201 1 RP-1999-0047 2 3 THE ONTARIO ENERGY BOARD 4 5 IN THE MATTER OF the Ontario Energy Board Act, 1998, 6 S.O. 1998, c. 15, Schedule B; 7 8 AND IN THE MATTER OF an Application by Union Gas Limited 9 for a regulation designating the area known as the 10 Mandaumin Pool in the Townships of Enniskillen, Plympton 11 and the City of Sarnia, Lambton County as a gas storage 12 area; and for authorization to inject gas into, store 13 gas in and remove gas from the said Pool; 14 15 AND IN THE MATTER OF an Application by Union Gas Limited 16 for a regulation designating the area known as Bluewater 17 Pool in the Township of Moore and the City of Sarnia, 18 Lambton County as a gas storage area; and for 19 authorization to inject gas into, store gas in and 20 remove gas from the said Pool; 21 22 AND IN THE MATTER OF an Application by Union Gas Limited 23 for a regulation designating the area known as the Oil 24 City Pool, in the Township of Enniskillen, Lambton 25 County as gas storage area; and for authorization to 26 inject gas into, store gas in and remove gas from the 27 said Pool; 28 202 1 AND IN THE MATTER OF an Application by Union Gas Limited 2 for an order granting leave to construct natural gas 3 pipelines in the Townships of Enniskillen, Plympton, 4 Moore, Dawn-Euphemia and the City of Sarnia; 5 6 AND IN THE MATTER OF an Application by Union Gas Limited 7 to the Minister of Natural Resources for licenses to 8 drill or deepen 7 wells in the proposed designated 9 storage areas; 10 11 AND IN THE MATTER OF an Application by Union Gas Limited 12 for approval of the parties to, the period of, and the 13 storage that is the subject of proposed storage 14 contracts. 15 16 B E F O R E : 17 S.K. HALLADAY Presiding Member 18 J.B. SIMON Member 19 F.A. DROZD Member 20 21 Hearing held at: 22 Holiday Inn, 1498 Venetian Blvd., Great Hall 23 Centre/West, Sarnia, Ontario on Wednesday, 24 February 9, 2000, commencing at 0901 25 26 HEARING 27 28 VOLUME 2 203 1 APPEARANCES 2 JENNIFER LEA Board Counsel 3 CHRIS MACKIE/ Case Manager 4 BOB TREVAIL/ Board Technical Staff 5 ZORRA CRNOJACKI Board Technical Staff 6 7 APPLICANT 8 GLENN LESLIE/ Union Gas Limited 9 JO-ANN PATTERSON/ 10 KAREN HOCKIN 11 12 INTERVENORS 13 PAUL VOGEL/ LAMBTON COUNTY 14 ROBYN MARTTILA STORAGE ASSOCIATION 15 PHILIP WALSH/ CANENERCO 16 JOE GORMAN 17 18 19 20 21 22 23 24 25 26 27 28 204 1 Sarnia, Ontario 2 --- Upon resuming on Wednesday, February 9, 2000 3 at 0901 4 THE PRESIDING MEMBER: Please be seated. 5 Good morning. Before we begin and hear from 6 the landowners this morning are there any preliminary 7 matters? 8 MR. LESLIE: I have none. Thank you. 9 THE PRESIDING MEMBER: Thank you, Mr. Leslie. 10 MS LEA: No, thank you. 11 THE PRESIDING MEMBER: Ms Lea, that's fine. 12 Now is the opportunity that we would like to 13 hear from anyone, so if anyone has comments they would 14 like to present to the Board, please do so now. 15 PRESENTATION 16 MR. LAWSON: Good morning, Madam Chair, Panel 17 Members. My name is Harry Lawson. I was asked by Don 18 McGugan, who is the President of the Lambton Federation 19 of Agriculture, yesterday to speak on Lambton's behalf. 20 Don couldn't be here this morning, so I'm it. 21 My name is Harry Lawson. I am a Director of 22 the Kent Federation of Agriculture and a member of the 23 Ontario Federation of Agriculture, as are all our County 24 members. We wish to thank the Board for the opportunity 25 to speak here this morning. 26 The well drilling that gave birth to the 27 Canadian oil industry in Lambton County in the 1850s 28 brought along with it the problem of the abandonment of 205 LAWSON, Pres. 1 those wells and their effect on the food producing 2 industry and others in Ontario. 3 I have in my hand a copy of the leases that 4 were signed in actually Kent County in 1896 which are 5 still in effect, so it lasts a long time. You have to 6 wonder if the landowner had any idea at that time that 7 we would still be looking at -- those leases would still 8 be around in the year 2000. 9 In present day Ontario, the Oil, Gas and 10 S.A.L.T. Resources Act, 1997, requires commercial 11 operators to establish and maintain a trust fund to 12 guarantee the funding of their wells. This fund is 13 inadequate. As an oil gas production field goes through 14 the phases of exploration, development, production and 15 abandonment, it could have a series of owners. 16 The operator who coaxes the last little bit of 17 production out of the pool to the break-even point, and 18 sometimes beyond, poses the most significant 19 environmental and financial risk to the property owner. 20 I raise as an example the situation in Mosa Township in 21 neighbouring Middlesex County where a hundred acre 22 parcel of land with over a hundred wells is now held by 23 the Ontario Public Trustee. 24 The operator became the landowner when the 25 previous landowner, Reid Farmer, caused him some 26 problems, so it was easier to buy the property than hang 27 it up. That company later defaulted, ceased to exist, 28 and there was no one to take responsibility, so the 206 LAWSON, Pres. 1 province ended up dealing with it. 2 The operator holding the well licence at the 3 time production ceases is responsible for plugging any 4 wells they own and the site restoration. The trust find 5 prescribed under the Act, the Oil, Gas, S.A.L.T. 6 Resources Act, is capped at $70,000 presently. The 7 number of wells an operator can own is not capped. 8 Seventy thousand dollars sounds like a lot of 9 money until you consider the cost of plugging a well at 10 $5,000 or $15,000, or maybe more. Simple math shows 11 that this fund guarantees only enough money to plug a 12 few wells without any site cleanup costs included. 13 Landowners can be left with huge liabilities 14 for costs associated with plugging and cleanup and in 15 many cases they receive only token compensation through 16 the production phase. 17 The trust cap must be raised to an amount 18 equal to the cost of plugging all the wells of a 19 commercial operation to keep the liability where it 20 belongs, with the owner of the wells. 21 There are thousands of orphan wells in Ontario 22 where the property owner is responsible for all 23 liability and costs associated with plugging and cleanup 24 of the well because there is no one else. In many other 25 jurisdictions in North America, there are funds 26 available, public and industry funds along with some 27 landowner funds I expect, to deal with plugging these 28 wells, but Ontario does not have any fund presently. 207 LAWSON, Pres. 1 The Ontario Federation of Agriculture seeks 2 support within the petroleum industry and government for 3 a plugging fund to deal with the problem wells that pose 4 an immediate danger to the environment and safety of 5 anyone around them. Some preliminary work has been done 6 on this matter, but it needs industry help to move 7 forward. 8 Thank you very much, Madam Chairman. 9 THE PRESIDING MEMBER: Thank you, Mr. Lawson. 10 Mr. Lawson, before you go, I think that Board 11 staff -- do you have any questions of Mr. Lawson? 12 MS LEA: I have just a couple of things sort 13 of an administrative nature. Mr. Lawson, could you 14 spell your name for the record, please? 15 MR. LAWSON: Harry, H-a-r-r-y, Lawson, 16 L-a-w-s-o-n. 17 MS LEA: And the person you spoke of early on 18 in your presentation, Mr. McGugan, is that the name? 19 MR. LAWSON: Yes. 20 MS LEA: How do you spell that, please? 21 MR. LAWSON: M-c-G-u-g-a-n. 22 MS LEA: Okay. And the last thing was you 23 mentioned a township name which I didn't quite catch. 24 It almost sounded like Moses. 25 MR. LAWSON: Mosa, M-o-s-a. 26 MS LEA: Thank you. Pardon me for my 27 ignorance of the local geography. 28 MR. LAWSON: The Ministry of Natural Resources 208 LAWSON, Pres. 1 staff are extremely aware of the situation. 2 MS LEA: Okay. Good. Now, sir, do you 3 yourself have experience of orphaned wells that you 4 spoke of? 5 MR. LAWSON: Not on our immediate property, 6 but I'm from the Bothwell area in the northeast corner 7 of Kent County. There were hundreds if not thousands of 8 them drilled, so the neighbouring property owners have, 9 you know, there are lots of them around. There may be 10 wells on our property that we are not aware of that were 11 drilled and plugged. 12 MS LEA: To your observation, what has been 13 done to those wells? What has happened to them? 14 MR. LAWSON: Most of the old wells are 15 devonian wells. They are shallow wells where there was 16 just basically oil production with some gas production. 17 Many of these wells have just disappeared. The 18 landowners have just cut off the top, buried them up and 19 farmed over top of them. 20 Some of them were originally plugged with 21 cedar fence posts and other devices used back in the 22 early days. Sometimes those plugs deteriorate and they 23 start to leak, flow brine to the surface or into the 24 groundwater and they can become a problem. 25 MS LEA: So there's an element of danger or at 26 least damage from not plugging them properly then that 27 you observed. 28 MR. LAWSON: Certainly. Certainly. I 209 LAWSON, Pres. 1 differentiate between the old devonian wells and gas 2 wells. Gas wells are relatively -- well, in our area 3 are a relatively newer phenomenon. Most of them were 4 drilled in the forties, 1940s and after, so a lot of 5 those wells have just come now to the end of their life 6 cycle. They are becoming more of a problem. 7 MS LEA: And what's happening with those 8 wells, sir, that you have observed? 9 MR. LAWSON: Personally, we are dealing with 10 some in our local area where the landowners are 11 extremely concerned that there will be money available 12 when the company that presently owns the ones we are 13 immediately concerned with, whether or not there's money 14 there to actually close them. 15 MS LEA: One of the things that staff was 16 concerned about, because of some of the evidence filed 17 by your organization, was the zone pool. 18 MR. LAWSON: Yes. 19 MS LEA: Can you tell us a little bit about 20 that. 21 MR. LAWSON: Okay. 22 MS LEA: If you wish. You don't have to. 23 MR. LAWSON: It's an extremely complex story. 24 We are basically concerned that the company that 25 presently owns them doesn't have the assets or they have 26 a maximum amount in the trust fund from my 27 understanding, but they don't have the assets in the 28 company to deal with -- to pay for plugging the wells. 210 LAWSON, Pres. 1 We were concerned that the principal of the 2 company, the major shareholder -- well, he recently 3 passed away very suddenly, but we were concerned that he 4 could just leave the company, you know, let it die on 5 its own and no one would be responsible except the 6 landowners. 7 The definition of the oil in the Oil and Gas 8 S.A.L.T. Resources Act says that there is no other 9 person responsible. If there is no operator, then the 10 landowner becomes the operator. It's right in the 11 definition. These old leases, the terms of the lease in 12 most cases the landowner got a $100 per year payment as 13 their total compensation for the well being there. 14 Now, it's extremely -- it's an extremely 15 complicated problem. 16 MS LEA: Can you help me with this. Are 17 you -- are you concerned about any wells that you know 18 that Union has responsibility for at this time? 19 MR. LAWSON: No. Not in zone. They don't 20 own -- they sold all the production to this other 21 company. All the production wells and facilities. 22 MS LEA: What about outside of zone. Any 23 concerns about Union's wells there do you know? You may 24 not know who owns them. I don't know. 25 MR. LAWSON: I can't speak out of zone. I 26 don't -- I'm not aware of -- 27 MS LEA: Okay. Have you spoken to the 28 Ministry of Natural Resources who administer this act 211 LAWSON, Pres. 1 about your concerns? 2 MR. LAWSON: Extremely regularly in the last 3 three and a half years. 4 MS LEA: Okay. And do you have any specific 5 recommendations for this Board in terms of what the 6 Board can do in this hearing about -- that would help 7 your concerns in this regard? I can -- I can tell you 8 that at an earlier stage staff was asking Union to 9 consider coming up with a policy regarding abandonment. 10 Do you have any recommendations specifically with 11 respect to that? 12 MR. LAWSON: In zone there is -- from what I 13 understand there is a considerable amount of gas left in 14 place from what -- from what I have been reading from 15 the annual report of the company that owns it. There is 16 approximately 5 billion cubic feet of gas left, which is 17 a fairly significant volume. 18 The problem in zone is it has never been 19 unitized and/or pooled. There is -- there are producing 20 wells that are within a few feet of the neighbouring 21 property we are in and some cases there isn't even a 22 lease that exists. It has expired over the years and it 23 has gone. And other places there are leases that are, 24 as I understand it, perpetuated by a storage agreement, 25 which is really the reason I started with the whole 26 issue trying to clarify that and see what, you know, the 27 truth behind it was I guess, you know, for -- but we -- 28 the company is, from what I understand, is in the 212 LAWSON, Pres. 1 process of being sold and we are hoping that any 2 possible new owner would -- would consider a volunteer 3 unitization with the landowners. We would be certainly 4 willing to deal with any company on a fair basis to go 5 ahead and produce the assets that is there and hopefully 6 there is money available at the end of the day to plug 7 them. 8 MS LEA: Thank you very much. Thank you, 9 Madam Chair. 10 THE PRESIDING MEMBER: Thank you, Ms Lea. And 11 thank you very much, Mr. Lawson, for bringing it to our 12 attention. 13 Good morning, sir. 14 PRESENTATION 15 MR. McMURPHY: Good morning, Madam Chairman 16 and panel members. My name is Leonard McMurphy and I 17 was part and parcel of Phase I of the Century Pool 18 development. And my property, as I'm sure you are aware 19 of, was without lease and was taken by the order of the 20 Board. 21 I commend Union Gas for their finalization of 22 an agreement with respect to these proceedings with the 23 landowners, particularly with respect to the abandonment 24 issues of their facilities and the liability. I think 25 this is -- this is a significant movement for the 26 landowners. 27 In my case I don't have a lease on my property 28 and I recognize that my property is without facilities. 213 McMURPHY, Pres. 1 However, I would have -- I would have rather entered 2 into a lease willingly that provided for coverage with 3 abandonment and liability issues among some other 4 facilities related issues had there been facilities 5 going to be relocated on my property. 6 It is our desire to protect our -- our assets. 7 It is the land's ability to produce food that we are 8 desired -- it is our desire to protect. 9 As Harry Lawson has outlined, the deals we 10 sign are far-reaching. We live with those for a long, 11 long time. I have talked to the local member of 12 Parliament, Marcel Beaubien, and as far as 13 responsibility for abandonment, if it gets to the 14 extreme point that it comes back and the landowner is 15 the last owner of that well, it is his responsibility. 16 Marcel said that those -- say that those wells are put 17 down by an operator who profits by them and the 18 responsibility of that should not and will not lie on 19 the backs of the people of Ontario. 20 So that -- that confirms our concern that 21 before we initiate operations we need to identify at the 22 end of the day who is going to -- who is going to clean 23 this up before they go home. 24 Again, I appreciate the initiative Union has 25 taken to address these issues with us. We think that is 26 a very positive movement and then their settlement with 27 the landowners. 28 I received a letter from -- a year and a half 214 McMURPHY, Pres. 1 ago from a landowner that had concerns about how he was 2 protected when he entered into these agreements. And 3 the leasing agent assured him that the Ontario Energy 4 Board, the regulator, made sure that all these concerns 5 were addressed prior to any operations. And he asked 6 who sat on the Ontario Energy Board and the response he 7 got, and I was assured, it was with a straight face, 8 that they were retired farmers. So as retired farmers, 9 I'm sure this panel that we have here today fully 10 respects our concerns with preserving the ability of the 11 soil to produce food. 12 As far as negotiations went after the Board 13 ordered my property taken, I'm not aware of any further 14 negotiations other than the initial lease presented. 15 And I respect that. That is your position. That is the 16 standard lease. They really had nothing more to offer 17 than that. And as far as negotiations, there really 18 hasn't been any. 19 However, with recent movement and acceptance 20 of responsibility for abandonment, I look forward to 21 those issues being incorporated under future leases. So 22 thank you very much. 23 THE PRESIDING MEMBER: Thank you, Mr. 24 McMurphy. 