELINE SUMMARY


                                                                            Milepost  Designation
----------------------------------------------------------------------------------------------------------------------------------
Sys. Pipeline Name                       Year           ER #      Pipe Size    From         To      Length     Length     Miles
                                         Installed                                                   (miles)   (feet)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                  
     Kenai Pipeline
----------------------------------------------------------------------------------------------------------------------------------
  K  "A" Kalifonski to Burnt Island         1960                     12"           2.3          64.5    62.12    327,977
----------------------------------------------------------------------------------------------------------------------------------
  K   "A" Turnagain Crossing                1960                     12"          64.5          73.2     8.68     45,841
----------------------------------------------------------------------------------------------------------------------------------
  K   "B" Turnagain Crossing                1960                     12"          64.5          73.2     8.58     45,289
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Kalifonski to Kenai River       1975   74-513.2       12" & 16"        2.3           6.7     4.40
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Gutenrath to MP50.5             1975   74-513.2       12" & 16"       21.4          50.5    29.10
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Kenai River to MP 21.4          1978   78-1831.03     12" & 16"        6.7          21.4    14.70
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp MP 50.5 to MP 64.5              1978   78-1831.03     12" & 16"       50.5          64.5    14.00
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Kenai Sub Total   141.58
----------------------------------------------------------------------------------------------------------------------------------
     North Kenai Lateral
----------------------------------------------------------------------------------------------------------------------------------
  K  KPL Junction to East Forelands         1966   66-3074         4" & 6"        24.6          28.5     3.90
----------------------------------------------------------------------------------------------------------------------------------
  K  CEA Bernice Power Plant S/L            1972   72-2190            4"             0          0.14     0.14
----------------------------------------------------------------------------------------------------------------------------------
  K  Nikiski (Tesoro) to KPL                1977   77-1728.00         6"          23.8          24.6     0.75      3,979
----------------------------------------------------------------------------------------------------------------------------------
  K  Robinson Lp to Nikiski (Tesoro)        1977   77-1728.04         8"             0          23.8    24.01    126,765
----------------------------------------------------------------------------------------------------------------------------------
  K  KPL to  Bernice Lake Loop              1981   81-2180.03         6"          24.6          24.8     0.20
----------------------------------------------------------------------------------------------------------------------------------
  K  Beaver Creek Line                      1982   82-2290.02        12"             0          0.15     0.15
----------------------------------------------------------------------------------------------------------------------------------
  K  HEA Lateral                            1985   85-8500.04         6"             0           0.8     0.83      4,356
----------------------------------------------------------------------------------------------------------------------------------
  K  Sterling Gas Field Lateral             1993   9320.09            4"             0          0.64     0.64      3,397
----------------------------------------------------------------------------------------------------------------------------------
  K  N. Kenai Lateral Bypass                1995   9520.02            8"                                 0.92      4,835
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       N Kenai Sub Total    31.54
----------------------------------------------------------------------------------------------------------------------------------
     Anchorage Pipeline System
----------------------------------------------------------------------------------------------------------------------------------
  A  City Gate Pipeline                     1961                     12"          73.2          82.7     9.51     50,203
----------------------------------------------------------------------------------------------------------------------------------
  A   Tudor Lateral                         1968   68-417            12"             0           3.1     3.10
----------------------------------------------------------------------------------------------------------------------------------
  A  Muldoon Loop (Muldoon)                 1968   68-416            12"             0           3.7     3.70
----------------------------------------------------------------------------------------------------------------------------------
  A  Oilwell Rd. Lateral                    1968   68-416         10" & 12"          0          3.08     3.08
----------------------------------------------------------------------------------------------------------------------------------
  A  Fort Richardson Power Plant            1968   68-416             8"             0          1.06     1.06
----------------------------------------------------------------------------------------------------------------------------------
  A  Fort Richardson  Army Base             1971   71-470             6"             0           3.3     3.30
----------------------------------------------------------------------------------------------------------------------------------
  A  Muldoon Loop (Hillside)                1971   71-451            12"             0         10.94    10.94
----------------------------------------------------------------------------------------------------------------------------------
  A  International Airport Lateral          1967   67-4021         4" & 6"           0          1.33     1.33
----------------------------------------------------------------------------------------------------------------------------------
  A  West Side Feeder (Potter to Dim)       1976   76-570             8"             0           4.1     4.10
----------------------------------------------------------------------------------------------------------------------------------
  A  West Side Feeder (Dim. to Minn.)       1978   78-827             8"             0           6.4     6.40
----------------------------------------------------------------------------------------------------------------------------------
  A  City Gate Loop (Potter Valley)         1983   83-2340.01        16"             0           2.6     2.60
----------------------------------------------------------------------------------------------------------------------------------
  A  64th Lateral                           1989   89-8940.02        12"             0          3.37     3.37     17,790
----------------------------------------------------------------------------------------------------------------------------------
  A  Raspberry Lateral                      1990   90-9080.01         6"             0          0.87     0.87      4,573
----------------------------------------------------------------------------------------------------------------------------------
  A  International Airport Lateral          2001   501167000100     6" & 8"        1.33            3     1.67      8,800
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                         Anch. Sub Total    55.02
----------------------------------------------------------------------------------------------------------------------------------
     Beluga Pipeline System
----------------------------------------------------------------------------------------------------------------------------------
  B  Beluga Pipeline                        1984   84-30111.01       20"             0         101.6   101.60
----------------------------------------------------------------------------------------------------------------------------------
  B  Eagle River Lateral                    1987   87-8557            6"             0          0.18     0.17        923
----------------------------------------------------------------------------------------------------------------------------------
  B  Fire Lake Lateral                      1976   76-571             4"             0          3.65     3.65     19,260
----------------------------------------------------------------------------------------------------------------------------------
  B  Hiland Dr. Lateral                     1985   77-723, 8543    4" & 6"           0           3.1     3.10     16,368
----------------------------------------------------------------------------------------------------------------------------------
  B  Palmer Lateral                         1984   84-30211.01        6"             0           6.2     6.25     32,977
----------------------------------------------------------------------------------------------------------------------------------
  B  Wasilla Lateral                        1984   84-30211.11        4"             0           1.8     1.78      9,414
----------------------------------------------------------------------------------------------------------------------------------
  B  Lewis River Lateral                    1984   84-8460.01         6"             0           2.1     2.10     11,105
----------------------------------------------------------------------------------------------------------------------------------
  B  Vine Road Lateral                      1993   93-9320.03         4"             0          3.22     3.30     17,434
----------------------------------------------------------------------------------------------------------------------------------
  B  North Palmer Lateral                   1997   97-9720.04         4"             0          1.94     1.94     10,235
----------------------------------------------------------------------------------------------------------------------------------
  B  Seward Meridian Lateral                1999   99-0420002         4"             0          1.34     1.34      7,095
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Beluga Sub Total   125.24
----------------------------------------------------------------------------------------------------------------------------------
                                                        APC   SYSTEM   TOTAL                           353.37              353.37
                                                                                                    ------------------------------

<PAGE>






                               [GRAPHIC OMITTED]




<PAGE>


                                    EXHIBIT C
                                       TO
                     SPECIAL CONTRACT FOR GAS TRANSPORTATION



         Reservation Rate           $943,000/month

         Commodity Rate                  $0.075/Mcf




<PAGE>


                                    EXHIBIT D
                                       TO
                     SPECIAL CONTRACT FOR GAS TRANSPORTATION


                            MAXIMUM DAILY QUANTITIES


         The following segments of Transporter's System have the following
Maximum Daily Quantities:


                  Segment                   Maximum Daily Quantity
                  -------                   ----------------------

                  Kenai Pipeline            210 MMcf/d
                  Beluga Pipeline           200 MMcf/d










<PAGE>

                                                                       EXHIBIT C

                           GAS TRANSMISSION AGREEMENT


                                     between


                             ALASKA PIPELINE COMPANY


                                       and


                               SEMCO ENERGY, INC.







                        Dated as of September [___], 2003


<PAGE>
                                TABLE OF CONTENTS


                                                                                                           
ARTICLE I             DEFINITIONS.................................................................................1
      1.1                  Definitions............................................................................1
      1.2                  Rules of Construction..................................................................4

ARTICLE II            TERM........................................................................................4
      2.1                  Base Term and Renewal Term.............................................................4

ARTICLE III           TRANSPORTATION RELATED SERVICES.............................................................5
      3.1                  SEMCO's Rights and Obligations.........................................................5
      3.2                  APC's Rights and Obligations...........................................................6

ARTICLE IV            SPECIAL PAYMENT TERMS.......................................................................6
      4.1                  Reservation Rate and Commodity Rate....................................................6
      4.2                  Credit for Amounts Paid under Special Contract.........................................6
      4.3                  Special Payment Agreement..............................................................6
      4.4                  Billing and Payment....................................................................7
      4.5                  Reimbursement for Fees and Taxes.......................................................8

ARTICLE V             DEFAULT AND REMEDIES........................................................................8
      5.1                  Event of Default.......................................................................8
      5.2                  Notice and Opportunity To Cure.........................................................9
      5.3                  Remedies...............................................................................9
      5.4                  Election of Remedies...................................................................9

ARTICLE VI            DISPUTE RESOLUTION..........................................................................9
      6.1                  General................................................................................9

ARTICLE VII           INDEMNIFICATION AND INSURANCE..............................................................10
      7.1                  Indemnification.......................................................................10
      7.2                  Notice................................................................................11
      7.3                  Defense of Legal Actions..............................................................11
      7.4                  Survival..............................................................................11
      7.5                  Limitation on Damages.................................................................11
      7.6                  Insurance.............................................................................12
      7.7                  Coverage of SEMCO and Endorsement.....................................................12
      7.8                  Application of Property Insurance Proceeds............................................12

ARTICLE VIII          EFFECTIVENESS..............................................................................12
      8.1                  Conditions to Effectiveness...........................................................12


                                       i
<PAGE>


                                                                                                         
ARTICLE IX            MISCELLANEOUS..............................................................................12
      9.1                  Assignments...........................................................................12
      9.2                  Warranty of Title.....................................................................13
      9.3                  Indemnification of APC................................................................13
      9.4                  Force Majeure.........................................................................13
      9.5                  Restrictions on Adjustment of Payment Terms...........................................14
      9.6                  Binding Effect........................................................................14
      9.7                  Waiver................................................................................14
      9.8                  Severability..........................................................................14
      9.9                  Notices...............................................................................14
      9.10                 Retention of Records..................................................................14
      9.11                 Headings..............................................................................14
      9.12                 Governing Law.........................................................................14
      9.13                 No Third Party Beneficiary............................................................15
      9.14                 Prior Agreements Superseded...........................................................15
      9.15                 Amendment.............................................................................15
      9.16                 Counterparts..........................................................................15



Exhibits

     Exhibit A         Description of Transportation System
     Exhibit B         Special Contract
     Exhibit C         Maximum Daily Quantities
     Exhitit D         Rates
     Exhibit E         Insurance
     Exhibit F         Gas Supply Contracts

                                       ii
<PAGE>
                           GAS TRANSMISSION agreement

         This Gas Transmission Agreement (this "Agreement") entered into as of
September [___], 2003, by and between Alaska Pipeline Company, a corporation
organized and existing under the laws of the State of Alaska and having its
principal place of business at 3000 Spenard Road, P.O. Box 190288, Anchorage,
Alaska 99519-0288 ("APC"), and SEMCO Energy, Inc., a corporation organized and
existing under the laws of the State of Michigan and having its principal place
of business at 28470 13 Mile Road, Farmington Hills, Michigan 48334 ("SEMCO"),
each herein referred to as a "Party," and collectively, referred to as the
"Parties."

                                    RECITALS

         APC owns the intrastate natural gas transmission pipeline and
associated facilities described on Exhibit A hereto, and any capital
improvements added or made thereto during the term of this Agreement (the "APC
System").

         ENSTAR Natural Gas Company, a division of SEMCO ("ENSTAR"), provides
natural gas distribution services to customers, utilizing facilities which are
connected with the APC System (the "ENSTAR System").

         APC and ENSTAR have entered into a Special Contract for Gas
Transportation (subject to Commission approval) (the "Special Contract"), which
is attached as Exhibit B.

         APC and SEMCO desire to provide for additional transportation related
arrangements with respect to APC's existing Transportation Capacity on the APC
System pursuant to the terms and conditions set forth in this Agreement.

         NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein and other good and valuable consideration, the receipt of which
is hereby acknowledged, and intending to be legally bound, APC and SEMCO hereby
agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

         Section 1.1. Definitions. The following terms shall have the meanings
set forth below:

                  "AAA" is defined in Section 6.1.3.

                  "Alaska Clock Time" shall mean Alaska Daylight time when
daylight savings time is in effect and Alaska Standard Time when daylight
savings time is not in effect.

                  "APC" is defined in the introductory paragraph hereof.

                  "APC System" is defined in the Recitals hereto.

                  "Base Term" is defined in Section 2.1.

                                       1
<PAGE>

                  "Base Year" is defined in Section 3.1.2.

                  "Business Day" shall mean any Day except Saturday, Sunday or
any other Day on which banking institutions in the City of New York, New York or
the City of Anchorage, Alaska, are required or permitted to close.

                  "Buyer" shall mean Atlas Pipeline Partners, L.P. or its
designee.

                  "Commencement Date" shall mean the Day following the date APC
is acquired by Buyer pursuant to the Purchase Agreement.

                  "Commission" shall mean the Regulatory Commission of Alaska or
any successor commission or agency.

                  "Commodity Rate" is defined in Section 4.1.2.

                  "Day" shall mean a period of twenty-four (24) consecutive
hours beginning at midnight Alaska Clock Time and ending at 11:59:59 p.m. Alaska
Clock Time.

                  "Delivered Gas" shall mean the volumes of Gas (in Mcf)
transported each Month in APC's System. Delivered Gas for a Month shall be equal
to 99% of the difference between the volume of Gas delivered by ENSTAR during
such Month as measured at the Receipt Points, less the volume of Gas actually
consumed by APC during such Month as metered at the applicable meters where such
Gas is consumed.

                  "Delivery Point" shall mean any of the locations of
interconnection between the APC System and the ENSTAR System at which APC
delivers Gas to or on behalf of ENSTAR in accordance with the terms of the
Special Contract.

                  "Displacement" shall mean the method by which equivalent
volumes of Gas are delivered from one point on APC System to another point on
APC System without the physical movement of Gas from the first point to the
second point.

                  "ENSTAR" is defined in the Recitals hereto.

                  "ENSTAR System" is defined in the Recitals hereto.

                  "Gas" shall mean natural gas of the quality described in
Article VI of the Special Contract.

                  "Governmental Approval" shall mean any consent, authorization,
certificate, permit, right of way grant or approval of any Governmental
Authority that is necessary for the ownership and operation of the APC System in
accordance with applicable Laws.

                  "Governmental Authority" shall mean any court or tribunal in
any jurisdiction or any federal, state, tribal, municipal or local government or
other governmental body, agency, authority, department, commission, board,
bureau, instrumentality, arbitrator or arbitral body or any quasi-governmental
or private body lawfully exercising any regulatory or taxing authority,
including, without limitation, the Commission.

                                       2
<PAGE>

                  "Laws" shall mean any applicable statute, common law, rule,
regulation, judgment, order, ordinance, writ, injunction or decree issued or
promulgated by any Governmental Authority having jurisdiction with respect to
the applicable subject matter.

                  "Lost Volumes" is defined in Section 3.1.2.

                  "Maximum Daily Quantity" shall mean the quantity of Gas equal
to the maximum design Transportation Capacity of the relevant segment of APC
System at the time Transportation service is requested, but not more than the
quantity or quantities set out in Exhibit C hereto as being the portion of the
Transportation Capacity over each segment of APC System being purchased by SEMCO
for ENSTAR pursuant to this Agreement.

                  "Mcf" shall mean one thousand (1000) cubic feet of Gas
measured as provided in the Special Contract.

                  "Month" shall mean a period beginning at midnight Alaska Clock
Time on the first Day of a calendar month and ending at 11:59:59 Alaska Clock
Time on the last Day of the calendar month.

                  "O&M Agreement" shall mean the Operation and Maintenance and
Administrative Services Agreement to be dated as of the Commencement Date by and
between APC and ENSTAR.

                  "Party" and "Parties" are defined in the introductory
paragraph hereof.

                  "Receipt Point" shall mean a location on APC System at which
ENSTAR will tender Gas to APC for transportation on APC System in accordance
with the terms of the Special Contract.

                  "Renewal Term" is defined in Section 2.1.

                  "Reservation Rate" is defined in Section 4.1.1.

                  "SEMCO" is defined in the introductory paragraph hereof.

                  "Special Contract" is defined in the Recitals hereto.

                  "State" shall mean the State of Alaska.

                  "System" shall mean the APC System or the ENSTAR System.

                  "Transportation" shall mean the movement of Gas from a Receipt
Point to a Delivery Point and may include delivery of Gas by Displacement.

                                       3
<PAGE>

                  "Transportation Capacity" of the APC System at any time shall
mean the maximum quantity of Gas that a segment of the APC System is capable of
transporting at such time.

                  "Year" shall mean a period of twelve (12) consecutive Months
beginning at midnight Alaska Clock Time on January 1 and ending at 11:59:59
Alaska Clock Time on December 31.

         Section 1.2. Rules of Construction. In construing this Agreement:

                  (a) No consideration shall be given to the captions of
articles, sections, subsections or clauses, which are inserted for convenience
in locating the provisions of this Agreement and not as an aid in its
construction.

                  (b) No consideration shall be given to the fact or presumption
that one Party had a greater or lesser role in drafting this Agreement.

                  (c) The words "include" or "including" and their derivatives
shall be construed to be followed by the words "but not limited to."

                  (d) The plural shall be deemed to include the singular, and
vice versa.

                  (e) All references to prices, value or monetary amounts refer
to United States dollars, unless expressly provided otherwise.

                  (f) The words "this Agreement", "herein", "hereof", "hereby",
"hereunder" and words of similar import refer to this Agreement as a whole and
not to any particular subdivision, unless expressly stated.

                                   ARTICLE II

                                      TERM

         Section 2.1. Base Term and Renewal Term. Although this Agreement has
been executed prior to the Commencement Date, neither Party shall have any
obligation hereunder until the Commencement Date. Unless earlier terminated,
this Agreement shall remain in full force and effect for a period of ten years
from the Commencement Date (the "Base Term"). The Base Term automatically shall
be extended for successive additional one-year periods (each, a "Renewal Term"),
unless either Party gives the other Party notice of its intention to terminate
this Agreement at least one year prior to the end of the Base Term or 180 days
prior to the end of the then current Renewal Term. If the Purchase Agreement is
terminated without the purchase of APC contemplated therein occurring, this
Agreement shall terminate on the same day as the Purchase Agreement terminates
and no Party shall have any liability hereunder.


                                       4
<PAGE>

                                  ARTICLE III

                         TRANSPORTATION RELATED SERVICES

         Section 3.1. SEMCO's Rights and Obligations.

                  (a) SEMCO, acting for its ENSTAR division, shall have the
right during the term of this Agreement to obtain Transportation of a daily
quantity of Gas equal to the Maximum Daily Quantity on each segment of APC
System in accordance with the terms hereof and of the Special Contract. SEMCO
shall be entitled to nominate and schedule Transportation service for its ENSTAR
division up to the Maximum Daily Quantity for each Day of the Base Term and any
Renewal Term. SEMCO's right to obtain Transportation of such quantity of Gas
shall be exclusive, and APC shall reserve such portion of the Transportation
Capacity solely for SEMCO's use for its ENSTAR division. The Parties agree that
if there are ever multiple transporters on the APC System, APC and SEMCO shall
agree on the nomination and balancing provisions that shall be applicable to
this Agreement and the Special Contract. SEMCO hereby commits to Transportation
under this Agreement all Gas purchased by ENSTAR pursuant to the contracts
listed in Exhibit F other than Gas delivered to customers directly off of the
KKPL pipeline through connections to the ENSTAR System prior to the connection
between the KKPL pipeline and the APC System and which either (i) exist prior to
the date of this Agreement or (ii) if connected after the date of this
Agreement, cannot be economically served from the APC System.

                  (b) The Transportation Capacity purchased by SEMCO for its
ENSTAR division pursuant to this Agreement as set forth on Exhibit C is all of
the Transportation Capacity of APC System on the date of this Agreement. If APC
desires to increase the Transportation Capacity of any segment of APC System,
APC shall notify SEMCO. If SEMCO notifies APC within ten (10) days after receipt
of such notice that it would be interested in purchasing such increased
Transportation Capacity, then APC and SEMCO shall negotiate in good faith the
terms under which SEMCO would purchase such increased Transportation Capacity.
If APC and SEMCO are unable to reach an agreement on the terms of the purchase
by SEMCO of such increased Transportation Capacity within ninety (90) days of
the original notice from APC, APC shall be free to offer such increased
Transportation Capacity to third parties. If following the sale by APC of
Transportation Capacity to a third party, the Yearly deliveries of Gas by SEMCO
to such third party is less than the Gas deliveries in the Year immediately
prior to the Year in which APC sold capacity to such third party (the "Base
Year"), SEMCO and ENSTAR shall be entitled to a credit for such Year to be
applied against the next payment amounts due hereunder and under the Special
Contract in an amount equal to the sum of the greater of the annual Demand
Charge payable pursuant to Article IV of this Agreement or Article VII of the
Special Contract multiplied by a fraction, the numerator of which is the lesser
of the Gas deliveries by APC to such third party during such Year or the
aggregate reduction in Gas deliveries to such third parties for such Year when
compared to the Base Year (the "Lost Volumes"), and the denominator of which is
the total Gas deliveries in the Base Year. Any terms negotiated between APC and
SEMCO for increased Transportation Capacity shall be subject to Commission
approval, if required.



                                       5
<PAGE>

                  (c) SEMCO, acting for ENSTAR, shall tender at the Receipt
Point(s) the volume of Gas which it desires APC to transport to the ENSTAR
System, which total volume shall not exceed the applicable Maximum Daily
Quantity. SEMCO shall be responsible for all arrangements (and associated costs
and expenses) necessary to make Gas available at the Receipt Point(s). SEMCO
shall use its best efforts to notify APC, or cause its suppliers to notify APC,
at least four (4) hours prior to terminating, curtailing or interrupting
deliveries to a Receipt Point.

         Section 3.2. APC's Rights and Obligations.

                  (a) APC shall make Transportation service available to SEMCO's
ENSTAR division, up to the Maximum Daily Quantity for any segment of APC System,
pursuant to the terms of this Agreement and the Special Agreement.

                  (b) APC shall receive at the Receipt Point(s) all Gas up to
the Maximum Daily Quantities tendered by SEMCO, acting through its ENSTAR
division, and shall deliver an equivalent volume of Gas to the Delivery Point(s)
designated by ENSTAR, less Gas used for compression, lost or otherwise
unaccounted for. APC shall never be obligated to deliver during any Day more Gas
than ENSTAR tenders for delivery during that Day. APC shall deliver Gas to
ENSTAR at the Delivery Point(s) at APC's prevailing line pressure as such
pressure may vary from time to time.

                                   ARTICLE IV

                              SPECIAL PAYMENT TERMS

         Section 4.1. Reservation Rate and Commodity Rate. For each Month during
the Base Term and any Renewal Term, SEMCO shall pay and APC shall accept as
payment for Transportation services provided in accordance with this Agreement
the sum of the following amounts, each computed by use of the rates set forth on
Exhibit D:

                  (a) the amount of the Reservation Rate set forth on Exhibit D
(the "Reservation Rate"); plus

                  (b) the amount, calculated by multiplying the Commodity Rate
set forth on Exhibit D (the "Commodity Rate") by the Delivered Gas for the
Month, as measured in accordance with the measurement provisions in Articles IV
and V of the Special Contract.

         Section 4.2. Credit for Amounts Paid under Special Contract. SEMCO
shall receive a credit against the Monthly amounts due to APC under Section 4.1
above in an amount equal to any amounts to be paid by its ENSTAR division
pursuant to the terms of the Special Contract.

         Section 4.3. Special Payment Agreement. SEMCO and APC recognize that
the Commission could, in the future, modify the rates or other terms in the
Special Contract. Nevertheless, in recognition of the fact that payment of the
amounts set forth in Section 4.1 above for the Base Term represent an essential
component of the consideration paid by Buyer for the acquisition of APC from
SEMCO, SEMCO agrees to pay to APC the amounts set forth in Section 4.1 above for
the Base Term (and any Renewal Term) even if the rates in the Special Contract
are later reduced or increased by the Commission and regardless of the extent to
which ENSTAR is permitted to continue to include such payments in the rates
charged to its customers. SEMCO will continue to receive a Monthly credit
provided for in Section 4.2 above in the amount of any revised payments under
the Special Contract.



                                       6
<PAGE>

         Section 4.4. Billing and Payment.

                  (a) Payment of the Reservation Rate for the Month in which the
Commencement Date occurs shall be due on the Commencement Date. Payment of the
Reservation Rate for each succeeding Month shall be due, without invoice, on the
first Business Day of such Month.

                  (b) With respect to amounts payable other than the Reservation
Rate, APC shall deliver to SEMCO a monthly statement for Transportation services
for the preceding Month, which shall detail all charges payable by SEMCO during
the preceding Month and the basis for the calculation of the amount due;
provided, however, that so long as the Reservation Rate and the Commodity Rate
under the Special Contract have not been modified, the statement delivered by
APC to ENSTAR pursuant to Article VII of the Special Contract shall satisfy the
requirements of this Section 4.4.2. SEMCO shall pay APC the full amount due by
wire transfer of immediately available funds to the account designated by APC no
later than ten (10) days after SEMCO's receipt of such statement.

                  (c) If SEMCO disagrees with any statement, it shall promptly
notify APC in writing of its disagreement and the facts providing the basis
therefore. If the Parties are unable to agree upon a settlement of the contested
portion of a statement, the dispute shall be addressed in accordance with
Article VI. The existence of a dispute with regard to any portion of a payment
due shall not relieve SEMCO of the obligation to pay any uncontested amounts due
under this Agreement or to perform any other obligation under this Agreement.
SEMCO shall pay, no later than ten (10) days after SEMCO's receipt of the
statement, any disputed amount into a separate interest bearing account at First
National Bank of Alaska or its successor and shall notify APC of such deposit.
Any interest which may accrue in such account shall be payable to the Party in
whose favor the dispute is resolved, and any such interest actually paid shall
reduce the interest payments required to be made pursuant to Section 4.4.5
accordingly.

                  (d) Each Party shall have the right during normal business
hours to examine the books, records and charts of the other Party to the extent
necessary to verify the accuracy of any invoice related to this Agreement.
Claims for adjustments on account of subsequently discovered errors must be made
within twelve (12) Months of the date the statement was issued. The Party
discovering such an error shall promptly notify the other Party in writing of
the errors believed in good faith to have occurred and the facts providing the
basis for such belief. Adjustment of overpayments or underpayments shall be made
within ten (10) days after resolution of such subsequently discovered errors.

                  (e) If either Party shall fail to make any payment required by
this Agreement when due, including contested portions of bills, or if any Party
makes an overpayment requiring a refund by the other Party, the amount due shall
bear interest, from the due date of the payment or the date on which the
overpayment was made until the date of payment, at a rate per annum for the
first ten (10) days equal to the rate published as the "prime rate" in The Wall
Street Journal for the first Business Day of the month in which such invoice is
due, plus 2%, and thereafter at a rate per annum equal to 15%, but in no event
at any rate that is greater than the maximum interest rate allowed by applicable
Laws. If the due date of any payment is not a Business Day, then the next
Business Day shall be the last day on which payment can be paid without interest
charges being assessed.

                                       7
<PAGE>

         Section 4.5. Reimbursement for Fees and Taxes. In addition to the
transportation charges provided for in Section 4.1, SEMCO will reimburse APC for
all user fees, taxes (except income and ad valorem taxes), and the like, levied
upon the transportation of the Gas.

                                   ARTICLE V

                              DEFAULT AND REMEDIES

         Section 5.1. Event of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default" under this Agreement
during the continuance of such event:

                  (a) Failure by either APC or SEMCO to make payments for
undisputed amounts due hereunder or under the Special Contract when due.

                  (b) Failure by either Party to substantially perform any
material obligation under this Agreement or the Special Contract.

                  (c) Revocation by any Governmental Authority of any material
Governmental Approval due to APC's failure to comply with applicable statutes or
regulations.

                  (d) The dissolution or liquidation of a Party, or the
admission in writing of a Party of its inability to pay its debts as they become
due; or the failure by a Party to lift any execution, garnishment, or attachment
of such consequence as will impair such Party's ability to perform substantially
its obligations pursuant to this Agreement; or a filing of a voluntary petition
in bankruptcy by a Party under any provision of any federal or state bankruptcy
law or the consenting to the filing of any bankruptcy or reorganization petition
against such Party under similar law; or the adjudication of a Party as
bankrupt; or the making of an assignment by a Party for the benefit of
creditors; or the approval by a court of competent jurisdiction of a petition
applicable to a Party in any proceeding for the reorganization, arrangement,
composition, readjustment, liquidation, dissolution, or similar proceeding
instituted under the provisions of any bankruptcy act or under any similar act
in any domestic or foreign jurisdiction which many not be in effect or hereafter
enacted, or within ninety (90) days after the commencement of any such
proceeding against a Party such proceeding shall not have been dismissed, or the
filing of an answer admitting or not contesting the material allegations of a
petition against it in such proceeding; or the appointment by a Party, without
the consent or acquiescence of the other Party, of any trustee, receiver, or
liquidator of the Party or of any material part of its properties, if within
ninety (90) days thereafter such appointment shall not have been vacated, or if
the Party shall seek or consent or acquiesce in the appointment of any trustee,
receiver or liquidator of itself of any material part of its properties.



                                       8
<PAGE>

         Section 5.2. Notice and Opportunity To Cure. If a Party claims that an
Event of Default has occurred, such Party shall provide the defaulting Party
with written notice thereof, specifying the claim of breach and the basis of
such claim. Except for any Event of Default described in Section 5.1.4, the
alleged defaulting Party shall have a period of thirty (30) days (ten (10) days
in the case of a payment default) after receipt of notice, to cure such alleged
Event of Default. If any non-payment default (other than a default described in
Section 5.1.4) cannot be reasonably cured within such thirty (30) day period,
the cure period shall be extended by an additional thirty (30) days, so long as
the defaulting Party diligently pursues efforts to cure the default and the
non-defaulting Party is paid any actual and direct damages for any injury
sustained as a result of such default continuing during the extended cure
period.

         Section 5.3. Remedies.

                  (a) APC shall have the right to terminate this Agreement upon
a default by SEMCO that has not been cured within the cure period therefore
pursuant to Section 5.2. Upon such termination, APC shall be entitled to such
damages as are available at law and equity, subject to Section 7.5.

                  (b) In the case of a default by APC that has not been cured
within the cure period therefor, SEMCO shall have the option to either terminate
this Agreement or to operate and maintain the APC System in order to receive
Transportation service and to make payments pursuant to the terms of this
Agreement. SEMCO shall notify APC at least five (5) days before the expiration
of the cure period that it intends to exercise its option to operate and
maintain the APC System upon expiration of the cure period. Upon exercise of
SEMCO's option to operate and maintain the APC System or terminate this
Agreement, SEMCO shall be entitled to such damages as are available at law and
equity, subject to Section 7.5. If SEMCO pursues its option to operate and
maintain the APC System, (a) SEMCO's payments under this Agreement shall be
offset by the amount of actual operation and maintenance costs incurred by SEMCO
to operate and maintain the APC System if the O&M Agreement has been terminated,
and (b) upon the cure by APC of such default, SEMCO shall cease to operate and
maintain the APC System pursuant to this Section.

         Section 5.4. Election of Remedies. The termination of this Agreement or
exercise of SEMCO's option to operate and maintain the APC System shall not
excuse either Party from obligations which may have accrued under this Agreement
prior to such termination or exercise.

                                   ARTICLE VI

                               DISPUTE RESOLUTION

         Section 6.1. General.

                  (a) Any dispute arising under this Agreement or otherwise in
connection with this Agreement shall be resolved pursuant to this Section 6.1.

                  (b) Any Party has the right to request the other to meet to
discuss a dispute. The Party requesting the meeting will give at least ten (10)
Business Days notice in writing of the subject it wishes to discuss, provide a
written statement of the dispute, and designate an officer of the Party with
complete power to resolve the dispute to attend the meeting. Within five (5)
Business Days after receipt of such request, the Party receiving the request
will provide a responsive written statement and will designate an officer of the
Party who will attend the meeting with complete power to resolve the dispute.

                                       9
<PAGE>

                  (c) If the meeting fails to resolve the dispute by a signed
agreement among the officers, either Party may submit the dispute for binding
arbitration administered by the American Arbitration Association ("AAA") under
its Commercial Arbitration Rules before a single arbitrator, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.

                  (d) The Parties agree to make discovery and disclosure of all
matters relevant to the dispute to the extent and in the manner provided by the
Federal Rules of Civil Procedure. The arbitrator will rule on all requests for
discovery and disclosure and discovery shall be completed within 60 days after
the date of selection of the arbitrator. The arbitrator may consider any matter
relevant to the subject to the dispute and shall follow the statutes and
decisions of the substantive law of Alaska relevant to the subject. The
arbitrator shall not have the authority or power to alter, amend or modify any
of the terms and conditions of this Agreement. The arbitrator shall issue a
final ruling within 150 days after the date of selection of the arbitrator.

                  (e) The ruling of the arbitrator shall be in writing and
signed and shall be final and binding upon the Parties. The fees and expenses of
counsel, witnesses and employees of the Parties and all other costs and expenses
incurred exclusively for the benefit of the Party incurring the same shall be
borne by the Party incurring such fees and expenses. All other fees and expenses
including compensation for the arbitrator, shall be divided equally between the
Parties. All meetings and arbitrations held pursuant to this Section 6.1 shall
take place in Anchorage, Alaska.

                                  ARTICLE VII

                          INDEMNIFICATION AND INSURANCE

         Section 7.1. Indemnification. Each Party shall indemnify, hold harmless
and defend the other Party, its affiliates, successors and assigns and their
respective agents, officers, directors, managers, employees, representatives and
affiliates, against all claims, demands, losses, judgments, damages and
associated costs and expenses (including reasonable fees, disbursements and
expenses for attorneys and experts incurred by the indemnified Party in any
actions or proceedings between the indemnified Party and a third party), related
to property damage, personal injuries or death suffered by third persons
resulting from any act or failure to act by such indemnifying Party related to
this Agreement, or from the undertaking by such Party of any activity
contemplated by this Agreement, regardless of whether attributable in whole or
in part to any act, omission, negligence (active, passive, sole, joint or
concurrent with that of the indemnified Party or any other person), strict
liability, any condition or defect on or in any property, or other fault or
responsibility of the indemnified Party or any other person or party (whether
such liability is based on contract, warranty, tort, statute or otherwise),
except that if the property damage, personal injuries or death are caused in
part, but not entirely, by the indemnified Party then the indemnifying Party
shall be obligated under this Section 7.1 only to the extent of the percentage
of fault attributed to such indemnifying Party and/or its agents, officers,
directors, managers, employees, representatives and affiliates. The indemnities
provided in this Section shall be the sole and exclusive remedy of the
indemnified Party with respect to all matters related to property damage,
personal injuries or death resulting from any act or failure to act by an
indemnifying Party related to this Agreement.



                                       10
<PAGE>

         Section 7.2. Notice. If a Party becomes aware of any event or
circumstance which might give rise to indemnification under this Agreement, it
shall provide the other Party with written notification within the earlier of
thirty (30) days after discovery of the event or circumstance or ten (10) days
prior to the time any response regarding such event or circumstances is required
by law to be made.

         Section 7.3. Defense of Legal Actions. At the indemnified Party's
request, the indemnifying Party shall defend any suit asserting a claim covered
by this indemnity and shall pay all costs and expenses (including reasonable
fees, disbursements and expenses for attorneys and experts) that may be incurred
in enforcing this indemnity. The indemnified Party may, at its own expense,
retain separate counsel and participate in the defense of any such suit or
action. The indemnifying Party shall not compromise or settle a claim hereunder
without the prior written consent of the indemnified Party, provided, however,
that if such consent is withheld then the liability of the indemnifying Party
shall be limited to the aggregate of the amount of the proposed settlement or
compromise, the amount of fees, disbursements and expenses for attorneys and
experts outstanding at the time such consent shall have been withheld, and the
amount of any outstanding claim against which the indemnification applies and
which is not covered by the proposed settlement or compromise (together with all
costs and expenses associated with such outstanding claim). Thereafter, the
indemnified Party shall hold harmless and reimburse the indemnifying Party, upon
demand, for the amount of any additional liability, fees, disbursements and
expenses for attorneys and experts incurred by the indemnifying Party in excess
of the amounts described above after such consent shall have been withheld.

         Section 7.4. Survival. Each Party's indemnification and defense of
action obligations hereunder for acts or occurrences prior to the expiration or
termination of this Agreement shall continue in full force and effect regardless
of the expiration or termination of this Agreement. Such obligations shall not
be limited in any way by any limitation on insurance, by the amount or types of
damages, or by any compensation or benefits payable by the Parties under
worker's compensation acts, disability benefit acts or other employee acts.

         Section 7.5. Limitation on Damages. NEITHER PARTY SHALL BE LIABLE TO
THE OTHER PARTY FOR INCIDENTAL, PUNITIVE, SPECIAL, INDIRECT, OR CONSEQUENTIAL
DAMAGES CONNECTED WITH OR RESULTING FROM PERFORMANCE OR NON-PERFORMANCE OF THIS
AGREEMENT OR ANY ACTION UNDERTAKEN IN CONNECTION WITH, OR RELATED TO THIS
AGREEMENT, INCLUDING ANY SUCH DAMAGES WHICH ARE BASED UPON CAUSES OF ACTION FOR
BREACH OF CONTRACT, TORT (INCLUDING NEGLIGENCE AND MISREPRESENTATION), BREACH OF
WARRANTY OR STRICT LIABILITY. Notwithstanding the foregoing, if a Party is held
liable to a third party for any such damages and the other Party is obligated to
provide indemnity for the matter that gave rise to such damages, such indemnity
shall obligate the indemnifying Party to pay such damages.



                                       11
<PAGE>

         Section 7.6. Insurance. APC shall maintain and keep in full force and
effect the insurance in the types and amounts listed on Exhibit E. All such
insurance polices may contain deductible permitted under the O&M Agreement or
otherwise that are amounts standard in the industry.

         Section 7.7. Coverage of SEMCO and Endorsement. APC shall cause SEMCO
to be named as an additional insured on such insurance policies with regard to
comprehensive bodily injury and property damage insurance. APC shall require its
insurance carriers to send SEMCO a copy of all notices affecting APC's insurance
coverage. APC shall provide SEMCO with certificates of all outstanding
insurance. APC shall cause SEMCO to receive thirty (30) days prior written
notice of non-renewal, cancellation or significant modification to any of the
insurance policies listed on Exhibit E. All insurance shall be placed and
maintained with insurers authorized to do business in the State of Alaska and
who have an A.M. Best rating of "A" or better unless otherwise approved by
SEMCO.

         Section 7.8. Application of Property Insurance Proceeds. Subject to any
restrictions imposed by APC's or Buyer's senior secured lenders, all proceeds of
property insurance collected by APC as a result of damage caused to the APC
System shall be applied to the reconstruction or repair of the APC System.

                                  ARTICLE VIII

                                  EFFECTIVENESS

         Section 8.1. Conditions to Effectiveness. Although this Agreement has
been executed and delivered prior to the Commencement Date, the performance
obligations of the Parties shall not begin until the Commencement Date.

                                   ARTICLE IX

                                  MISCELLANEOUS

         Section 9.1. Assignments. Any company which shall succeed by purchase,
merger or consolidation to all or substantially all of the APC System, in the
case of APC, or the ENSTAR System, in the case of SEMCO, shall be entitled to
the rights and shall be subject to the obligations of its predecessor in title
under this Agreement. Either Party may also assign or pledge this Agreement
under the provisions of any mortgage, deed of trust, indenture, or similar
instrument which it has executed or may execute hereafter covering substantially
all of its properties. Except as permitted by this Section 9.1, neither Party
shall assign this Agreement or any of its rights hereunder unless it first shall
have obtained the consent thereto in writing of the other Party, which consent
shall not be unreasonably withheld, conditioned or delayed; provided, further,
however, that neither Party shall be released from its obligations hereunder
without the consent in writing of the other Party.

                                       12
<PAGE>

         Section 9.2. Warranty of Title. SEMCO shall be deemed in exclusive
control and possession of the Gas until such Gas has been tendered to APC at the
Receipt Point(s) and after such Gas has been redelivered to or for the account
of SEMCO at the Delivery Point(s). SEMCO warrants that it has, or will have at
the time of tender of Gas to APC at the Receipt Point, good title to the Gas.
SEMCO further represents and warrants that the Gas so tendered shall remain free
from all liens, encumbrances and other adverse claims while in the custody of
APC. Custody of SEMCO's Gas shall pass to APC at the Receipt Point(s) and
custody will pass from APC to SEMCO at the Delivery Point(s). Title to SEMCO's
Gas shall remain with SEMCO at all times. APC shall have the right to reject
tender of any Gas for which title is in dispute or which is encumbered by a
lien, encumbrance or other adverse claim of any kind.

         Section 9.3. Indemnification of APC. In the absence of gross negligence
or willful misconduct by APC, SEMCO waives any claims that it may have against
APC arising out of or in any way connected with (a) the quality, use or
condition of the Gas after delivery from APC System at the Delivery Point(s) and
(b) any losses or shrinkage of Gas during or resulting from transportation
hereunder. SEMCO agrees to provide APC with a waiver of subrogation of SEMCO's
insurance company for all claims subject to the indemnification provisions of
this paragraph.

         Section 9.4. Force Majeure.

                  (a) The term "Force Majeure" shall mean: (a) acts of God; (b)
governmental action, acts of the public enemy, wars, blockades, insurrections,
riots or epidemics; (c) strikes, lockouts or other industrial disturbances of
third parties; (d) volcanic eruptions, landslides, lightning, earthquakes,
fires, hurricanes, tornadoes, high winds, storms, storm warnings, floods,
tsunami, or washouts; (e) arrests and restraints of governments and people, or
civil disturbances; (f) explosions, breakage or accidents to machinery or lines
of pipe; and (g) any other causes, whether of the kind enumerated or otherwise,
not reasonably within the control of the Party and which by the exercise of due
diligence the Party is unable to prevent or overcome. "Force Majeure" shall also
include: (a) in those instances where either Party is required to obtain
servitudes, right-of-way grants, permits or licenses to enable the Party to
fulfill its obligations, the inability of the Party to acquire, or the delays
encountered by the Party, despite the best efforts, in acquiring, at reasonable
cost, the servitudes, right-of-way grants, permits or licenses; (b) in those
instances where either Party is required to furnish materials and supplies for
the purpose of constructing, repairing or maintaining facilities or is required
to secure permits or permission from any governmental agency to enable the Party
to fulfill its obligations, the inability of the Party to acquire, or the delays
encountered by the Party, despite its best efforts in acquiring at reasonable
cost the materials and supplies, permits and permissions; and (c) any "Force
Majeure Event" under the O&M Agreement.

                  (b) If by reason of Force Majeure, a Party is rendered unable,
wholly or in part, to carry out its obligations under this Agreement, the Party
shall give the other Party notice of the Force Majeure as soon as reasonably
possible. The obligations (except the obligation to make payments when due)
which the Party cannot fulfill because of the Force Majeure and its effects
shall be suspended for the duration of the Force Majeure and its effects, but
for no longer period. A Party affected by Force Majeure shall use due diligence
to remedy its effects as quickly as possible.

                                       13
<PAGE>

         Section 9.5. Restrictions on Adjustment of Payment Terms. Except as
provided in this Section 9.5, such Party agrees that during the Base Term and
any Renewal Term, without the consent of the other Party, it will not file any
application with the Commission to request a change in APC's rates.
Notwithstanding the foregoing, APC may file an application with the Commission
to increase the rates payable under the Special Contract (but not this
Agreement) in order to take into account capital expenditures incurred by APC;
provided that such capital expenditures result in a material increase in APC's
rate base from the rate base used in its 2000 test year.

         Section 9.6. Binding Effect. This Agreement shall inure to the benefit
of and shall be binding upon the Parties and their respective permitted
successors and assigns.

         Section 9.7. Waiver. No omission or delay in the exercise of any right
under this Agreement shall impair any such right or shall be taken, construed or
considered as a waiver or relinquishment thereof, but any such right may be
exercised from time to time and as often as may be deemed expedient. In the
event that any agreement or covenant herein shall be breached and thereafter
waived, such waiver shall be limited to the particular breach so waived and
shall not operate or be construed as a waiver of any future default or defaults,
whether of a like or a different character.

         Section 9.8. Severability. Except as otherwise stated herein, any
provision declared or rendered unlawful by a court of law or regulatory agency
with jurisdiction over a Party or this Agreement, or deemed unlawful because of
statutory change, will not otherwise affect the lawful obligations that arise
under this Agreement.

         Section 9.9. Notices. Notices provided in this Agreement shall be in
writing, unless other means are specified, and shall be effective upon delivery
by hand, by U.S. mail first class postage prepaid, or facsimile or electronic
communication before 5 p.m. Alaska Clock Time at the addresses provided by such
Party prior to the Commencement Date.

         Each Party shall promptly notify the other Party in writing of any
change in persons to receive notice or the addresses to which notices should be
delivered.

         Section 9.10. Retention of Records. Each Party shall maintain and
preserve all records of data and information necessary to calculate payments or
evidence of fulfillment of obligations under this Agreement or pertaining to
facilities associated with performance of obligations under this Agreement for a
period of not less than six (6) years, or such longer period as may be required
by any governmental or other regulatory authority with jurisdiction over a Party
or this Agreement.

         Section 9.11. Headings. The headings used for Articles and Sections
herein are for convenience and reference purpose only and shall in no way affect
the meaning or interpretation of this Agreement.

         Section 9.12. Governing Law. This Agreement shall be interpreted,
performed and enforced in accordance with the laws of the State of Alaska,
without giving effect to its conflict of laws principles.



                                       14
<PAGE>

         Section 9.13. No Third Party Beneficiary. It is expressly agreed that
there is no third party beneficiary of this Agreement, and that this Agreement
does not impart enforceable rights to anyone other than a Party or a permitted
successor or assign of a Party.

         Section 9.14. Prior Agreements Superseded. This Agreement shall
completely and fully supersede all prior understandings or agreements, written
and oral, between the Parties relating to the subject matter hereof.

         Section 9.15. Amendment. This Agreement shall not be amended unless
such amendment is in writing and signed by the Parties.

         Section 9.16. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.



                                       15
<PAGE>

         IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed effective the day first written above by their duly authorized
officers.


                                      SEMCO ENERGY, INC.



                                      By:   ________________________
                                      Name: ________________________
                                      Title:________________________




                                      ALASKA PIPELINE COMPANY

                                      By:   ________________________
                                      Name: ________________________
                                      Title:________________________




                                       16
<PAGE>




                                    EXHIBIT A
                                       TO
                           GAS TRANSMISSION AGREEMENT


                      DESCRIPTION OF TRANSPORTATION SYSTEM


         The APC's System consists of the following:

         Kenai Pipeline System:

         The Kenai Pipeline System consists of combined 142 miles of looped
12-inch and 16-inch diameter pipeline, including a nine mile twin crossing of
the Turnagain Arm of the Cook Inlet, plus 25 miles of 8-inch diameter pipeline
known as the Royalty Lateral and six miles of 12-inch, 6-inch, and 4-inch
diameter lateral pipelines connecting to the Royalty Lateral. All lines have a
maximum allowable operating pressure (MAOP) of 300 pounds per square inch gage
(psig) or greater. The Kenai Pipeline has two compressor stations totaling 8,400
horsepower.

         Beluga Pipeline System:

         The Beluga Pipeline System consists of 102 miles of 20-inch pipeline
and 23 miles of 6-inch and 4-inch diameter lateral pipelines connecting to the
20-inch pipeline. All lines have a MAOP of 300 psig or greater. It does not have
any compression capacity.

         The Anchorage Pipeline System:

         The Anchorage Pipeline system consists of 55 miles of 12-inch, 10-inch,
8-inch, 6-inch and 4-inch diameter pipelines and lateral pipelines in the
greater Anchorage area interconnecting with the Kenai Pipeline System at Potter
Station and with the Beluga Pipeline System at East Anchorage City Gas Station.
All lines have a MAOP of 300 psig or greater.

         The locations of the Kenai Pipeline System, the Beluga Pipeline System
and the Anchorage Pipeline System are shown on the attached map.



<PAGE>


                              APC PIPELINE SUMMARY




                                                                                Milepost  Designation
----------------------------------------------------------------------------------------------------------------------------------
Sys. Pipeline Name                       Year         ER #       Pipe Size        From           To     Length    Length     Miles
                                         Installed                                                     (miles)    (feet)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       
     Kenai Pipeline
----------------------------------------------------------------------------------------------------------------------------------
  K  "A" Kalifonski to Burnt Island         1960                     12"           2.3          64.5    62.12    327,977
----------------------------------------------------------------------------------------------------------------------------------
  K   "A" Turnagain Crossing                1960                     12"          64.5          73.2     8.68     45,841
----------------------------------------------------------------------------------------------------------------------------------
  K   "B" Turnagain Crossing                1960                     12"          64.5          73.2     8.58     45,289
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Kalifonski to Kenai River       1975   74-513.2       12" & 16"        2.3           6.7     4.40
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Gutenrath to MP50.5             1975   74-513.2       12" & 16"       21.4          50.5    29.10
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Kenai River to MP 21.4          1978   78-1831.03     12" & 16"        6.7          21.4    14.70
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp MP 50.5 to MP 64.5              1978   78-1831.03     12" & 16"       50.5          64.5    14.00
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                    Kenai Sub Total        141.58
----------------------------------------------------------------------------------------------------------------------------------
     North Kenai Lateral
----------------------------------------------------------------------------------------------------------------------------------
  K  KPL Junction to East Forelands         1966   66-3074         4" & 6"        24.6          28.5     3.90
----------------------------------------------------------------------------------------------------------------------------------
  K  CEA Bernice Power Plant S/L            1972   72-2190            4"             0          0.14     0.14
----------------------------------------------------------------------------------------------------------------------------------
  K  Nikiski (Tesoro) to KPL                1977   77-1728.00         6"          23.8          24.6     0.75      3,979
----------------------------------------------------------------------------------------------------------------------------------
  K  Robinson Lp to Nikiski (Tesoro)        1977   77-1728.04         8"             0          23.8    24.01    126,765
----------------------------------------------------------------------------------------------------------------------------------
  K  KPL to  Bernice Lake Loop              1981   81-2180.03         6"          24.6          24.8     0.20
----------------------------------------------------------------------------------------------------------------------------------
  K  Beaver Creek Line                      1982   82-2290.02        12"             0          0.15     0.15
----------------------------------------------------------------------------------------------------------------------------------
  K  HEA Lateral                            1985   85-8500.04         6"             0           0.8     0.83      4,356
----------------------------------------------------------------------------------------------------------------------------------
  K  Sterling Gas Field Lateral             1993   9320.09            4"             0          0.64     0.64      3,397
----------------------------------------------------------------------------------------------------------------------------------
  K  N. Kenai Lateral Bypass                1995   9520.02            8"                                 0.92      4,835
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       N Kenai Sub Total    31.54
----------------------------------------------------------------------------------------------------------------------------------
     Anchorage Pipeline System
----------------------------------------------------------------------------------------------------------------------------------
  A  City Gate Pipeline                     1961                     12"          73.2          82.7     9.51     50,203
----------------------------------------------------------------------------------------------------------------------------------
  A   Tudor Lateral                         1968   68-417            12"             0           3.1     3.10
----------------------------------------------------------------------------------------------------------------------------------
  A  Muldoon Loop (Muldoon)                 1968   68-416            12"             0           3.7     3.70
----------------------------------------------------------------------------------------------------------------------------------
  A  Oilwell Rd. Lateral                    1968   68-416         10" & 12"          0          3.08     3.08
----------------------------------------------------------------------------------------------------------------------------------
  A  Fort Richardson Power Plant            1968   68-416             8"             0          1.06     1.06
----------------------------------------------------------------------------------------------------------------------------------
  A  Fort Richardson  Army Base             1971   71-470             6"             0           3.3     3.30
----------------------------------------------------------------------------------------------------------------------------------
  A  Muldoon Loop (Hillside)                1971   71-451            12"             0         10.94    10.94
----------------------------------------------------------------------------------------------------------------------------------
  A  International Airport Lateral          1967   67-4021         4" & 6"           0          1.33     1.33
----------------------------------------------------------------------------------------------------------------------------------
  A  West Side Feeder (Potter to Dim)       1976   76-570             8"             0           4.1     4.10
----------------------------------------------------------------------------------------------------------------------------------
  A  West Side Feeder (Dim. to Minn.)       1978   78-827             8"             0           6.4     6.40
----------------------------------------------------------------------------------------------------------------------------------
  A  City Gate Loop (Potter Valley)         1983   83-2340.01        16"             0           2.6     2.60
----------------------------------------------------------------------------------------------------------------------------------
  A  64th Lateral                           1989   89-8940.02        12"             0          3.37     3.37     17,790
----------------------------------------------------------------------------------------------------------------------------------
  A  Raspberry Lateral                      1990   90-9080.01         6"             0          0.87     0.87      4,573
----------------------------------------------------------------------------------------------------------------------------------
  A  International Airport Lateral          2001      501167000100 6" & 8"        1.33             3     1.67      8,800
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Anch. Sub Total      55.02
----------------------------------------------------------------------------------------------------------------------------------
     Beluga Pipeline System
----------------------------------------------------------------------------------------------------------------------------------
  B  Beluga Pipeline                        1984   84-30111.01       20"             0         101.6   101.60
----------------------------------------------------------------------------------------------------------------------------------
  B  Eagle River Lateral                    1987   87-8557            6"             0          0.18     0.17        923
----------------------------------------------------------------------------------------------------------------------------------
  B  Fire Lake Lateral                      1976   76-571             4"             0          3.65     3.65     19,260
----------------------------------------------------------------------------------------------------------------------------------
  B  Hiland Dr. Lateral                     1985   77-723, 8543    4" & 6"           0           3.1     3.10     16,368
----------------------------------------------------------------------------------------------------------------------------------
  B  Palmer Lateral                         1984   84-30211.01        6"             0           6.2     6.25     32,977
----------------------------------------------------------------------------------------------------------------------------------
  B  Wasilla Lateral                        1984   84-30211.11        4"             0           1.8     1.78      9,414
----------------------------------------------------------------------------------------------------------------------------------
  B  Lewis River Lateral                    1984   84-8460.01         6"             0           2.1     2.10     11,105
----------------------------------------------------------------------------------------------------------------------------------
  B  Vine Road Lateral                      1993   93-9320.03         4"             0          3.22     3.30     17,434
----------------------------------------------------------------------------------------------------------------------------------
  B  North Palmer Lateral                   1997   97-9720.04         4"             0          1.94     1.94     10,235
----------------------------------------------------------------------------------------------------------------------------------
  B  Seward Meridian Lateral                1999   99-0420002         4"             0          1.34     1.34      7,095
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                        Beluga Sub Total   125.24
----------------------------------------------------------------------------------------------------------------------------------
                                                        APC   SYSTEM   TOTAL                           353.37              353.37
                                                                                                    ------------------------------



<PAGE>






                               [GRAPHIC OMITTED]




<PAGE>


                                    EXHIBIT B
                                       TO
                           GAS TRANSMISSION AGREEMENT


                     SPECIAL CONTRACT FOR GAS TRANSPORTATION




<PAGE>


                                    EXHIBIT C
                                       TO
                           GAS TRANSMISSION AGREEMENT


                            MAXIMUM DAILY QUANTITIES


         The following segments of Transporter's System have the following
Maximum Daily Quantities:


                  Segment                         Maximum Daily Quantity
                  -------                         ----------------------
                  Kenai Pipeline                  210 MMcf/d
                  Beluga Pipeline                 200 MMcf/d



<PAGE>


                                    EXHIBIT D
                                       TO
                           GAS TRANSMISSION AGREEMENT



         Reservation Rate               $943,000/month

         Commodity Rate                  $0.075/Mcf




<PAGE>


                                    EXHIBIT E
                                       TO
                           GAS TRANSMISSION AGREEMENT


                                    INSURANCE


         (A) Workers Compensation insurance complying with all applicable Laws,
and Employer's Liability insurance with limits of not less than the Alaskan
statutory limit. Each Party and their parent, subsidiary and affiliated
companies and their respective employees shall be provided a waiver of all
rights of subrogation under this insurance. Either Party under this Agreement
shall have the right at their sole option to be a qualified self-insurer for
worker's compensation insurance.

         (B) Commercial or comprehensive general liability insurance with a
combined single limit of not less than $1,000,000 per occurrence for bodily
injury and property damage, including coverage for premises-operations, blanket
contractual liability, broad form property damage liability, personal injury
liability, advertising injury liability, independent contractor coverage,
products/completed operations, sudden and accidental pollution liability and the
explosion, collapse and underground hazards.

         (C) Automobile liability insurance with a combined single limit of not
less than $1,000,000 per occurrence for bodily injury and property damage
including coverage for all owned, non-owned and hired vehicles.

         (D) Umbrella and/or excess liability insurance with a combined single
limit of not less than $25,000,000 per occurrence for bodily injury and property
damage covering excess of the employer's liability, general liability and
automobile liability insurance required above.




<PAGE>


                                    Exhibit F
                                       To
                           Gas Transmission Agreement


                              GAS SUPPLY CONTRACTS



1.       Gas Purchase Contract dated December 20, 1982, between Shell Oil
         Company and Alaska Pipeline Company, as amended and supplemented. (The
         current parties to this Agreement are Chevron U.S.A. Inc.,
         ConocoPhillips and the Municipality of Anchorage.)

2.       Gas Purchase Agreement dated November 26, 1984, between Phillips
         Petroleum Company (now ConocoPhillips) and Alaska Pipeline Company, as
         amended.

3.       Gas Purchase Agreement dated May 1, 1988, between Marathon Oil Company
         and Alaska Pipeline Company, as amended.

4.       Gas Purchase Agreement dated May 16, 2000, among Anadarko Petroleum
         Corporation, Phillips Alaska, Inc. and Alaska Pipeline Company, as
         amended. (The current party to this Agreement is Aurora Gas, LLC.)

5.       Gas Purchase Agreement dated November 17, 2000, between Union Oil
         Company of California and Alaska Pipeline Company, as amended.











<PAGE>




                                                                       EXHIBIT D

                      BILL OF SALE AND ASSIGNMENT AGREEMENT

         This BILL OF SALE and ASSIGNMENT AGREEMENT (this "Bill of Sale"), dated
as of _______________, 2004, is made and entered into by and between
[____________], ("Purchaser"), and SEMCO ENERGY, INC., a Michigan corporation
("Seller").

         WHEREAS, Atlas Pipeline Partners, L.P. ("Atlas") and Seller have
entered into a Purchase and Sale Agreement, dated as of September __, 2003 (the
"Purchase Agreement"), pursuant to which Seller has agreed to sell, transfer,
convey, assign and deliver to Atlas, and Atlas has agreed to purchase and
acquire from Seller, 100% of the membership interests of Alaska Pipeline
Company, LLC, a Delaware limited liability company (the "Company Equity
Interests").

         WHEREAS, Atlas has designated Purchaser to purchase and acquire the
Company Equity Interests in accordance with Section 13.7 of the Purchase
Agreement.

         WHEREAS, Seller desires to transfer and assign to Purchaser the Company
Equity Interests to Purchaser, and Purchaser desires to accept sale, transfer,
conveyance, assignment and delivery thereof.

         NOW, THEREFORE, for and in consideration of the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller hereby irrevocably sells,
transfers, conveys, assigns and delivers to Purchaser the Company Equity
Interests free and clear of all Encumbrances (as defined in the Purchase
Agreement), TO HAVE AND TO HOLD THE SAME UNTO Purchaser, its successors and
assigns, forever, and Purchaser hereby accepts such assignment.

         This Bill of Sale may be executed in any number of counterparts, each
of which will be deemed an original, but all of which together will constitute
one and the same instrument. This Bill of Sale and all of the provisions hereof
shall be binding upon and shall inure the benefit of the respective parties and
their assigns, transferees and successors.

         This Bill of Sale shall be governed by, and construed, interpreted and
enforced in accordance with, the substantive law of the State of New York
without reference to any principles of conflicts of laws thereof except that if
it is necessary in any other jurisdiction to have the law of such other
jurisdiction govern this Bill of Sale in order for this Bill of Sale to be
effective in any respect, then the laws of such other jurisdiction shall govern
this Bill of Sale to such extent.

         This Bill of Sale is delivered pursuant to the Purchase Agreement.




<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Bill of Sale as of
the date first above written.

                                                  [____________________]


                                                  By:________________________
                                                  Name:
                                                  Title:


                                                  SEMCO ENERGY, INC.

                                                  By:________________________
                                                  Name:
                                                  Title:






<PAGE>




                                                                       EXHIBIT E

                       LIMITED LIABILITY COMPANY AGREEMENT
                                       OF
                          ALASKA PIPELINE COMPANY, LLC,
                      a Delaware Limited Liability Company


         This LIMITED LIABILITY COMPANY AGREEMENT of Alaska Pipeline Company,
LLC (this "Agreement"), dated as of _____________, 2004, is adopted, executed
and agreed to by the sole Member (as defined below).

         1. Formation. Alaska Pipeline Company, LLC (the "Company") has been
formed as a Delaware limited liability company under and pursuant to the
Delaware Limited Liability Company Act (the "Act").

         2. Term. The Company shall have a perpetual existence.

         3. Purposes. The purposes of the Company are to carry on any lawful
business, purpose or activity for which limited liability companies may be
formed under the Act.

         4. Sole Member. SEMCO Energy, Inc., a Michigan corporation, shall be
the sole member of the Company (the "Member").

         5. Contributions. Without creating any rights in favor of any third
party, the Member may, from time to time, make contributions of cash or property
to the capital of the Company, but shall have no obligation to do so.

         6. Distributions. The Member shall be entitled (a) to receive all
distributions (including, without limitation, liquidating distributions) made by
the Company and (b) to enjoy all other rights, benefits and interests in the
Company.

         7. Management. The Management of the Company is fully reserved to the
Member, and the Company shall not have "managers," as that term is used in the
Act. The powers of the Company shall be exercised by or under the authority of,
and the business and affairs of the Company shall be managed under the direction
of, the Member, who shall make all decisions and take all actions for the
Company.

         8. Dissolution. The Company shall dissolve and its affairs shall be
wound up at such time, if any, as the Member may elect. No other event
(including, without limitation, an event described in Section 18-801(4) of the
Act) will cause the Company to dissolve.

         9. Governing Law. THIS AGREEMENT IS GOVERNED BY AND SHALL BE CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (EXCLUDING ITS
CONFLICT-OF-LAWS RULES).

                            [signature on next page]


<PAGE>


                             SEMCO ENERGY, INC.






                             By:____________________________________________



                             Name:__________________________________________



                             Title:_________________________________________





<PAGE>




                                                                       EXHIBIT F

                         GAS CONTROL SERVICES AGREEMENT

                                 BY AND BETWEEN

                          ALASKA PIPELINE COMPANY, LLC

                                       and

                           ENSTAR NATURAL GAS COMPANY,
                        A DIVISION OF SEMCO ENERGY, INC.



                           Dated as of _________, 2004




<PAGE>




                                TABLE OF CONTENTS




                                                                                                           
ARTICLE I             Definitions.................................................................................1
      Section 1.1          Definitions............................................................................1

ARTICLE II            Services to Be Provided.....................................................................3
      Section 2.1          Operation and Maintenance Services.....................................................3
      Section 2.2          Facilities Available to Operator.......................................................4

ARTICLE III           Operator's Covenants........................................................................4
      Section 3.1          Operator's Ability to Provide Services.................................................4
      Section 3.2          Standards for the Provision of Gas Control Services....................................4
      Section 3.3          No Breach..............................................................................5

ARTICLE IV            Service Term, Suspension and Early Termination..............................................5
      Section 4.1          Service Term; Extension of Service Term................................................5
      Section 4.2          Owner's Right to Suspend Performance or to Terminate the Agreement.....................5
      Section 4.3          Cooperation in Connection with Expiration or Termination...............................6

ARTICLE V             Compensation................................................................................6
      Section 5.1          Compensation for Gas Control...........................................................6

ARTICLE VI            Dispute Resolution..........................................................................6
      Section 6.1          General................................................................................6

ARTICLE VII           Confidentiality of Information..............................................................7
      Section 7.1          General................................................................................7
      Section 7.2          Operator's Obligations.................................................................7
      Section 7.3          Owner's Obligations....................................................................8
      Section 7.4          Compulsory Disclosure..................................................................8
      Section 7.5          Injunction.............................................................................8

ARTICLE VIII          Relationship BETWEEN the Parties............................................................9
      Section 8.1          No Joint Venture.......................................................................9

ARTICLE IX            Indemnification; Release; Limit on Liability................................................9
      Section 9.1          Indemnification by Operator............................................................9
      Section 9.2          Indemnification by Owner...............................................................9
      Section 9.3          Procedures............................................................................10
      Section 9.4          Indemnification Payments..............................................................10
      Section 9.5          Survival..............................................................................10
      Section 9.6          Release and Limit on Liability........................................................11

ARTICLE X             Required Insurance.........................................................................11
      Section 10.1         Required Insurance....................................................................11

ARTICLE XI            Miscellaneous Provisions...................................................................12
      Section 11.1         Agency of Operator....................................................................12
      Section 11.2         Force Majeure.........................................................................13
      Section 11.3         Notices...............................................................................13
      Section 11.4         Successors and Assigns................................................................13
      Section 11.5         Survival..............................................................................14
      Section 11.6         Signatures, Counterparts..............................................................14
      Section 11.7         Amendments............................................................................14
      Section 11.8         Governing Law.........................................................................14
      Section 11.9         Entire Agreement......................................................................14
      Section 11.10        Negotiated Agreement..................................................................14
      Section 11.11        Waiver................................................................................14
      Section 11.12        Severability..........................................................................15
      Section 11.13        No Third Party Beneficiaries..........................................................15


Exhibits and Schedules

Exhibit A         Description of Pipeline System





<PAGE>


                         GAS CONTROL SERVICES AGREEMENT


         This GAS CONTROL SERVICES AGREEMENT (this "Agreement") is entered into
as of ____________, 2004, by and between Alaska Pipeline Company, LLC, a
Delaware limited liability company ("Owner"), and ENSTAR Natural Gas Company, a
Division of SEMCO Energy, Inc., a Michigan corporation ("Operator").

                                    Recitals

         Owner owns the Pipeline System and has retained Operator to provide
operations, maintenance and administrative services pursuant to the O&M
Agreement.

         In addition to the services provided pursuant to the O&M Agreement,
Owner desires to retain Operator to provide Gas Control Services, and Operator
is willing to do so on the terms and subject to the conditions of this
Agreement.

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

ARTICLE I

                                   Definitions

         Section 1.1. Definitions. The following capitalized terms when used
herein shall have the following meanings:

         "AAA" is defined in Section 8.1(b).

         "Accepted Gas Pipeline Practices" shall mean those practices, methods
and acts that (i) are generally engaged in by a significant portion of the
natural gas pipeline industry during the term of this Agreement with respect to
assets and facilities having similar characteristics to the Pipeline System and
reasonably accounting for local conditions and (ii) which, in the exercise of
reasonable judgment in light of the facts known or that reasonably should have
been known at the time a decision is made, would be expected to accomplish a
desired result at a reasonable cost consistent with good business practices,
reliability, safety, environmental protection and expedition. Accepted Gas
Pipeline Practices are not intended to be limited to the optimum practice,
method or act to the exclusion of others, but rather to those practices, methods
and acts generally engaged in by a significant portion of the natural gas
pipeline industry in the relevant geographic region during the term of this
Agreement and include taking reasonable steps to provide for:

                  (a) adequate materials, resources and supplies being available
to meet the needs of the Pipeline System under reasonably anticipated conditions
with respect to Gas Control Services;


<PAGE>

                  (b) sufficient operating personnel being available, adequately
experienced and trained to provide the Gas Control Services;

                  (c) appropriate monitoring and testing being performed to
determine that equipment is functioning as designed and can reasonably be
expected to function properly under reasonably anticipated conditions; and

                  (d) equipment being operated in a manner safe to workers, the
general public, the environment, and the Pipeline System.

         "Business Day" shall mean any day except Saturday, Sunday and any other
day on which banking institutions located in the City of New York, New York or
the City of Anchorage, Alaska, are required or authorized to close.

         "Company" is defined in Section 10.1.

         "Confidential Information" is defined in Section 7.1.

         "Effective Date" shall mean the date of this Agreement.

         "Force Majeure Event" shall mean an act of God, fire, flood,
earthquake, storm, lightning, an act of Governmental Authority, or necessity for
compliance with any Laws, a strike, lockout or other industrial disturbance, not
directed exclusively at a Party or the Pipeline System, an act of the public
enemy, sabotage, war, act of terrorism, insurrection or blockade, riot or other
civil disturbance, epidemic, explosions, and any other similar event that, in
each such case, (i) affects and prevents, in whole or in part, the performance
of a Party's obligations under this Agreement, (ii) is not reasonably within the
control of the affected Party, (iii) which by the exercise of commercially
reasonable efforts the affected Party is unable to overcome or prevent and (iv)
is not the direct or indirect result of the affected Party's negligence or the
failure of such Party to perform any of its obligations under this Agreement.

         "Gas Control Services" is defined in Section 2.1.

         "Governmental Approval" shall mean any consent, authorization,
certificate, permit, right of way grant or approval of any Governmental
Authority that is necessary for the ownership and operation of the Pipeline
System in accordance with applicable Laws.

         "Governmental Authority" shall mean any court or tribunal in any
jurisdiction or any federal, state, tribal, municipal or local government or
other governmental body, agency, authority, department, commission, board,
bureau, instrumentality, arbitrator or arbitral body or any quasi-governmental
or private body lawfully exercising any regulatory or taxing authority,
including, without limitation, the Regulatory Commission of Alaska.

         "Indemnified Party" is defined in Section 9.3.

         "Indemnifying Party" is defined in Section 9.3.

                                       2
<PAGE>

         "Laws" shall mean any applicable statute, common law, rule, regulation,
judgment, order, ordinance, writ, injunction or decree issued or promulgated by
any Governmental Authority having jurisdiction with respect to the applicable
subject matter.

         "Loss" is defined in Section 9.1.

         "O&M Agreement" shall mean the Operations and Maintenance and
Administrative Services Agreement dated as of the date of this Agreement between
Operator and Owner, as amended or modified or supplemented from time to time.

         "Operator Indemnified Party" is defined in Section 9.2.

         "Operator Parties" is defined in Section 9.6.

         "Owner Indemnified Party" is defined in Section 9.1.

         "Party" shall mean either Owner or Operator.

         "Pipeline System" shall mean the natural gas transmission pipeline
described on Exhibit A to this Agreement, and any capital improvements added or
made to the Pipeline System during the Service Term.

         "Service Term" shall mean the term beginning on midnight prevailing
Alaska time on the Effective Date and ending at 11:59:59 prevailing Alaska time
on the last day of the one hundred twentieth (120th) succeeding full calendar
month, subject to extension in accordance with ARTICLE V.

         "Tax" shall mean any tax, duty, imposition, levy of any nature (whether
central, territorial, federal, state or local) whatsoever and whenever charged,
levied or imposed, together with any interest and penalties in relation thereto.

                                   ARTICLE II

                             Services to Be Provided

         Section 2.1. Operation and Maintenance Services. Operator agrees to
provide to Owner (and its successors and assigns), at no cost to Owner other
than as provided in Article VI, the following services (the "Gas Control
Services"):

                  (A) analyses of pressures for irregularities, as received;

                  (B) collecting pressures by telephone, microwave and radio;

                  (C) maintaining pressures at compressor stations, key line
junctions and regulating stations to divide the available gas during heavy
demand periods;

                  (D) maintaining pressure log sheets;



                                       3
<PAGE>

                  (E) maintaining proper compression ratios at compressor
stations, consistent with economical operations;

                  (F) maintaining necessary line pressures consistent with
satisfactory service;

                  (G) requesting pressure changes at compressor stations,
regulating stations and key line junctions;

                  (H) rerouting gas during emergencies and planned shutdowns;

                  (I) instructing gas suppliers to increase or decrease receipt
point pressures and gas flows; and

                  (J) collection, logging and distribution of data pertaining to
the pressures, receipts, deliveries, nominations, balancing and scheduling of
the pipeline system.


         Section 2.2. Facilities Available to Operator. Throughout the Service
Term, Owner shall make available to Operator for purposes of performing the Gas
Control Services pursuant to this Agreement, all of the facilities that comprise
the Pipeline System.

                                  ARTICLE III

                              Operator's Covenants

         Section 3.1. Operator's Ability to Provide Services. Operator agrees
that it shall, throughout the Service Term, (a) maintain and cause to be devoted
to the provision of Gas Control Services under this Agreement, sufficient
personnel and financial resources to provide Gas Control Services (i) in the
same manner as during the twelve (12) months immediately prior to the Effective
Date, (ii) in accordance with Accepted Gas Pipeline Practices and applicable
Laws, (iii) as required to satisfy Owner's contractual obligations to its
customers, and (iv) in accordance with the terms of this Agreement; (b) pay all
direct and indirect costs associated with the provision of Gas Control Services
under this Agreement, and (c) not place or permit to be placed on the Pipeline
System any lien, security interest, mortgage, easement, license or other
encumbrance, other than inchoate liens in favor of providers of goods or
services securing amounts not yet due and payable or which are being contested
by Operator in good faith.

         Section 3.2. Standards for the Provision of Gas Control Services.
Operator agrees that it will perform the Gas Control Services (a) in good faith
on a commercially reasonable basis; (b) in accordance with (i) Accepted Gas
Pipeline Practices and applicable Governmental Approvals and Laws, and
consistent with all applicable orders, judgments, decrees, rulings or
injunctions; (ii) manufacturers' warranties for the Pipeline System; (iii)
Owner's contractual obligations to its customers; (iv) the terms of this
Agreement; and (v) the terms of Operator's and Owner's insurance policies; and
(c) using at least the same standard of care used in the performance of such
services for the Pipeline System during the twelve (12) months immediately prior
to the Effective Date. EXCEPT AS SET FORTH IN THIS SECTION, OPERATOR MAKES NO
REPRESENTATION, WARRANTY OR GUARANTY, EXPRESS OR IMPLIED, OF ANY KIND CONCERNING
THE SERVICES, OR ANY RESULTS OR WORK PRODUCT OF SUCH SERVICES, AND SPECIFICALLY
MAKES NO WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND
NONE SHALL BE IMPLIED. ALL OTHER REPRESENTATIONS, WARRANTIES OR GUARANTEES,
WRITTEN OR ORAL, EXPRESS OR IMPLIED IN FACT OR IN LAW, AND WHETHER OR NOT BASED
ON STATUTE, ARE EXCLUDED. OWNER ACKNOWLEDGES AND AGREES THAT THE LEVEL OF
COMPENSATION OPERATOR HAS AGREED TO ACCEPT FOR PERFORMANCE OF ITS OBLIGATIONS
HEREUNDER IS PREDICATED ON THIS LIMITATION OF LIABILITY AND DISCLAIMER OF
WARRANTIES.

                                       4
<PAGE>

         Section 3.3. No Breach. Notwithstanding anything to the contrary
contained herein, Operator shall not be deemed to be in breach of its
obligations hereunder to the extent such breach is caused by any of the
following: (a) the failure of Owner to grant its consent within a reasonable
time after a request by Operator therefor to any matter requiring such consent
prior to Operator's performance of its obligations with respect to such matter,
or (b) any acts of Operator based solely in reliance upon a direction of Owner.

                                   ARTICLE IV

                 Service Term, Suspension and Early Termination

         Section 4.1. Service Term; Extension of Service Term. The term of this
Agreement shall be the Service Term; provided, however, that if at the
termination of the Service Term, Operator is still providing operations,
maintenance and administrative services pursuant to the O&M Agreement, or any
replacement agreement for the provision of operations, maintenance and
administrative services, the Service Term under this Agreement shall
automatically be extended to co-terminous with the then current term of such O&M
Agreement.

         Section 4.2. Owner's Right to Suspend Performance or to Terminate the
Agreement. Owner shall have the right to terminate this Agreement, in addition
to all other remedies available to it under law and in equity, if Operator (a)
breaches in any material respect any of its obligations under this Agreement and
such breach has not been cured within thirty (30) days after written notice of
such breach to Operator; (b) is or becomes insolvent or bankrupt or ceases to
pay its debts as they become due or consents to or acquiesces in the appointment
of a receiver, trustee or liquidator for a substantial part of its property; (c)
institutes a voluntary bankruptcy, winding up, reorganization, insolvency or
similar proceeding; (d) has an involuntary bankruptcy, winding up,
reorganization, insolvency or similar proceeding instituted against it that is
not stayed, dismissed or terminated within ninety (90) days after commencement;
or (e) ceases to carry on its business.

         Section 4.3. Cooperation in Connection with Expiration or Termination.
During the final three (3) months prior to the expiration of the Service Term,
and during the period of three (3) months following the termination of this
Agreement under Section 5.2 hereof, Operator shall cooperate with Owner and its
representatives in (i) the appointment and training of a successor operator
("Successor Operator") to take over the Gas Control Services. During such
period, Operator shall provide Owner and Successor Operator and their respective
representatives full access to all information, data and records relating to the
Gas Control Services, and Operator shall comply with all reasonable requests by
Owner or Successor Operator in connection with taking over the Operator's
duties, including the execution and delivery of documents and taking of other
actions, in each case as shall be necessary to facilitate the orderly transition
of duties from Operator to Successor Operator. At the request of Owner, upon the
expiration or termination of this Agreement under this Article IV, Operator
shall not assert its rights, if any, to retain its personnel who spend 75% or
more of their time on matters relating to the Gas Control Services and shall
otherwise permit such personnel to transfer to the employ of Successor Operator.



                                       5
<PAGE>

                                   ARTICLE V

                                  Compensation

         Section 5.1. Compensation for Gas Control. As compensation for all Gas
Control Services to be performed for the full Service Term, Owner shall pay
Operator a single payment of $450,000, the receipt of which is hereby
acknowledged by Operator.

                                   ARTICLE VI

                               Dispute Resolution

         Section 6.1. General. Any dispute arising under this Agreement or
otherwise in connection with this Agreement shall be resolved pursuant to this
Section 6.1.

                  (a) Any Party has the right to request the other to meet to
discuss a dispute. The Party requesting the meeting will give at least ten (10)
Business Days notice in writing of the subject it wishes to discuss, provide a
written statement of the dispute, and designate an officer of the Party with
complete power to resolve the dispute to attend the meeting. Within five (5)
Business Days after receipt to such request, the Party receiving the request
will provide a responsive written statement and will designate an officer of the
Party who will attend the meeting with complete power to resolve the dispute.

                  (b) If the meeting fails to resolve the dispute by a signed
agreement among the officers, either Party may submit the dispute for binding
arbitration administered by the American Arbitration Association ("AAA") under
its Commercial Arbitration Rules before a single arbitrator, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.

                  (c) The Parties agree to make discovery and disclosure of all
matters relevant to the dispute to the extent and in the manner provided by the
Federal Rules of Civil Procedure. The arbitrator will rule on all requests for
discovery and disclosure and discovery shall be completed within 60 days after
the date of appointment of the arbitrator. The arbitrator may consider any
matter relevant to the subject to the dispute and shall follow the statutes and
decisions of the substantive law of Alaska relevant to the subject. The
arbitrator shall not have the authority or power to alter, amend or modify any
of the terms and conditions of the agreement of the Parties. The arbitrator
shall issue a final ruling within 150 days after the date of appointment of the
arbitrators.

                                       6
<PAGE>

                  (d) The ruling of the arbitrator shall be in writing and
signed and shall be final and binding upon the Parties. The fees and expenses of
counsel, witnesses and employees of the Parties and all other costs and expenses
incurred exclusively for the benefit of the Party incurring the same shall be
borne by the Party incurring such fees and expenses. All other fees and expenses
including, without limitation, compensation for the arbitrator, shall be divided
equally between the Parties. All meetings and arbitrations held pursuant to this
Section 6.1 shall take place in Anchorage, Alaska.

                                  ARTICLE VII

                         Confidentiality of Information

         Section 7.1. General. As used in this Article VII, "Confidential
Information" shall mean any information not in the public domain or generally
known in the industry, in any form relating to the business and operations of
Owner or Operator (each such entity, for purposes of this Article VII, a
"Company"), including but not limited to information regarding customers,
vendors, suppliers, trade secrets, training programs, manuals or materials,
technical information, contracts, systems, procedures, mailing lists, know-how,
trade names, improvements, price lists, financial or other data (including the
revenues, costs or profits associated with any of such Company's services),
business plans, code books, invoices and other financial statements, computer
programs, software systems, databases, disks and printouts, plans (business,
technical or otherwise), customer and industry lists, correspondence, internal
reports, personnel files, sales and advertising material, telephone numbers,
names, addresses or any other compilation of information, written or unwritten,
which is or was used by such Company, regardless of whether such information was
or is owned during the term of this Agreement by such Company.

         Section 7.2. Operator's Obligations. Operator shall maintain the
confidentiality of any Confidential Information of Owner acquired by Operator
during the term of this Agreement, and except as otherwise provided in this
Agreement, shall not use such Confidential Information for any purpose other
than the performance of this Agreement and the performance of services under the
O&M Agreement; provided, however, Operator may use any Confidential Information
in the resolution of any disputes under this Agreement. Upon termination of this
Agreement, except as otherwise provided in this Agreement, Operator agrees to
turn over such Confidential Information to Owner or to destroy such Confidential
Information, but only in accordance with the instructions of Owner; provided,
however, that Operator may maintain one archive copy of all of such Confidential
Information in a secure data storage facility.

         Section 7.3. Owner's Obligations. Owner shall maintain the
confidentiality of any Confidential Information of Operator acquired by Owner
during the term of this Agreement, and except as otherwise provided in this
Agreement, shall not use such Confidential Information for any purpose other
than the performance of this Agreement; provided, however, Owner may disclose
invoices and other similar financial information concerning the cost of Gas
Control Services to any prospective purchaser of Operator or the Transmission
Business, and may use any Confidential Information in the resolution of any
disputes under this Agreement. Upon termination of this Agreement, except as
otherwise provided in this Agreement, Owner agrees to turn over such
Confidential Information to Operator or to destroy such Confidential Information
in accordance with the instructions of Operator; provided, however, that Owner
may maintain one archive copy of all of such Confidential Information in a
secure data storage facility.



                                       7
<PAGE>

         Section 7.4. Compulsory Disclosure. If any Company is requested or
required to disclose Confidential Information of another unaffiliated Company
pursuant to any judicial or administrative process, law, regulation or statute,
then such receiving Company shall promptly notify the other unaffiliated Company
to this Agreement in writing of such request or requirement. The Company whose
Confidential Information is requested or required to be disclosed shall either
(i) promptly seek protective relief from such disclosure obligation or (ii)
direct the receiving Company to comply with such request or requirement. If,
after a reasonable opportunity to seek protective relief, such relief is not
obtained by the Company whose Confidential Information is subject to discovery
or disclosure, or if such Company fails to obtain such relief, the receiving
Company may disclose such portion of such Confidential Information that such
Company reasonably believes it is legally obligated to disclose.

         Section 7.5. Injunction. Each Company agrees that the breach by another
unaffiliated Company of its obligations under this Article VII would cause
significant and irreparable harm to the aggrieved Company, which may be
difficult to measure with certainty or to compensate through money damages. Each
Company acknowledges that the aggrieved Company shall be entitled, without proof
of irreparable harm and without waiving any other right or remedy available to
it, to such injunctive and equitable relief as may be deemed proper by a court
of competent jurisdiction.

                                  ARTICLE VIII

                        Relationship BETWEEN the Parties

         Section 8.1. No Joint Venture. It is the intent of the Parties that
with respect to the provision of the Services pursuant to this Agreement, Owner
and Operator are independent contractors. Except to the extent Operator executes
contracts or documents as the agent of Owner pursuant to the terms of Section
16.1, nothing in this Agreement shall cause the relationship between Operator
and Owner to be deemed to constitute an agency, partnership or joint venture.
The terms of this Agreement are not intended to constitute a joint employer for
any purpose between any of the Parties and their affiliates. Each of the Parties
agrees that the provisions of this Agreement as a whole are not intended to, and
do not, constitute control of the other Party (or any affiliates thereof) or
provide it with the ability to control such other Party (or any affiliates
thereof), and each Party hereto expressly disclaims any right or power under
this Agreement to exercise any power whatsoever over the management or policies
of the other (or any affiliates thereof). Nothing in this Agreement shall oblige
either Party hereto to act in breach of the requirements of applicable Laws or
Governmental Approvals.



                                       8
<PAGE>
                                   ARTICLE IX

                  Indemnification; Release; Limit on Liability

         Section 9.1. Indemnification by Operator. Operator shall indemnify,
defend and hold harmless Owner, and each of its officers, directors, employees,
agents, and affiliates (and the officers, directors, employees and agents of
such affiliates) ("Owner Indemnified Party") if any such Owner Indemnified Party
shall at any time or from time to time suffer any damage, judgment, fine,
penalty, demand, settlement, liability, loss, cost, expense (including
reasonable attorneys', consultants' and experts' fees), claim or cause of action
(each, a "Loss") arising out of, relating to or resulting from the Operator's
performance of this Agreement, to the extent such Loss results from any breach
of this Agreement or the fault, tortuous act, negligence, strict liability,
gross negligence or willful misconduct of Operator. Further, Operator shall
indemnify and hold Owner harmless and defend Owner from any and all claims,
costs, damages, injuries, demands and causes of action commenced by an employee
of Operator (or his or her estate or legal representative) which arises directly
or indirectly from the performance of Services except to the extent that such
Loss directly results from the gross negligence or willful misconduct of Owner.

         Section 9.2. Indemnification by Owner. Owner shall indemnify, defend
and hold harmless Operator, and each of its officers, directors, employees,
agents, and affiliates (and the officers, directors, employees and agents of
such affiliates) ("Operator Indemnified Party") if any such Operator Indemnified
Party shall at any time or from time to time suffer any Loss arising out of,
relating to or resulting from Owner's performance of this Agreement, to the
extent such Loss results from any breach of this Agreement or the fault,
tortuous act, negligence, strict liability, gross negligence or willful
misconduct of Owner. Further, Owner shall indemnify and hold Operator harmless
and defend Operator from any and all claims, costs, damages, injuries, demands
and causes of action commenced by an employee of Owner (or his or her estate or
legal representative), except to the extent that (i) such Loss directly results
from the gross negligence or willful misconduct of Operator, or (ii) Owner is
entitled to indemnity from Operator under Section 13.1.

         Section 9.3. Procedures. Any Party asserting a claim for
indemnification hereunder (such Party seeking indemnification, the "Indemnified
Party") shall notify the other Party (the "Indemnifying Party") (with reasonable
specificity) promptly after it becomes aware of facts supporting a claim or
action for indemnification under this Article IX, and shall provide to the
Indemnifying Party as soon as practicable thereafter all information and
documentation reasonably necessary to support and verify any Losses associated
with such claim or action. The failure to so notify or provide information to
the Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to any Indemnified Party, except to the extent that the
Indemnifying Party demonstrates that it has been materially prejudiced by the
Indemnified Party's failure to give such notice, in which case the Indemnifying
Party shall be relieved from its obligations hereunder to the extent of such
material prejudice. The Indemnifying Party may, and, at the request of the
Indemnified Party, shall participate in and defend, contest or otherwise protect
the Indemnified Party against any such claim or action by counsel of the
Indemnifying Party's choice at its sole cost and expense; provided, however,
that the Indemnifying Party shall not make any settlement or compromise without
the prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld, conditioned or delayed) unless the sole relief provided
is monetary damages that are paid in full by the Indemnifying Party. The
Indemnified Party shall have the right, but not the obligation, to participate
at its own expense in the defense thereof by counsel of the Indemnified Party's
choice and shall in any event use its reasonable best efforts to cooperate with
and assist the Indemnifying Party. If the Indemnifying Party fails timely to
defend, contest or otherwise protect against such suit, action, investigation,
claim or proceeding, the Indemnified Party shall have the right to do so,
including, without limitation, the right to make any compromise or settlement
thereof, and the Indemnified Party shall be entitled to recover the entire cost
thereof from the Indemnifying Party, including, without limitation, reasonable
attorneys' fees, disbursements and amounts paid as the result of such suit,
action, investigation, claim or proceeding.



                                       9
<PAGE>

         Section 9.4. Indemnification Payments. Any payment hereunder shall be
made by wire transfer of immediately available funds to such account or accounts
as the Indemnified Party shall designate to the Indemnifying Party in writing.

         Section 9.5. Survival. The provisions of this Article IX shall survive
the termination of this Agreement for claims made within a period of three (3)
years after the expiration date of the Service Term.

         Section 9.6. Release and Limit on Liability. Operator shall not be
liable to Owner for, and Owner hereby releases Operator and its affiliates, and
each officer, director, employee and agent of Operator and/or any of its
affiliates (the "Operator Parties") from, any Loss arising from any act or
omission of Operator in connection with the Gas Control Services, except to the
extent any such Loss results from an event for which Owner is entitled to
indemnification under Section 9.1. Owner shall not be liable to Operator for,
and Operator hereby releases Owner and its affiliates, and each officer,
director, employee and agent of Owner and/or any of its affiliates (the "Owner
Parties") from, any Loss arising from any act or omission of Owner in connection
with the Services, except to the extent any such Loss results from an event for
which Operator is entitled to indemnification under Section 9.2. Notwithstanding
anything in this Agreement to the contrary, the aggregate liability of the
Operator Parties under this Agreement shall not exceed the sum of (i) the
aggregate amount of payments received by Operator pursuant to Section 5.1
hereof, and (ii) any payments actually received by Operator or paid to any third
party on behalf of Operator in respect to such liabilities under policies of
insurance. IN NO EVENT SHALL ANY OF THE OPERATOR PARTIES BE LIABLE TO ANY OF THE
OWNER PARTIES, NOR SHALL ANY OF THE OWNER PARTIES BE LIABLE TO ANY OF THE
OPERATOR PARTIES, FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
LOSS, DAMAGES OR EXPENSES (INCLUDING LOST PROFITS OR SAVINGS) ARISING FROM THIS
AGREEMENT.

                                       10
<PAGE>

                                   ARTICLE X

                               Required Insurance

         Section 10.1. Required Insurance. Until the expiration of the Service
Term, each Party shall maintain on behalf of itself and all of its employees,
the following minimum insurance coverage, with the cost of Owner's policies
being paid by Operator:

                  (a) Workers Compensation insurance complying with all
applicable Laws, and Employer's Liability insurance with limits of not less than
the Alaskan statutory limit. Each Party and their parent, subsidiary and
affiliated companies and their respective employees shall be provided a waiver
of all rights of subrogation under this insurance. Either Party under this
Agreement shall have the right at their sole option to be a qualified
self-insurer for worker's compensation insurance.

                  (b) Commercial or comprehensive general liability insurance
with a combined single limit of not less than $1,000,000 per occurrence for
bodily injury and property damage, including coverage for premises-operations,
blanket contractual liability, broad form property damage liability, personal
injury liability, advertising injury liability, independent contractor coverage,
products/completed operations, sudden and accidental pollution liability and the
explosion, collapse and underground hazards.

                  (c) Automobile liability insurance with a combined single
limit of not less than $1,000,000 per occurrence for bodily injury and property
damage including coverage for all owned, non-owned and hired vehicles.

                  (d) Umbrella and/or excess liability insurance with a combined
single limit of not less than $25,000,000 per occurrence for bodily injury and
property damage covering excess of the employer's liability, general liability
and automobile liability insurance required above.

                  (e) Any of the above-required liability insurance that is
maintained on a claims made basis shall have a retroactive date the same as the
date of this Agreement or earlier, and shall remain in effect for at least three
years following, or shall provide for a three year discovery and reporting
period following, the termination of the Service Term.

                  (f) Operator shall be named as an additional insured and shall
be provided with a waiver of all rights of subrogation under the Owner's
insurance required in (b), (c) and (d) above to the extent of Owner's
indemnification obligations and liabilities assumed under this Agreement. Owner
and its lenders shall be named as additional insureds and shall be provided with
a waiver of all rights of subrogation under Operator's insurance required in
(b), (c) and (d) above to the extent of Operator's indemnification obligations
and liabilities assumed under this Agreement.

                  (g) Upon request of one Party under this Agreement,
certificates of insurance evidencing the above-required insurance shall be
provided to the other Party under this Agreement.



                                       11
<PAGE>

                                   ARTICLE XI

                            Miscellaneous Provisions

         Section 11.1. Agency of Operator. Owner hereby appoints Operator to act
as its agent for the performance of Gas Control Services in accordance with, and
as limited by, the applicable terms and provisions of this Agreement; provided,
however, that Operator shall not, without the prior written approval of an
Owner, have any authority under this Agreement to:

                  (i) jointly employ any person who is employed by Owner;

                  (ii) borrow money from or on behalf of, or lend money to,
Owner;

                  (iii) create any lien or encumbrance on the Pipeline System or
Owner's facilities other than inchoate liens in favor of providers of goods or
services securing amounts not yet due and payable or which are being contested
by Operator in good faith;

                  (iv) make any filing with any Governmental Authority or
execute, terminate or amend any Governmental Approval relating to the Pipeline
System or Owner's facilities;

                  (v) file or settle any litigation relating to the Pipeline
System; or

                  (vi) retain outside legal counsel or public accountants to
provide services to Owner; or

                  (vii) enter into any agreement binding upon Owner.

         Section 11.2. Force Majeure. If by reason of a Force Majeure Event
either Party is rendered unable, in whole or in part, to perform its obligations
under this Agreement, other than the obligation to make payments of money then
due, such Party shall be excused from such performance to the extent it is
prevented by, and during the continuance of, such Force Majeure Event. The Party
whose performance is affected by an Force Majeure Event shall (i) give the other
Party notice of the occurrence of such Force Majeure Event as soon as
practicable and (ii) use all commercially reasonable efforts to remedy the
cause(s) and effect(s) of such Force Majeure Event with all reasonable dispatch;
provided, however, that the affected Party shall not be obligated to undertake
unreasonable or uneconomic costs or burdens, in order to overcome the effects of
the Force Majeure Event and reinstate full performance of its obligations under
this Agreement.

         Section 11.3. Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be deemed given if delivered
personally, by facsimile (which is confirmed) or sent by overnight courier
(providing proof of delivery), to the Parties at the following address:



                                       12
<PAGE>

         If to Operator:           [_________________________
                                   __________________________
                                   __________________________
                                   _________________________]

         If to Owner:              [_________________________
                                   __________________________
                                   __________________________
                                   _________________________]


         Any Party may, by notice given in accordance with this Section 11.3 to
the other Parties, designate another address or person for receipt of notices
hereunder provided that notice of such a change shall be effective upon receipt.

         Section 11.4. Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the Parties and their respective successors,
assigns and legal representatives (whether by acquisition, merger, operation of
law, other transaction constituting a change of control or otherwise). No Party
may assign this Agreement or any right or obligation hereunder without the prior
written consent of the other Party, and any assignment without such consent
shall be void; provided, however, that nothing in this Agreement shall prohibit
a transfer of a Party's rights and obligations hereunder by acquisition of
substantially all of the assets of such Party, merger or operation of law, but
if any such transfer is made by Operator without Owner's prior written consent,
Owner shall have the right to terminate this Agreement and neither Party shall
have any future obligation hereunder.

         Section 11.5. Survival. Any provision of this Agreement that expressly
or by implication comes into or remains in force following the termination or
expiration of this Agreement shall survive for a period of three (3) years after
the expiration of the Service Term.

         Section 11.6. Signatures, Counterparts. Facsimile transmission of any
signed original document and/or retransmission of any signed facsimile
transmission shall be the same as delivery of an original. On request, a Party
will confirm its facsimile transmission by signing a duplicate original
document. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.

         Section 11.7. Amendments. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Parties.

         Section 11.8. Governing Law. THIS AGREEMENT WILL BE GOVERNED AS TO
FORMATION, PERFORMANCE, INTERPRETATION AND ENFORCEMENT BY THE LAWS OF THE STATE
OF ALASKA WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES.

         Section 11.9. Entire Agreement. This Agreement constitutes the entire
agreement between the Parties hereto relating to the subject matter hereof and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties, and there are no
general or specific warranties, representations or other agreements by or among
the Parties in connection with the entering into of this Agreement or the
subject matter hereof except as specifically set forth or contemplated herein or
therein.



                                       13
<PAGE>

         Section 11.10. Negotiated Agreement. This Agreement has been negotiated
by the Parties and the fact that the initial and final draft will have been
prepared by either Party will not give rise to any presumption for or against
any party to this Agreement or be used in any respect or forum in the
construction or interpretation of this Agreement or any of its provisions.

         Section 11.11. Waiver. No consent or waiver, express or implied, by any
Party to or of any breach or default by any other Party in the performance by
such other Party of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance of
obligations hereunder by such other Party hereunder. Failure on the part of any
Party to complain of any act or failure to act of any other Party or to declare
any other Party in default, irrespective of how long such failure continues,
shall not constitute a waiver by such first Party of any of its rights
hereunder.

         Section 11.12. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each Party directs that such court interpret and
apply the remainder of this Agreement in the manner that it determines most
closely effectuates the Parties' intent in entering into this Agreement, and in
doing so particularly take into account the relative importance of the term,
provision, covenant or restriction being held invalid, void or unenforceable.

         Section 11.13. No Third Party Beneficiaries. Except as set forth in
Article IX, nothing in this Agreement is intended or shall be construed to give
any person, other than the Parties hereto, their successors and permitted
assigns, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.



                                       14
<PAGE>

         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.

                                            OWNER

                                            ALASKA PIPELINE COMPANY, LLC


                                            By:______________________________
                                            Name:
                                            Title:

                                            OPERATOR

                                            ENSTAR NATURAL GAS COMPANY,
                                            A DIVISION OF SEMCO ENERGY, INC.


                                            By:_______________________________
                                            Name:
                                            Title:




                                       15
<PAGE>




                                                                       EXHIBIT A


Description of Transportation System

         The APC's System consists of the following:

         Kenai Pipeline System:

         The Kenai Pipeline System consists of combined 142 miles of
looped12-inch and 16-inch diameter pipeline, including a nine mile twin crossing
of the Turnagain Arm of the Cook Inlet, plus 25 miles of 8-inch diameter
pipeline known as the Royalty Lateral and six miles of 12-inch, 6-inch, and
4-inch diameter lateral pipelines connecting to the Royalty Lateral. All lines
have a maximum allowable operating pressure (MAOP) of 300 pounds per square inch
gage (psig) or greater. The Kenai Pipeline has two compressor stations totaling
8,400 horsepower.

         Beluga Pipeline System:

         The Beluga Pipeline System consists of 102 miles of 20-inch pipeline
and 23 miles of 6-inch and 4-inch diameter lateral pipelines connecting to the
20-inch pipeline. All lines have a MAOP of 300 psig or greater. It does not have
any compression capacity.

         The Anchorage Pipeline System:

         The Anchorage Pipeline system consists of 55 miles of 12-inch, 10-inch,
8-inch, 6-inch and 4-inch diameter pipelines and lateral pipelines in the
greater Anchorage area interconnecting with the Kenai Pipeline System at Potter
Station and with the Beluga Pipeline System at East Anchorage City Gas Station.
All lines have a MAOP of 300 psig or greater.

         The locations of the Kenai Pipeline System, the Beluga Pipeline System
and the Anchorage Pipeline System are shown on the attached map.



<PAGE>


                              APC PIPELINE SUMMARY




                                                                            Milepost  Designation
----------------------------------------------------------------------------------------------------------------------------------
Sys. Pipeline Name                         Year        ER #      Pipe Size      From            To    Length     Length     Miles
                                         Installed                                                    (miles)    (feet)
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
     Kenai Pipeline
----------------------------------------------------------------------------------------------------------------------------------
  K  "A" Kalifonski to Burnt Island         1960                     12"           2.3          64.5    62.12    327,977
----------------------------------------------------------------------------------------------------------------------------------
  K   "A" Turnagain Crossing                1960                     12"          64.5          73.2     8.68     45,841
----------------------------------------------------------------------------------------------------------------------------------
  K   "B" Turnagain Crossing                1960                     12"          64.5          73.2     8.58     45,289
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Kalifonski to Kenai River       1975   74-513.2       12" & 16"        2.3           6.7     4.40
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Gutenrath to MP50.5             1975   74-513.2       12" & 16"       21.4          50.5    29.10
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp Kenai River to MP 21.4          1978   78-1831.03     12" & 16"        6.7          21.4    14.70
----------------------------------------------------------------------------------------------------------------------------------
  K  "B" Lp MP 50.5 to MP 64.5              1978   78-1831.03     12" & 16"       50.5          64.5    14.00
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Kenai Sub Total    141.58
----------------------------------------------------------------------------------------------------------------------------------
     North Kenai Lateral
----------------------------------------------------------------------------------------------------------------------------------
  K  KPL Junction to East Forelands         1966   66-3074         4" & 6"        24.6          28.5     3.90
----------------------------------------------------------------------------------------------------------------------------------
  K  CEA Bernice Power Plant S/L            1972   72-2190            4"             0          0.14     0.14
----------------------------------------------------------------------------------------------------------------------------------
  K  Nikiski (Tesoro) to KPL                1977   77-1728.00         6"          23.8          24.6     0.75      3,979
----------------------------------------------------------------------------------------------------------------------------------
  K  Robinson Lp to Nikiski (Tesoro)        1977   77-1728.04         8"             0          23.8    24.01    126,765
----------------------------------------------------------------------------------------------------------------------------------
  K  KPL to  Bernice Lake Loop              1981   81-2180.03         6"          24.6          24.8     0.20
----------------------------------------------------------------------------------------------------------------------------------
  K  Beaver Creek Line                      1982   82-2290.02        12"             0          0.15     0.15
----------------------------------------------------------------------------------------------------------------------------------
  K  HEA Lateral                            1985   85-8500.04         6"             0           0.8     0.83      4,356
----------------------------------------------------------------------------------------------------------------------------------
  K  Sterling Gas Field Lateral             1993   9320.09            4"             0          0.64     0.64      3,397
----------------------------------------------------------------------------------------------------------------------------------
  K  N. Kenai Lateral Bypass                1995   9520.02            8"                                 0.92      4,835
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       N Kenai Sub Total   31.54
----------------------------------------------------------------------------------------------------------------------------------
     Anchorage Pipeline System
----------------------------------------------------------------------------------------------------------------------------------
  A  City Gate Pipeline                     1961                     12"          73.2          82.7     9.51     50,203
----------------------------------------------------------------------------------------------------------------------------------
  A   Tudor Lateral                         1968   68-417            12"             0           3.1     3.10
----------------------------------------------------------------------------------------------------------------------------------
  A  Muldoon Loop (Muldoon)                 1968   68-416            12"             0           3.7     3.70
----------------------------------------------------------------------------------------------------------------------------------
  A  Oilwell Rd. Lateral                    1968   68-416         10" & 12"          0          3.08     3.08
----------------------------------------------------------------------------------------------------------------------------------
  A  Fort Richardson Power Plant            1968   68-416             8"             0          1.06     1.06
----------------------------------------------------------------------------------------------------------------------------------
  A  Fort Richardson  Army Base             1971   71-470             6"             0           3.3     3.30
----------------------------------------------------------------------------------------------------------------------------------
  A  Muldoon Loop (Hillside)                1971   71-451            12"             0         10.94    10.94
----------------------------------------------------------------------------------------------------------------------------------
  A  International Airport Lateral          1967   67-4021         4" & 6"           0          1.33     1.33
----------------------------------------------------------------------------------------------------------------------------------
  A  West Side Feeder (Potter to Dim)       1976   76-570             8"             0           4.1     4.10
----------------------------------------------------------------------------------------------------------------------------------
  A  West Side Feeder (Dim. to Minn.)       1978   78-827             8"             0           6.4     6.40
----------------------------------------------------------------------------------------------------------------------------------
  A  City Gate Loop (Potter Valley)         1983   83-2340.01        16"             0           2.6     2.60
----------------------------------------------------------------------------------------------------------------------------------
  A  64th Lateral                           1989   89-8940.02        12"             0          3.37     3.37     17,790
----------------------------------------------------------------------------------------------------------------------------------
  A  Raspberry Lateral                      1990   90-9080.01         6"             0          0.87     0.87      4,573
----------------------------------------------------------------------------------------------------------------------------------
  A  International Airport Lateral          2001      501167000100 6" & 8"        1.33             3     1.67      8,800
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Anch.     Sub Total 55.02
----------------------------------------------------------------------------------------------------------------------------------
     Beluga Pipeline System
----------------------------------------------------------------------------------------------------------------------------------
  B  Beluga Pipeline                        1984   84-30111.01       20"             0         101.6   101.60
----------------------------------------------------------------------------------------------------------------------------------
  B  Eagle River Lateral                    1987   87-8557            6"             0          0.18     0.17        923
----------------------------------------------------------------------------------------------------------------------------------
  B  Fire Lake Lateral                      1976   76-571             4"             0          3.65     3.65     19,260
----------------------------------------------------------------------------------------------------------------------------------
  B  Hiland Dr. Lateral                     1985   77-723, 8543    4" & 6"           0           3.1     3.10     16,368
----------------------------------------------------------------------------------------------------------------------------------
  B  Palmer Lateral                         1984   84-30211.01        6"             0           6.2     6.25     32,977
----------------------------------------------------------------------------------------------------------------------------------
  B  Wasilla Lateral                        1984   84-30211.11        4"             0           1.8     1.78      9,414
----------------------------------------------------------------------------------------------------------------------------------
  B  Lewis River Lateral                    1984   84-8460.01         6"             0           2.1     2.10     11,105
----------------------------------------------------------------------------------------------------------------------------------
  B  Vine Road Lateral                      1993   93-9320.03         4"             0          3.22     3.30     17,434
----------------------------------------------------------------------------------------------------------------------------------
  B  North Palmer Lateral                   1997   97-9720.04         4"             0          1.94     1.94     10,235
----------------------------------------------------------------------------------------------------------------------------------
  B  Seward Meridian Lateral                1999   99-0420002         4"             0          1.34     1.34      7,095
----------------------------------------------------------------------------------------------------------------------------------
                                                                                                       Beluga Sub Total   125.24
----------------------------------------------------------------------------------------------------------------------------------
                                                        APC   SYSTEM   TOTAL                           353.37             353.37
                                                                                                       ---------------------------


<PAGE>




                               [GRAPHIC OMITTED]






<PAGE>




                                                                       EXHIBIT G


                                  TOWER LICENSE

         This Tower License (hereinafter referred to as this "License") is
entered into this day of _____, 2004 between ENSTAR Natural Gas Company, a
Division of SEMCO Energy, Inc. (hereinafter "Licensor" or the "Company"), and
Alaska Pipeline Company LLC (hereinafter referred to as "Licensee"). This
License sets forth the terms and conditions whereby Licensor agrees to
irrevocably license to Licensee the right to utilize certain radio tower
facilities that Licensor owns solely for specified purposes.

         WHEREAS, Licensor desires to irrevocably license unto Licensee the
right to utilize certain radio tower facilities (the "Facilities") owned by
Licensor solely for the purpose of operating the natural gas pipeline system
owned by Licensee (the "System"); and

         WHEREAS, Licensee desires to irrevocably license from Licensor the
right to use such radio tower facilities exclusively for such purpose;

         NOW THEREFORE, for and in consideration of the terms and mutual
promises herein contained and for other good and valuable consideration the
receipt and sufficiency of which are hereby acknowledged, Licensor and Licensee
agree as follows:

         1.       USE OF TOWER FACILITIES - Licensor hereby grants to Licensee,
                  and Licensee hereby accepts, a perpetual, irrevocable and
                  non-exclusive license to use the Facilities described on
                  Exhibit A hereto to: (a) receive and transmit wireless
                  communications pursuant to a commercial mobile radio service
                  license granted to Licensee by the Federal Communications
                  Commission ("FCC"), in connection with the operation of the
                  System, and (b) operate a microwave system for Licensee's own
                  internal purposes relating to the operations of the System,
                  including, without limitation, use of antenna equipment, cable
                  wiring, back-up power sources (including generators and fuel
                  storage tanks), and necessary related fixtures. Licensor also
                  hereby grants Licensee reasonable ingress and egress to the
                  Facilities for purposes of maintenance, repair, modification,
                  replacement, and removal of equipment on the Facilities
                  twenty-four (24) hours per day, seven (7) days per week.

         2.       TERM - This License shall commence on the date of the
                  completion of the sale of the System by Licensor to Licensee
                  and may be terminated only in accordance with the provisions
                  of Sections 13 and 15 hereof.

         3.       CONSIDERATION -

                  License Fee - Upon the execution of this License, Licensee
                  shall pay to Licensor a one time non-refundable payment of Two
                  Hundred Fifty Thousand Dollars ($250,000) (the "License Fee").


<PAGE>

         4.       WARRANTY OF TITLE AND QUIET ENJOYMENT; SUBORDINATION -
                  Licensor warrants that (a) Licensor owns and operates the
                  Facilities, (b) the use of this License by Licensee in
                  accordance with the terms hereof will not breach, violate or
                  infringe on the rights of any third parties, and (c) Licensor
                  has full right to make and perform this License. Upon
                  Licensee's payment of the License Fee and otherwise complying
                  with the terms hereof, Licensor shall ensure that Licensee may
                  have quiet use and enjoyment of the Facilities. Subject to the
                  foregoing, this License shall be subordinate and inferior to
                  any mortgage or lien which currently encumbers the Facilities.
                  Licensee further agrees to subordinate this License to any
                  future mortgage or deed of trust that Licensor, its successors
                  and assigns, obtains against the Facilities, provided that
                  Licensor obtains a non-disturbance agreement reasonably
                  acceptable to Licensee from the holder of any such mortgage or
                  deed of trust.

         5.       COVENANTS AND AGREEMENTS-

                  (a) Licensor, at Licensor's sole cost and expense, shall
                      maintain the Facilities in good order and repair
                      sufficient for the operation of the System consistent with
                      past practices, reasonable wear and tear, damage by fire,
                      the elements or other casualty excepted. Licensor shall be
                      under no obligation to improve or expand the Facilities to
                      accommodate Licensee's System. Damage to the Facilities or
                      the equipment or improvements of Licensor, which results
                      from the acts or omissions of Licensee, shall be repaired
                      by Licensee at Licensee's cost and expense, or at the
                      option of Licensor, Licensee shall reimburse Licensor for
                      the actual costs incurred by Licensor in repairing such
                      damage or replacing such equipment or improvements, as
                      evidenced by adequate documentation. Damage to the
                      equipment or improvements of Licensee, which results from
                      the acts or omissions of Licensor, shall be repaired by
                      Licensor at Licensor's cost and expense, or at the option
                      of Licensee, Licensor shall reimburse Licensee for the
                      actual costs incurred by Licensee in repairing such damage
                      or replacing such equipment or improvements, as evidenced
                      by adequate documentation.

                  (b) Licensor shall not enter into any agreement to sell or
                      otherwise transfer ownership of all or any part of the
                      Facilities unless the purchaser agrees to be bound by and
                      be subject to the terms of this License.

                  (c) Licensee will use the Facilities solely in connection with
                      its operation of the System and in a manner that will not
                      unreasonably disturb the occupancy of Licensor or any
                      other licensees of the Facilities or the sites where the
                      Facilities are located. Licensee agrees that it will not
                      install any equipment of types and radio frequencies which
                      would cause interference to communications operations
                      being conducted from the Facilities by Licensor. Licensee
                      also covenants that any equipment installed by Licensee
                      shall comply with all applicable laws, ordinances and
                      regulations, including but not limited to those
                      regulations promulgated by the FCC. In the event the
                      equipment installed by Licensee causes such interference,
                      Licensee will promptly after notice from Licensor take the
                      steps necessary to correct and eliminate the interference.
                      If such interference cannot be eliminated within
                      forty-eight (48) hours after receipt by Licensee of notice
                      from Licensor describing the existence of the
                      interference, Licensee shall temporarily disconnect the
                      electric power and shut down the equipment (except for
                      intermittent operation for the purpose of testing, after
                      performing maintenance, repair, modification, replacement,
                      or other action taken for the purpose of correcting such
                      interference) until such interference is corrected. If
                      such interference is not corrected within thirty (30) days
                      after receipt by Licensee of such prior written notice
                      from Licensor of the existence of interference, Licensee
                      agrees to then remove the equipment causing such
                      interference from the Facilities. Licensor shall impose
                      upon future licensees a duty to refrain from interfering
                      with Licensee which is similar to that set forth herein
                      and Licensee covenants that it shall not subsequently
                      modify its equipment at the Facilities in a way which
                      causes interference with other then existing equipment at
                      the Facilities.


<PAGE>

         6.       UTILITIES - Except as provided herein, Licensor shall pay
                  utility services relating to the Facilities. Any utility
                  services installed on the Facilities for the use or benefit of
                  Licensee shall be made at the sole cost and expense of
                  Licensee and shall be separately metered from Licensor's
                  utilities. Notwithstanding the foregoing, to the extent
                  utility facilities can be shared by multiple licensees of the
                  Facilities, Licensor agrees to use its best efforts to
                  allocate the construction and installation costs of common
                  utility facilities equally between the licensees that have
                  executed license agreements as of the time construction and
                  installation of the utility facilities commences. The Parties
                  acknowledge and agree that the provisions of this Section 6 do
                  not apply with respect to services, including the use of the
                  Facilities, provided by Licensor pursuant to the terms of the
                  Operations and Maintenance and Administration Services
                  Agreement of even date herewith between Licensor and Licensee,
                  as such agreement may be amended, supplemented or replaced
                  from time to time.

         7.       TAXES - Except as provided herein, Licensor shall pay all real
                  property taxes relating to the Facilities. Licensee shall pay
                  any and all property, use or other taxes associated with any
                  expansion of the Facilities made exclusively for Licensee's
                  use.

         8.       TOWER MARKING AND LIGHTING REQUIREMENTS - Licensor shall be
                  responsible for compliance with any applicable marking and
                  lighting requirements of the FAA and the FCC, provided that if
                  the requirement for compliance results from the presence of
                  equipment of the Licensee, then Licensee shall pay costs and
                  expenses therefor (including any lighting automated alarm
                  system so required).

         9.       MECHANICS' LIENS - Licensee shall not permit any mechanics,'
                  materialmen's, contractors' or subcontractors' liens arising
                  from any construction work, repair, restoration or removal or
                  any other claims or demands to be enforced against the
                  Facilities or any part thereof. Licensor shall have the right
                  at any time to post and maintain upon the Facilities such
                  notices as may be necessary to protect Licensor against
                  liability for all such liens and encumbrances. Licensee shall
                  give Licensor written notice prior to the commencement of any
                  work or the delivery of any materials connected with such work
                  or construction, repair, restoration, or removal of materials
                  on the Facilities. Licensor shall assume no liability for the
                  payment of materials or labor which accrue in the installation
                  of Licensee's improvements upon the Facilities and no
                  mechanics' or materialmen's lien for Licensee's improvements
                  shall attach to the interest of Licensor in the Facilities.

         10.      FINANCING AGREEMENT - Licensee may, upon written notice to
                  Licensor, mortgage or grant a security interest in any
                  equipment it installs on the Facilities to any such mortgagees
                  or holders of security interests including their successors
                  and assigns (hereinafter collectively referred to as "Secured
                  Parties"). No such security interest shall extend in any way
                  to the interests or property of Licensor or any other licensee
                  of the Facilities.

