ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT

Exhibit 10.7

ASSIGNMENT AND ASSUMPTION OF LEASE AGREEMENT

This Assignment and Assumption of Lease (the “ Assignment of Lease ”) is made this 21st day of June, 2005, by and between, CALPINE CORPORATION a Delaware Corporation (the “ Assignor ”) and CALPINE NATURAL GAS L.P. a Delaware Limited Partnership, (the “ Assignee ”).

WITNESSETH:

WHEREAS, Assignor (as successor in interest to Sheridan Energy, Inc. and Calpine Natural Gas Company), is the tenant under that certain lease, dated February 15, 1999, (the “ Lease ”), with EOP-TABOR, LLC, a Delaware limited liability company (the “Prime Landlord”), as amended by that certain First Amendment, dated February 14, 2000 (the “First Amendment ”), that Second Amendment, dated September 14, 2000 (the “ Second Amendment ”) and that Third Amendment dated July 9, 2003, (the “ Third Amendment”) and for certain premises (the “Prime Leased Premises ”) described thereunder in the building known as the Tabor Center, which is 1200 Seventeenth Street, City of Denver, County of Denver, State of Colorado (the “ Building ”); and

WHEREAS, Assignor and Assignee desire that Assignor assign to Assignee its interest in the Lease as amended (“ Prime Lease ”), and contemporaneously enter into a sublease agreement pursuant to which Assignee will sublease to Assignor a portion of the Prime Leased Premises (the “Sublease Premises”).

NOW, THEREFORE, in consideration of the premises and other good and valuable consideration, it is hereby mutually covenanted and agreed as follows: