107263--3/9/2006--WILLIAMS_COMPANIES

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{operation, natural, condition}

{gas, price, oil}

{regulation, change, law}

{cost, regulation, environmental}

{capital, credit, financial}

{operation, international, foreign}

{condition, economic, financial}

{acquisition, growth, future}

{stock, price, operating}

{competitive, industry, competition}

{system, service, information}

{loss, insurance, financial}

{financial, litigation, operation}

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{cost, operation, labor}

Risks Inherent to our Industry and Business The long-term financial condition of our natural gas transmission and midstream businesses is dependent on the continued availability of natural gas supplies in the supply basins that we access, demand for those supplies in our traditional markets, and market demand for natural gas. Estimating reserves and future net revenues involves uncertainties and negative revisions to reserve estimates, and oil and gas price declines may lead to impairment of oil and gas assets. Historic performance of our exploration and production business is no guarantee of future performance. Our drilling, production, gathering, processing and transporting activities involve numerous risks that might result in accidents and other operating risks and costs. Costs of environmental liabilities and complying with existing and future environmental regulations could exceed our current expectations. Our operating results for certain segments of our business might fluctuate on a seasonal and quarterly basis. Risks Related to the Current Geopolitical Situation Our investments and projects located outside of the United States expose us to risks related to laws of other countries, taxes, economic conditions, fluctuations in currency rates, political conditions and policies of foreign governments. These risks might delay or reduce our realization of value from our international projects. Risks Related to Strategy and Financing Our debt agreements impose restrictions on us that may adversely affect our ability to operate our business. Developments affecting the wholesale power and energy trading industry sector have reduced market activity and liquidity and might continue to adversely affect our results of operations. Our lack of investment grade credit ratings increases our costs of doing business in many ways and increases our risks from market disruptions and further credit downgrades. Despite our restructuring efforts, we may not attain investment grade ratings. Electricity, natural gas liquids and gas prices are volatile and this volatility could adversely affect our financial results, cash flows, access to capital and ability to maintain existing businesses. We might not be able to successfully manage the risks associated with selling and marketing products in the wholesale energy markets. Risks Related to Regulations that Affect our Industry Our gas sales, transmission, and storage operations are subject to government regulations and rate proceedings that could have an adverse impact on the profitability of these operations. Our revenues might decrease if we are unable to gain adequate, reliable and affordable access to transmission and distribution assets due to the FERC and regional regulation of wholesale market transactions for electricity and gas. The different regional power markets in which we compete or will compete in the future have changing regulatory structures, which could affect our growth and performance in these regions. Our businesses are subject to complex government regulations. The operation of our businesses might be adversely affected by changes in these regulations or in their interpretation or implementation. The outcome of pending rate cases to set the rates we can charge customers on certain of our pipelines might result in rates that do not provide an adequate return on the capital we have invested in those pipelines. Legal and regulatory proceedings and investigations relating to the energy industry and capital markets have adversely affected our business and many continue to do so. Risks Related to Accounting Standards Potential changes in accounting standards might cause us to revise our financial results and disclosure in the future, which might change the way analysts measure our business or financial performance. Risks Related to Market Volatility and Risk Management Our risk measurement and hedging activities might not prevent losses. Risks Related to Employees, Outsourcing of Non-Core Support Activities Institutional knowledge residing with current employees or our former employees now employed by our outsourcing service providers might not be adequately preserved. Failure of the outsourcing relationships might negatively impact our ability to conduct our business. Our ability to receive services from outsourcing provider locations outside of the United States might be impacted by cultural differences, political instability, or unanticipated regulatory requirements in jurisdictions outside the United States. Risks Related to Weather, other Natural Phenomena and Business Disruption Our assets and operations can be affected by weather and other natural phenomena.

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107263--3/9/2006--WILLIAMS_COMPANIES_INC