         11.      DISCLAIMER OF WARRANTIES - LICENSEE ACKNOWLEDGES THAT, EXCEPT
                  AS SET FORTH IN SECTION 4, LICENSOR HAS NOT MADE ANY
                  REPRESENTATION OR WARRANTY, EXPRESS, IMPLIED OR AT COMMON LAW,
                  BY STATUTE, OR OTHERWISE RELATING TO ANY FACILITIES INCLUDING,
                  WITHOUT LIMITATION, THE CONDITION OF THE TOWER FACILITIES
                  (INCLUDING, WITHOUT LIMITATION, ANY IMPLIED OR EXPRESSED
                  WARRANTY OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE,
                  CONFORMITY TO MODELS OR SAMPLES OF MATERIALS, ENVIRONMENTAL
                  CONDITION, OR GEOLOGIC CONDITION). IN FURTHERANCE OF THE
                  FOREGOING, LICENSOR HEREBY EXPRESSLY DISCLAIMS AND NEGATES,
                  AND LICENSEE HEREBY WAIVES (I) ANY IMPLIED OR EXPRESSED
                  WARRANTY OF MERCHANTABILITY; (II) ANY IMPLIED OR EXPRESSED
                  WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, (III) ANY
                  IMPLIED OR EXPRESSED WARRANTY OF CONFORMITY TO MODELS OR
                  SAMPLES OF MATERIALS; (IV) ANY CLAIM FOR DAMAGES BECAUSE OF
                  ANY LATENT OR PATENT DEFECTS OR OTHER DEFECTS, WHETHER KNOWN
                  OR UNKNOWN AND (V) ANY AND ALL IMPLIED WARRANTIES EXISTING
                  UNDER APPLICABLE LAW. IT IS THE EXPRESS INTENTION OF THE
                  PARTIES HERETO THAT ALL TOWER FACILITIES BE LICENSED ON AN AS
                  IS, WHERE IS BASIS. THE PARTIES HERETO AGREE THAT, TO THE
                  EXTENT REQUIRED BY APPLICABLE LAW TO BE EFFECTIVE, THE
                  DISCLAIMERS OF CERTAIN WARRANTIES CONTAINED IN THIS SECTION
                  ARE CONSPICUOUS DISCLAIMERS.


<PAGE>

         12.      INDEMNIFICATION -

                  (a) Defined Terms - As used in this Section 12, these terms
                      are defined as follows:

                      (i) "Affiliate" means, with respect to any person, (i) any
                      other person directly or indirectly controlled by,
                      controlling or under common control with such first person
                      and (ii) any director or officer of such first person or
                      of any person referred to in clause (i) above. For the
                      purposes of this definition control of any person means
                      ownership, directly or indirectly, of 50% or more of the
                      voting stock of such person, if a corporation, and
                      ownership of 50% or more of the equity or beneficial
                      interest in any other person. The general partner of any
                      person which is a partnership will be deemed to control
                      such person.

                      (ii) "Claim" means, demands, claims, suits, actions,
                      proceedings or investigations brought against a Person by
                      an unrelated or unaffiliated Person.

                      (iii) "Damages" means, debts, liabilities, obligations,
                      losses, damages, cost and expenses, whether actual,
                      consequential or punitive, interest (including, without
                      limitation, prejudgment interest), penalties, reasonable
                      legal fees, disbursements and costs of investigations,
                      deficiencies, levies, duties and imposts

                      (iv) "Environmental Law" means any and all federal, state,
                      local, statutes, laws (including common law), regulations,
                      ordinances, rules, judgments, orders, decrees, codes and
                      any binding administrative or judicial interpretation
                      thereof relating to the protection of the environment
                      (including indoor or outdoor ambient air, surface water,
                      groundwater, drinking water, soils and subsurface strata,
                      biota and natural resources) and health and safety,
                      including without limitation those pertaining to the use,
                      distribution, generation, emission, discharge, handling,
                      storage, processing, transportation, treatment, disposal,
                      investigation, remediation and monitoring of pollutants,
                      contaminants, petroleum products or petroleum byproducts,
                      asbestos in friable form, polychlorinated biphenyls or
                      flammable, corrosive, radioactive, reactive, hazardous or
                      toxic substances, materials, products, compounds,
                      chemicals or wastes or any other substances or materials
                      that are defined or characterized under Environmental Law
                      as "hazardous," "toxic," or "dangerous" (collectively,
                      "Hazardous Materials").
<PAGE>

                      (v) "Indemnified Parties" means any Person entitled to
                      indemnification pursuant to this Section 12.

                      (vi) "Person" means an individual, corporation, limited
                      liability company, partnership, joint venture, bank,
                      trust, unincorporated organization and/or a government or
                      any department or agency thereof or other entity of any
                      kind.

                  (b) By Licensee - Licensee, its heirs, grantees, successors,
                      and assigns shall indemnify, defend and hold harmless
                      Licensor, its Affiliates and their respective directors,
                      officers, shareholders, successors and assigns from all
                      Damages arising from any Claim to the extent such Claim is
                      attributable to the joint, concurrent or sole negligence,
                      gross negligence, or willful misconduct or strict
                      liability of Licensee, or its agents, employees,
                      representatives, contractors or other persons acting or
                      engaged by, through or under Licensee. For purposes of
                      clarification of the foregoing, Licensee shall not be
                      responsible or liable to any of the foregoing Indemnified
                      Parties for any Damages resulting from any Claim to the
                      extent attributable to any acts or omissions of other
                      licensees or tower users occupying the Facilities or for
                      any structural or power failures or destruction or damage
                      to the Facilities except to the extent caused by the
                      joint, concurrent or sole negligence, gross negligence, or
                      willful misconduct of Licensee.

                  (c) By Licensor - Licensor, its heirs, grantees, successors,
                      and assigns shall indemnify, defend and hold harmless
                      Licensee, its Affiliates and their respective directors,
                      officers, shareholders, successors and assigns from all
                      Damages arising from any Claim to the extent such Claim is
                      attributable to the joint, concurrent or sole negligence,
                      gross negligence, or willful misconduct or strict
                      liability of Licensor, or its agents, employees,
                      representatives, contractors or other persons acting or
                      engaged by, through or under Licensor. For purposes of
                      clarification of the foregoing, Licensor shall not be
                      responsible or liable to any of the foregoing Indemnified
                      Parties for any Damages resulting from any Claim to the
                      extent attributable to any acts or omissions of other
                      licensees or tower users occupying the Facilities or for
                      any structural or power failures or destruction or damage
                      to the Facilities except to the extent caused by the
                      joint, concurrent or sole negligence, gross negligence, or
                      willful misconduct of Licensor.

                  (d) Environmental By Licensee - Licensee, its heirs, grantees,
                      successors, and assigns shall indemnify, defend and hold
                      harmless Licensor, its Affiliates and their respective
                      directors, officers, shareholders, successors and assigns
                      from and against any and all environmental Damages, caused
                      by activities conducted at the Facilities by Licensee, and
                      (i) arising from the presence of any Hazardous Materials
                      upon, about or beneath the Facilities or migrating to or
                      from the Facilities, or (ii) arising in any manner
                      whatsoever out of the violation by Licensee of any
                      Environmental Law pertaining to the Facilities and any
                      activities thereon, either of which conditions came into
                      existence after the execution of this License and are
                      solely attributable to activities conducted by Licensee at
                      the sites where the Facilities are located. Licensee
                      covenants that it shall not nor shall Licensee allow its
                      employees, agents or independent contractors to use,
                      treat, store or dispose of any Hazardous Materials at the
                      sites where the Facilities are located.
<PAGE>

                  (e) Environmental By Licensor - Licensor, its heirs, grantees,
                      successors, and assigns shall indemnify, defend and hold
                      harmless Licensee, its Affiliates and their respective
                      directors, officers, shareholders, successors and assigns
                      from and against any and all environmental Damages arising
                      (i) from the presence of any Hazardous Materials upon,
                      about or beneath the Facilities or migrating to or from
                      the Facilities; or (ii) in any manner whatsoever out of
                      the violation of any Environmental Law pertaining to the
                      Facilities and any activities thereon, either of which
                      conditions are solely attributable to activities conducted
                      by Licensor at the sites where the Facilities are located.

                  (f) Survival - The provisions of this Section 12 shall survive
                      the termination of this License with respect to any events
                      occurring on or before termination of this License whether
                      or not Claims relating thereto are asserted before or
                      after termination of this License.

         13.      DESTRUCTION OR CONDEMNATION - If the whole or any substantial
                  part of the Facilities shall be taken by any public authority
                  under the power of eminent domain, or if the whole or any
                  substantial part of the Facilities shall be destroyed by fire
                  or other casualty, so as to materially interfere with
                  Licensee's use and occupancy thereof, then this License shall
                  cease on the part so taken on the date of possession by such
                  authority of that part or the destruction of that part, and
                  Licensee shall have the right to terminate this License upon
                  written notice to Licensor, which notice shall be delivered by
                  Licensee within thirty (30) days following the date written
                  notice is received by Licensee of such taking or possession.

         14.      DEFAULT BY LICENSEE - Any failure of Licensee to perform or
                  observe any term, covenant, provision or condition of this
                  License which failure is not corrected or cured by Licensee
                  within thirty (30) days of receipt by Licensee of written
                  notice from Licensor of the existence of such a default
                  (except such thirty (30) day cure period shall be extended as
                  reasonably necessary to permit Licensee to complete a cure so
                  long as Licensee commences the cure within such thirty (30)
                  day cure period and thereafter continuously and diligently
                  pursues and completes such cure) shall be considered to be a
                  default of this License by Licensee.

         15.      REMEDIES - In the event of a default by Licensee under the
                  terms of Section 14 of this License and after the Licensee's
                  failure to cure such default within the time allowed the
                  Licensee to cure such default, then this License shall
                  automatically terminate, and Licensor may remove any of
                  Licensee's equipment at the Facilities without being deemed
                  liable for trespass or conversion and store the same at
                  Licensee's sole cost and expense.

         16.      NOTICES - All notices or demands by or from Licensor to
                  Licensee, or Licensee to Licensor, shall be in writing.
                  Notices shall be effective on the day they are sent. Such
                  notices or demands shall be mailed (U.S. mail, certified with
                  return receipt requested or by overnight courier service) to
                  the other party at the following address:


                  Licensor:


                  Licensee:

<PAGE>

         17.      RELOCATION OF FACILITIES - Licensor may, at its election,
                  relocate the Facilities to, or replace the Facilities in,
                  alternative locations or properties owned or leased by
                  Licensor. Such relocations will (i) be at Licensor's sole
                  cost; and (ii) not result in an interruption of Licensee's
                  communications services. Upon such relocation, the Facilities
                  covered herein shall be the relocated or replaced Facilities.
                  At the request of either party, Licensor and Licensee shall
                  enter into an amendment of this License to clarify the rights
                  of Licensee to the relocated or replaced Facilities.

         18.      ENTIRE AGREEMENT - This License contains the entire agreement
                  between the parties hereto with respect to the use of the
                  Facilities and supersedes all previous negotiations leading
                  thereto. This License may be modified only by an agreement in
                  writing executed by Licensor and Licensee.

         19.      SUCCESSORS AND ASSIGNS - This License shall be binding upon
                  and inure to the benefit of the legal representatives, heirs,
                  successors, and assigns of Licensor and Licensee. Licensee may
                  not sublicense all or any part of the Facilities without
                  Licensor's prior written consent. Licensee may assign all of
                  its rights hereunder to any party acquiring Licensee's
                  interest in the System provided such party agrees to bound and
                  subject to the terms of this License. Licensor may assign its
                  rights hereunder to any party who owns the Facilities and
                  agrees to be bound and subject to the terms of this License.

         20.      LIMITATION OF PARTIES' LIABILITY - Neither Licensor nor
                  Licensee shall be responsible for any incidental or
                  consequential damages incurred resulting from (i) Licensor's
                  or Licensee's use or inability to use the Facilities, or (ii)
                  damage to the other's equipment.

         21.      MISCELLANEOUS - (a) This License is governed by the laws of
                  the State of Alaska; (b) If any provision of this License is
                  invalid or unenforceable with respect to any party, the
                  remainder of this License will not be affected and each
                  provision of this License will be valid and enforceable to the
                  fullest extent permitted by law; (c) The prevailing party in
                  any court action or mutually agreed upon arbitration
                  proceeding to enforce the terms of this License is entitled to
                  receive its reasonable attorneys' fees and other reasonable
                  expenses from the non-prevailing party; (d) Failure or delay
                  on the part of either party to exercise any right, power or
                  privilege hereunder will not operate as a waiver thereof and
                  waiver or breach of any provision hereof under any
                  circumstances will not constitute a waiver of any subsequent
                  breach; (e) Each party executing this License acknowledges
                  that it has full power and authority to do so and that the
                  person executing on its behalf has the authority to bind the
                  party; (f) Neither party shall be deemed the drafter of this
                  License for purposes of any applicable judicial principles or
                  rules of contract construction.


<PAGE>

         IN WITNESS WHEREOF, the Licensor and Licensee have executed this Tower
License as of the date and year first above written.

LICENSOR:

ENSTAR NATURAL GAS COMPANY,
A DIVISION OF SEMCO ENERGY, INC.

By:__________________________________________
         Name:
         Title:


LICENSEE:

ALASKA PIPELINE COMPANY, LLC


By:__________________________________________
         Name:
         Title:

Date:


<PAGE>


                                                                       EXHIBIT A


Tower Locations
----------------

Beluga Purchase Station
Wasilla Office
Site Summit (Anchorage, leased from DoD)
Spenard Office (Anchorage)
Anchorage Operations Center
Glen Alps (Anchorage)
Soldotna Office
Kalifonsky Purchase and Compressor Stations
Gudenrath Compressor Station

Potter Gate Station (Anchorage)
Anchorage City Gate
East Anchorage City Gate
Pt. Mackenzie
Pretty Creek Purchase Station
Stump Lake/van River Purchase Station
Lewis River
CIGGS/KNPL Purchase Station
Beaver Creek Purchase Station
Mile 39 (Beluga-Anchorage Pipeline)
Sterling Purchase Station







<PAGE>








                                                                       EXHIBIT H

                               RECIPROCAL EASEMENT

                                       AND

                               JOINT USE AGREEMENT



                                 BY AND BETWEEN



                          ALASKA PIPELINE COMPANY, LLC

                                       AND

                           ENSTAR NATURAL GAS COMPANY,
                        A DIVISION OF SEMCO ENERGY, INC.




<PAGE>




                                TABLE OF CONTENTS




                                                                                                           
ARTICLE I             DEFINITIONS.................................................................................1
      Section 1.1.         Definitions............................................................................1

ARTICLE II            RECIPROCAL EASEMENTS........................................................................2
      Section 2.1.         Grant by APC...........................................................................2
      Section 2.2.         Grant by ENSTAR........................................................................3
      Section 2.3.         Limitations............................................................................3
      Section 2.4.         Recordable Documents...................................................................4
      Section 2.5.         Modifications to Schedules.............................................................4

ARTICLE III           JOINT USE RIGHTS AND OBLIGATIONS............................................................4
      Section 3.1.         Maintenance and Repair Obligations.....................................................4
      Section 3.2.         Additions/Alterations..................................................................4
      Section 3.3.         Avoiding Endangerment..................................................................5
      Section 3.4.         Conflicting Uses.......................................................................5
      Section 3.5.         Abandonment............................................................................5

ARTICLE IV            INDEMNIFICATION; RELEASE; LIMIT ON LIABILITY................................................6
      Section 4.1.         Indemnification by APC.................................................................6
      Section 4.2.         Indemnification by ENSTAR..............................................................6
      Section 4.3.         Procedures.............................................................................6
      Section 4.4.         Indemnification Payments...............................................................7
      Section 4.5.         Limit on Liability.....................................................................7

ARTICLE V             DISPUTE RESOLUTION..........................................................................7
      Section 5.1.         General................................................................................7

ARTICLE VI            MISCELLANEOUS PROVISIONS....................................................................8
      Section 6.1.         Notices................................................................................8
      Section 6.2.         Successors and Assigns.................................................................8
      Section 6.3.         Signatures, Counterparts...............................................................8
      Section 6.4.         Amendments.............................................................................8
      Section 6.5.         Governing Law..........................................................................8
      Section 6.6.         Entire Agreement.......................................................................8
      Section 6.7.         Negotiated Agreement...................................................................9
      Section 6.8.         Waiver.................................................................................9
      Section 6.9.         Severability...........................................................................9
      Section 6.10.        No Third Party Beneficiaries...........................................................9


SCHEDULES

Schedule 2.1      APC Affected Rights of Way
Schedule 2.4      ENSTAR Affected Rights of Way



<PAGE>


                   RECIPRoCAL EASEMENT AND JOINT USE AGREEMENT

         This Reciprocal Easement and Joint Use Agreement (this "Agreement") is
made this ___ day of [________], 2004 by and between ALASKA PIPELINE COMPANY,
LLC, a Delaware limited liability company ("APC") and ENSTAR Natural Gas
Company, a Division of SEMCO Energy, Inc., a Michigan corporation ("ENSTAR").

                                    Recitals

         APC and ENSTAR each hold title to rights of way, easements and licenses
for the installation and maintenance of natural gas pipelines and related
equipment (collectively, the "Rights of Way").

         Prior to the date of this Agreement, APC was a wholly owned subsidiary
of ENSTAR and, from time to time, (i) APC located pipelines and related
facilities used in its gas transmission business ("APC Facilities") in Rights of
Way held by ENSTAR and (ii) ENSTAR located pipelines and related facilities used
in its gas distribution business ("ENSTAR Facilities") in Rights of Way held by
APC.

         As a result of the sale by ENSTAR of APC, APC and ENSTAR are no longer
commonly owned, and as a result, the Parties desire to provide for the continued
use by APC of Rights of Way held by ENSTAR for APC Facilities and for the
continued use by ENSTAR of Rights of Way held by APC for ENSTAR Facilities on
the terms and subject to the conditions set forth in this Agreement.

         NOW THEREFORE, in consideration of the premises and the mutual promises
herein contained, the Parties agree as follows:

                                   ARTICLE I

                                   DEFINITIONS

         Section 1.1. Definitions. The following capitalized terms when used in
this Agreement shall have the following meanings:

         "AAA" is defined in Section 5.1(b).

         "Affected Right of Way" shall mean either of an APC Affected Right of
Way or an ENSTAR Affected Right of Way.

         "Agreement" is defined in the Introductory Paragraph of this Agreement.

         "APC" is defined in the Introductory Paragraph of this Agreement.

         "APC Affected Rights of Way" is defined in Section 2.1.

         "APC Easement" is defined in Section 2.2.

                                       1
<PAGE>

         "APC Facilities" is defined in the Recitals to this Agreement.

         "APC Indemnified Party" is defined in Section 4.1.

         "APC Permitted Uses" is defined in Section 2.2.

         "Easement" shall mean either the APC Easement or the ENSTAR Easement.

         "ENSTAR" is defined in the Introductory Paragraph of this Agreement.

         "ENSTAR Affected Rights of Way" is defined in Section 2.2.

         "ENSTAR Easement" is defined in Section 2.1.

         "ENSTAR Facilities" is defined in the Recitals to this Agreement.

         "ENSTAR Indemnified Party" is defined in Section 4.2.

         "ENSTAR Permitted Uses" is defined in Section 2.1.

         "Facilities" means either the APC Facilities or the ENSTAR Facilities.

         "Indemnified Party" is defined in Section 4.3.

         "Laws" shall mean any applicable statute, common law, rule, regulation,
judgment, order, ordinance, writ, injunction or decree issued by any
governmental authority having jurisdiction with respect to the applicable
subject matter.

         "Limited Party" is defined in Section 3.4.

         "Limiting Party" is defined in Section 3.4.

         "Loss" is defined in Section 4.1.

         "Party" means either APC or ENSTAR.

         "Rights of Way" is defined in the Recitals to this Agreement.

                                   ARTICLE II

                              RECIPROCAL EASEMENTS

         Section 2.1. Grant by APC. APC hereby grants ENSTAR, for the term of
the underlying Right of Way and any extension thereof or replacement therefor,
an easement and license (the "ENSTAR Easement") to use those Rights of Way now
held by APC and on which ENSTAR Facilities are currently located, including,
without limitation, those Rights of Way described on Schedule 2.1 (the "APC
Affected Rights of Way") for the purpose of inspecting, maintaining, repairing,
removing, replacing, locating or relocating pipeline and related equipment used
in connection with ENSTAR's natural gas distribution business (the "ENSTAR
Permitted Uses").

                                       2
<PAGE>

         Section 2.2. Grant by ENSTAR. ENSTAR hereby grants to APC, for the term
of the underlying Right of Way and any extension thereof or any replacement
therefor, an easement and license (the "APC Easement") to use those Rights of
Way now held by ENSTAR and on which APC Facilities are currently locating,
including, without limitation, those Right of Way described on Schedule 2.2 (the
"ENSTAR Affected Rights of Way") for the purpose of inspecting, maintaining,
repairing, removing, replacing, locating or relocating pipeline and related
equipment used in connection with APC's natural gas transmission business (the
"APC Permitted Uses").

         Section 2.3. Limitations. The Easements granted pursuant to Sections
2.1 and 2.3 are expressly subject to the following limitations:

                  (a) Each Easement is expressly subject to the scope of the
underlying Right of Way, and to the extent the scope of any Easement exceeds the
scope of any underlying Right of Way, such Easement shall be deemed to be
limited to the maximum scope now or hereafter permitted by such underlying Right
of Way.

                  (b) APC shall be entitled to use the APC Easement only for APC
Permitted Purposes and ENSTAR shall be entitled to use the ENSTAR Easement only
for ENSTAR Permitted Purposes.

                  (c) ENSTAR ACCEPTS THE ENSTAR EASEMENT AND THE LANDS OVER
WHICH THE ENSTAR EASEMENT IS LOCATED "AS-IS," AND IN THE CONDITION EXISTING ON
THE DATE OF THIS AGREEMENT. ENSTAR ACKNOWLEDGES AND AGREES THAT APC MAKES NO
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE WITH RESPECT TO THE ENSTAR
EASEMENT, INCLUDING WITHOUT LIMITATION ANY REPRESENTATIONS OR WARRANTIES
REGARDING (i) APC'S RIGHT, TITLE OR INTEREST IN OR TO ANY PART OF ANY APC
AFFECTED RIGHT OF WAY (AND THE ENSTAR EASEMENT IS ACCORDINGLY GRANTED HEREUNDER
WITHOUT ANY WARRANTIES OR COVENANTS OF TITLE); (ii) ENCROACHMENT OR TRESPASS OF
ENSTAR FACILITIES ONTO, OVER OR UNDER THE PROPERTY OF OTHERS, OR ENCROACHMENTS
OR TRESPASS OF FACILITIES, STRUCTURES OR USES OF THIRD PARTIES ONTO, OVER OR
UNDER ANY APC AFFECTED RIGHT OF WAY; (iii) THE SPECIFIC LOCATION OF THE ENSTAR
FACILITIES ON, OVER, UNDER, ACROSS OR ALONG THE APC AFFECTED RIGHTS OF WAY OR
ANY PART THEREOF; OR (iv) THE SUITABILITY OF ANY APC AFFECTED RIGHT OF WAY FOR
THE ENSTAR FACILITIES OR ANY PART THEREOF, THE FREEDOM OF ANY APC AFFECTED RIGHT
OF WAY FROM HAZARDS, OR OTHERWISE IN ANY MANNER REGARDING THE PHYSICAL CONDITION
OR CHARACTERISTICS OF ANY APC AFFECTED RIGHT OF WAY OR ANY PART THEREOF.

                  (d) APC ACCEPTS THE APC EASEMENT AND THE LANDS OVER WHICH THE
APC EASEMENT IS LOCATED "AS-IS," AND IN THE CONDITION EXISTING ON THE DATE OF
THIS AGREEMENT. APC ACKNOWLEDGES AND AGREES THAT ENSTAR MAKES NO REPRESENTATIONS
OR WARRANTIES OF ANY KIND OR NATURE WITH RESPECT TO THE APC EASEMENT, INCLUDING
WITHOUT LIMITATION ANY REPRESENTATIONS OR WARRANTIES REGARDING (i) ENSTAR'S
RIGHT, TITLE OR INTEREST IN OR TO ANY PART OF ANY ENSTAR AFFECTED RIGHT OF WAY
(AND THE APC EASEMENT IS ACCORDINGLY GRANTED HEREUNDER WITHOUT ANY WARRANTIES OR
COVENANTS OF TITLE); (ii) ENCROACHMENT OR TRESPASS OF APC FACILITIES ONTO, OVER
OR UNDER THE PROPERTY OF OTHERS, OR ENCROACHMENTS OR TRESPASS OF FACILITIES,
STRUCTURES OR USES OF THIRD PARTIES ONTO, OVER OR UNDER ANY ENSTAR AFFECTED
RIGHT OF WAY; (iii) THE SPECIFIC LOCATION OF THE APC FACILITIES ON, OVER, UNDER,
ACROSS OR ALONG THE ENSTAR AFFECTED RIGHTS OF WAY OR ANY PART THEREOF; OR (iv)
THE SUITABILITY OF ANY ENSTAR AFFECTED RIGHT OF WAY FOR THE APC FACILITIES OR
ANY PART THEREOF, THE FREEDOM OF ANY ENSTAR AFFECTED RIGHT OF WAY FROM HAZARDS,
OR OTHERWISE IN ANY MANNER REGARDING THE PHYSICAL CONDITION OR CHARACTERISTICS
OF ANY ENSTAR AFFECTED RIGHT OF WAY OR ANY PART THEREOF.

                                       3
<PAGE>

         Section 2.4. Recordable Documents. At the request of either Party, a
counterpart of this Agreement in recordable form shall be placed of record in
the real estate records in any jurisdiction in which any Affected Right of Way
is located.

         Section 2.5. Modifications to Schedules. The Parties agree to update
Schedules 2.1 and 2.2 from time to time to correct any errors contained therein
and to add any Affected Rights of Way not listed on such Schedules.

                                  ARTICLE III

                        JOINT USE RIGHTS AND OBLIGATIONS

         Section 3.1. Maintenance and Repair Obligations. Each Party shall at
its own expense (i) conduct its operations in any Affected Right of Way,
including operation of its Facilities located in any Affected Right of Way, in
compliance with applicable Law, (ii) maintain and repair, in structurally and
operationally safe condition, its Facilities located on the Affected Rights of
Way, (iii) maintain such portions, if any, of the Affected Rights of Way as are
exclusively used, occupied and controlled by such Party, and (iv) with
reasonable promptness cause all damage to the lands underlying the Affected
Rights of Way or the other Party's Facilities resulting from activities
associated with the Permitted Uses undertaken by such Party to be repaired to a
condition at least substantially equivalent to that existing prior thereto
including, as appropriate, leveling of the surface thereof and seeding with
grasses or other ground cover as appropriate following excavation (it being
understood that the reasonable time for performance of certain restoration work,
such as reseeding, may depend on weather or seasonal considerations).

         Section 3.2. Additions/Alterations. This Agreement gives each Party the
right, in its discretion, to alter, improve, relocate or construct additional
Facilities on its Easement (an "Improvement"). A Party desiring to make an
Improvement shall notify the other party at least ten (10) days before
commencing work on the Improvement, and shall include in such notice plans,
specifications, surveys and/or other information pertaining to the proposed
Improvement so as to fully inform the other Party as to the nature and extent
thereof. Improvements shall be subject to all terms and conditions of this
Agreement. All Improvements shall be constructed in compliance in all material
respects with applicable Laws and the underlying Rights of Way, and otherwise in
a good and workmanlike manner. The Party constructing any Improvement shall be
responsible for ensuring that the Improvement does not violate any of the terms
and conditions of this Agreement or exceed the scope of the Easement on which
such Improvement is constructed.

                                       4
<PAGE>

         Section 3.3. Avoiding Endangerment. The Party on whose Affected Right
of Way an Improvement is to be constructed may notify the other Party in writing
within ten (10) days after receipt of notice of the Improvement of reasonable
work and design restrictions and precautions that are needed to avoid
endangering such Party's Facilities located on the Affected Right of Way, and
the Party undertaking the Improvement shall comply with all such restrictions
and precautions. Such restrictions and precautions may include, by way of
example and not limitation, restrictions and precautions that must be following
in the event that any pipeline or buried cable is to be uncovered, or for
installation of facilities that will cross pipelines or buried cables or will be
in close proximity to pipelines or buried cables. Neither the content of any
such work or design restrictions or precautions, nor the failure to specify such
restrictions or precautions, nor any failure to enforce to any extent any such
work or design restrictions or precautions shall limit or affect in any way the
obligations and liabilities of the Party undertaking the Improvements under this
Agreement.

         Section 3.4. Conflicting Uses. The Parties recognize that the use of an
Affected Right of Way by one Party may preclude or limit the right of the other
Party to use the Affected Right of Way. The Parties agree to cooperate with each
other and to use commercially reasonable efforts to minimize the likelihood of
conflicting uses. In the event that a Party's Facilities in an Affected Right of
Way limits or precludes a Permitted Use of the Affect Right of Way by the other
Party, the Party whose Permitted Use is limited or precluded (the "Limited
Party") shall have the right to cause the other Party (the "Limiting Party") to
relocate its Facilities located on the Affected Right of Way, subject to the
following:

                  (a) In no event shall any Facilities of the Limiting Party be
relocated if such relocation (i) unreasonably interferes with the Limiting
Party's normal business operations, or (ii) is to a location that increases the
Limiting Party's costs of operation or in which the Limiting Party has rights
that are less extensive or secure as such Party's property rights in the
Affected Right of Way.

                  (b) The Limited Party shall pay all of the costs and expenses
of the Limiting Party in relocating its Facilities, including, without
limitation, costs of alternative rights of way, design, engineering, permitting
and surveying costs and costs of construction of the replacement Facilities.

                  Section 3.5. Abandonment. Before abandoning any Affected Right
of Way, the Party holding such Affected Right of Way shall offer to transfer the
Affected Right of Way to the other Party, without cost other than reimbursement
of reasonable out-of-pocket transaction costs.



                                       5
<PAGE>

                                   ARTICLE IV

                  INDEMNIFICATION; RELEASE; LIMIT ON LIABILITY

         Section 4.1. Indemnification by APC. APC shall indemnify, defend and
hold harmless ENSTAR, and each of its officers, directors, employees, agents,
and affiliates (and the officers, directors, employees and agents of such
affiliates) ("ENSTAR Indemnified Party") if any such ENSTAR Indemnified Party
shall at any time or from time to time suffer any damage, judgment, fine,
penalty, demand, settlement, liability, loss, cost, expense (including
reasonable attorneys', consultants' and experts' fees), claim or cause of action
(each, a "Loss") arising out of, relating to or resulting from the APC's
performance of this Agreement, to the extent such Loss results from any breach
of this Agreement or the fault, tortuous act, negligence, strict liability,
gross negligence or willful misconduct of APC.

         Section 4.2. Indemnification by ENSTAR. ENSTAR shall indemnify, defend
and hold harmless APC, and each of its officers, directors, employees, agents,
and affiliates (and the officers, directors, employees and agents of such
affiliates) ("APC Indemnified Party") if any such APC Indemnified Party shall at
any time or from time to time suffer any Loss arising out of, relating to or
resulting from ENSTAR's performance of this Agreement, to the extent such Loss
results from any breach of this Agreement or the fault, tortuous act,
negligence, strict liability, gross negligence or willful misconduct of ENSTAR.

         Section 4.3. Procedures. Any Party asserting a claim for
indemnification hereunder (such Party seeking indemnification, the "Indemnified
Party") shall notify the other Party (the "Indemnifying Party") (with reasonable
specificity) promptly after it becomes aware of facts supporting a claim or
action for indemnification under this Article IV, and shall provide to the
Indemnifying Party as soon as practicable thereafter all information and
documentation reasonably necessary to support and verify any Losses associated
with such claim or action. The failure to so notify or provide information to
the Indemnifying Party shall not relieve the Indemnifying Party of any liability
that it may have to any Indemnified Party, except to the extent that the
Indemnifying Party demonstrates that it has been materially prejudiced by the
Indemnified Party's failure to give such notice, in which case the Indemnifying
Party shall be relieved from its obligations hereunder to the extent of such
material prejudice. The Indemnifying Party may, and, at the request of the
Indemnified Party, shall participate in and defend, contest or otherwise protect
the Indemnified Party against any such claim or action by counsel of the
Indemnifying Party's choice at its sole cost and expense; provided, however,
that the Indemnifying Party shall not make any settlement or compromise without
the prior written consent of the Indemnified Party (which consent shall not be
unreasonably withheld or delayed) unless the sole relief provided is monetary
damages that are paid in full by the Indemnifying Party. The Indemnified Party
shall have the right, but not the obligation, to participate at its own expense
in the defense thereof by counsel of the Indemnified Party's choice and shall in
any event use its reasonable best efforts to cooperate with and assist the
Indemnifying Party. If the Indemnifying Party fails timely to defend, contest or
otherwise protect against such suit, action, investigation, claim or proceeding,
the Indemnified Party shall have the right to do so, including, without
limitation, the right to make any compromise or settlement thereof, and the
Indemnified Party shall be entitled to recover the entire cost thereof from the
Indemnifying Party, including, without limitation, reasonable attorneys' fees,
disbursements and amounts paid as the result of such suit, action,
investigation, claim or proceeding.

                                       6
<PAGE>

         Section 4.4. Indemnification Payments. Any payment hereunder shall be
made by wire transfer of immediately available funds to such account or accounts
as the Indemnified Party shall designate to the Indemnifying Party in writing.

         Section 4.5. Limit on Liability. IN NO EVENT SHALL ANY PARTY BE LIABLE
TO THE OTHER PARTY FOR SPECIAL, INDIRECT, INCIDENTAL, CONSEQUENTIAL OR PUNITIVE
LOSS, DAMAGES OR EXPENSES (INCLUDING LOST PROFITS OR SAVINGS).

                                   ARTICLE V

                               DISPUTE RESOLUTION

         Section 5.1. General. Any dispute arising under this Agreement or
otherwise in connection with this Agreement shall be resolved pursuant to this
Section 5.1.

                  (a) Any Party has the right to request the other to meet to
discuss a dispute. The Party requesting the meeting will give at least ten (10)
Business Days notice in writing of the subject it wishes to discuss, provide a
written statement of the dispute, and designate an officer of the Party with
complete power to resolve the dispute to attend the meeting. Within five (5)
Business Days after receipt to such request, the Party receiving the request
will provide a responsive written statement and will designate an officer of the
Party who will attend the meeting with complete power to resolve the dispute.

                  (b) If the meeting fails to resolve the dispute by a signed
agreement among the officers, either Party may submit the dispute for binding
arbitration administered by the American Arbitration Association ("AAA") under
its Commercial Arbitration Rules before a single arbitrator, and judgment on the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof.

                  (c) The Parties agree to make discovery and disclosure of all
matters relevant to the dispute to the extent and in the manner provided by the
Federal Rules of Civil Procedure. The arbitrator will rule on all requests for
discovery and disclosure and discovery shall be completed within 60 days after
the date of appointment of the arbitrator. The arbitrator may consider any
matter relevant to the subject to the dispute and shall follow the statutes and
decisions of the substantive law of Alaska relevant to the subject. The
arbitrator shall not have the authority or power to alter, amend or modify any
of the terms and conditions of the agreement of the Parties. The arbitrator
shall issue a final ruling within 150 days after the date of appointment of the
arbitrators.

                  (d) The ruling of the arbitrator shall be in writing and
signed and shall be final and binding upon the Parties. The fees and expenses of
counsel, witnesses and employees of the Parties and all other costs and expenses
incurred exclusively for the benefit of the Party incurring the same shall be
borne by the Party incurring such fees and expenses. All other fees and expenses
including, without limitation, compensation for the arbitrator, shall be divided
equally between the Parties. All meetings and arbitrations held pursuant to this
Section 5.1 shall take place in Anchorage, Alaska.

                                       7
<PAGE>

                                   ARTICLE VI

                            MISCELLANEOUS PROVISIONS

Section 6.1. Notices. Any notice or other communication required or permitted
hereunder shall be in writing and shall be deemed given if delivered personally,
by facsimile (which is confirmed) or sent by overnight courier (providing proof
of delivery), to the Parties at the following address:

                  If to APC:                [_____________________
                                            ______________________
                                            ______________________
                                            _____________________]

                  If to ENSTAR:            [______________________
                                            ______________________
                                            ______________________
                                            _____________________]


         Any Party may, by notice given in accordance with this Section 6.1 to
the other Parties, designate another address or person for receipt of notices
hereunder provided that notice of such a change shall be effective upon receipt.

         Section 6.2. Successors and Assigns. This Agreement will be binding
upon and inure to the benefit of the Parties and their respective successors,
assigns and legal representatives (whether by acquisition, merger, operation of
law, other transaction constituting a change of control or otherwise).

         Section 6.3. Signatures, Counterparts. Facsimile transmission of any
signed original document and/or retransmission of any signed facsimile
transmission shall be the same as delivery of an original. On request, a Party
will confirm its facsimile transmission by signing a duplicate original
document. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall be considered
one and the same agreement.

         Section 6.4. Amendments. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the Parties.

         Section 6.5. Governing Law. THIS AGREEMENT WILL BE GOVERNED AS TO
FORMATION, PERFORMANCE, INTERPRETATION AND ENFORCEMENT BY THE LAWS OF THE STATE
OF ALASKA WITHOUT GIVING EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES.

         Section 6.6. Entire Agreement. This Agreement constitutes the entire
agreement between the Parties hereto relating to the subject matter hereof and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions, whether oral or written, of the Parties, and there are no
general or specific warranties, representations or other agreements by or among
the Parties in connection with the entering into of this Agreement or the
subject matter hereof except as specifically set forth or contemplated herein or
therein.

                                       8
<PAGE>

         Section 6.7. Negotiated Agreement. This Agreement has been negotiated
by the Parties and the fact that the initial and final draft will have been
prepared by either Party will not give rise to any presumption for or against
any party to this Agreement or be used in any respect or forum in the
construction or interpretation of this Agreement or any of its provisions.

         Section 6.8. Waiver. No consent or waiver, express or implied, by any
Party to or of any breach or default by any other Party in the performance by
such other Party of its obligations hereunder shall be deemed or construed to be
a consent or waiver to or of any other breach or default in the performance of
obligations hereunder by such other Party hereunder. Failure on the part of any
Party to complain of any act or failure to act of any other Party or to declare
any other Party in default, irrespective of how long such failure continues,
shall not constitute a waiver by such first Party of any of its rights
hereunder.

         Section 6.9. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, each Party directs that such court interpret and
apply the remainder of this Agreement in the manner that it determines most
closely effectuates the Parties' intent in entering into this Agreement, and in
doing so particularly take into account the relative importance of the term,
provision, covenant or restriction being held invalid, void or unenforceable.

         Section 6.10. No Third Party Beneficiaries. Except as set forth in
Article IV, nothing in this Agreement is intended or shall be construed to give
any person, other than the Parties hereto, their successors and permitted
assigns, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.


                                       9
<PAGE>


         IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.

                                          APC

                                          ALASKA PIPELINE COMPANY, LLC


                                          By:_______________________________
                                          Name:
                                          Title:


                                          ENSTAR

                                          ENSTAR NATURAL GAS COMPANY,
                                          A DIVISION OF SEMCO ENERGY, INC.


                                          By:________________________________
                                          Name:
                                          Title:



                                       10
<PAGE>


                                                                    Schedule 2.1


                       [To be completed prior to closing]



<PAGE>



                                                                    Schedule 2.2


                       [To be completed prior to closing]









Source: OneCLE Business Contracts.