FERC Grants Exemption to Atmos Energy Subsidiary For New Gas Gathering System in Eastern Kentucky.

DALLAS -- Atmos Energy Corporation (NYSE:ATO) said today that the Federal Energy Regulatory Commission (FERC) has issued a declaratory order finding that its Straight Creek Gathering, L.P., unit will perform a gathering function and that the facilities it plans to build in eastern Kentucky will be exempt from FERC jurisdiction.

Atmos Energy said the Straight Creek Gas Gathering System should help relieve severe gas gathering and transportation constraints that historically have burdened natural gas producers in the area and should improve delivery reliability to natural gas customers.

"The comments submitted by the federal and state representatives and local producers demonstrate a strong support for the need for the Straight Creek facilities," FERC stated in its order (Docket No. CP06-369-000). The commission also found the goals of providing additional supplies of natural gas to the public and promoting competition within the areas of the proposed facilities are consistent with public policy set out in the federal Natural Gas Act and Natural Gas Policy Act of 1978.

"Our Straight Creek Gathering project represents an incremental, but important, strategic step for Atmos Energy," said Robert W. Best, chairman, president and chief executive officer of Atmos Energy Corporation. "Upstream gathering projects like this offer a new opportunity for Atmos Energy to apply its expertise in a closely related line of business that we think could benefit our shareholders and customers in the future."

When all its facilities are completed, the Straight Creek Gathering System will consist of a 60-mile, 20-inch diameter gathering backbone, with several smaller-diameter gathering laterals extending off the backbone. The system will gather natural gas from producing fields throughout eight counties in eastern Kentucky.

"We believe that our Straight Creek project not only can help deliver more natural gas to consumers, but also can encourage producers in the Big Sandy region of Kentucky to drill more wells," said Mark H. Johnson, senior vice president, nonutility operations, of Atmos Energy Corporation. "Producers will be able to depend on our gathering system year-round, and the competition and added gas supplies should benefit customers as more natural gas is brought to market," Johnson said.

From its origin point in Floyd County, Kentucky, the Straight Creek system will gather local gas production from producing fields located along the entire length of the gathering system. Operating at relatively low pressures, the system will be able to accept unprocessed gas, which will be processed and treated at the Straight Creek Processing Plant to be constructed at the northern end of the system in Carter County, Kentucky. The gas will be delivered into Tennessee Gas Pipeline Company's interstate pipeline.

The project is estimated to cost between $75 million to $80 million, according to Johnson. He said that Kinzer Drilling Company, a major independent oil and gas producer in the region, will own an interest in the project. More than a dozen other gas producers have executed agreements committing volumes to the Straight Creek system.

Johnson said that the project's construction is expected to begin in the fall of 2006 as soon as all required regulatory approvals are received. The gathering system is intended to go into operation as early as possible in 2007, with a goal to make producers' gas available to support storage injections and market demands next summer.

"This project should provide important economic benefits for gas producers in the region and consumers in Kentucky and the northeastern United States," Johnson said. He noted that the East Kentucky Oil and Gas Producers Association estimates the economic benefits to Kentucky of the new gathering system could exceed $150 million a year. A substantial volume of local natural gas has been unavailable to the consuming public, and the state has lost wellhead sales revenues, severance taxes, property taxes and royalty owner revenues.

Forward-Looking Statements

The matters discussed in this news release may contain "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements other than statements of historical fact included in this news release are forward-looking statements made in good faith by the company and are intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. When used in this news release or in any of the company's other documents or oral presentations, the words "anticipate," "believe," "estimate," "expect," "forecast," "goal," "intend," "objective," "plan," "projection," "seek," "strategy" or similar words are intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in this news release, including the risks relating to the company's acquisition of the operations of the TXU Gas operations, the company's ability to continue to access the capital markets and the other factors discussed in the company's SEC filings. These factors include the risks and uncertainties discussed in the company's Form 10-K for the fiscal year ended September 30, 2005, and the company's Form 10-Q for the three months and nine months ended June 30, 2006. Although the company believes these forward-looking statements to be reasonable, there can be no assurance that they will approximate actual experience or that the expectations derived from them will be realized. Further, the company undertakes no obligation to update or revise any of its forward-looking statements, whether as a result of new information, future events or otherwise.

About Atmos Energy

Atmos Energy Corporation, headquartered in Dallas, is the country's largest natural-gas-only distributor, serving about 3.2 million gas utility customers. Atmos Energy's utility operations serve more than 1,500 communities in 12 states from the Blue Ridge Mountains in the East to the Rocky Mountains in the West. Atmos Energy's nonutility operations, organized under Atmos Energy Holdings, Inc., operate in 22 states. They provide natural gas marketing and procurement services to industrial, commercial and municipal customers and manage company-owned natural gas storage and pipeline assets, including one of the largest intrastate natural gas pipelines in Texas. Atmos Energy is a Fortune 500 company. For more information, visit www.atmosenergy.com.

Straight Creek Gathering, L.P., is a unit of Atmos Gathering Company, LLC, a midstream natural gas gathering and processing company owned by Atmos Energy Corporation.