25 MR. McMURPHY: And I don't -- I hope I don't 26 have to spell anything. 27 MS LEA: Just your own name, please, sir. 28 MR. McMURPHY: Leonard McMurphy. 215 McMURPHY, Pres. 1 L-E-O-N-A-R-D M-c-M-U-R-P-H-Y. 2 MS LEA: Thank you very much. 3 MR. McMURPHY: Thank you. 4 THE PRESIDING MEMBER: Mr. McMurphy, before 5 you go, as you can guess, none of the panel members are 6 former retired farmers. 7 MR. McMURPHY: Really. 8 THE PRESIDING MEMBER: So I hate to disappoint 9 you but I wanted to set the record straight. 10 MR. McMURPHY: I would have thought you were 11 very successful if you had retired -- 12 THE PRESIDING MEMBER: Thank you. 13 Mr. McMurphy, I just want to confirm that there are no 14 issues of abandonment as far as your property is 15 concerned? There is no facilities there? 16 MR. McMURPHY: No, there are no -- and that 17 was part of the Board order that there were no 18 facilities that were going to be placed on my property. 19 THE PRESIDING MEMBER: Right. So although I 20 did not sit on the panel that time, I do recall that 21 your property was one without a lease. And I just want 22 to say that even though we are not retired farmers, we 23 are also equally concerned with environmental issues and 24 abandonment of wells and we will take under advisement 25 any considerations that you might have. 26 MR. McMURPHY: Thank you very much. 27 THE PRESIDING MEMBER: Thank you very much. 28 Anyone else? 216 McMURPHY, Pres. 1 PRESENTATION 2 MR. FEENSTRA: Yes, Madam Chair, I guess my 3 concern is boundaries on the designated area. 4 THE PRESIDING MEMBER: Excuse me, sir, could 5 you just state your name, please. 6 MR. FEENSTRA: Oh. Jake Feenstra. 7 THE PRESIDING MEMBER: Okay. Thank you. 8 MR. FEENSTRA: And I'm in the Mandaumin Pool. 9 F-E-E-N-S-T-R-A. 10 Okay. Yesterday some time was spent on 11 boundaries of the Oil City Pool and I was of the opinion 12 that the boundary issues were going to be dealt with in 13 the -- under section 38. So it kind of surprised me 14 when we didn't go from there to Mandaumin Pool. 15 But when I signed my amending agreement a year 16 ago with Mandaumin Pool I had one outline and when it 17 come back for designation I had another outline on my 18 property. 19 I have the two maps here and the part that 20 they took out is 50 acres and that was part of the old 21 production pools. It goes back to the '50s I believe. 22 I just wonder why that was taken out when the agreement 23 that we signed contains the old boundaries. 24 So I have the two maps here. 25 THE PRESIDING MEMBER: Thank you, 26 Mr. Feenstra. 27 Mr. Leslie, would you like to comment on why 28 his 50 acres were taken out from the original agreement? 217 FEENSTRA, Pres. 1 MR. LESLIE: Well, I don't know. I could ask 2 Mr. Egden if he knows about that. I expect he does. 3 You will appreciate that what is being said 4 here is this acreage is not in the DSA and the gentleman 5 thinks that it should be. I could ask Mr. Egden if he 6 can explain the change. 7 THE PRESIDING MEMBER: Okay. I appreciate 8 that. 9 Mr. Feenstra, the panel is being recalled 10 later this morning and we will be sure that that 11 question is asked of the geologist, why the 50 acres 12 were taken out. 13 MR. FEENSTRA: There is one comment that I 14 heard yesterday in the discussion about the Oil City 15 Pool, that they were reluctant to change the old 16 boundaries for administration reasons and for dealing 17 with farmers, telling them, you know, it was in, now 18 it's out. That applies to different spots on the 19 Mandaumin Pool also. 20 THE PRESIDING MEMBER: Right. I appreciate 21 that. 22 As you can understand it, it's always a 23 balancing between how much should be included in the 24 designated storage area, which has certain restrictions 25 as far as drilling, whatever, are attached to it and 26 what is excluded. 27 So it becomes, in many ways, as Board Staff 28 will no doubt be telling the panel members, a question 218 FEENSTRA, Pres. 1 of whether it is merely the geology of the pool that we 2 are protecting whether we do take into account other 3 unitization agreements that have been previously entered 4 into, whether we try to have the boundaries follow 5 straight lines rather than jog in and out as far as pool 6 wells are concerned. That is an issue that we will be 7 talking about. 8 MR. FEENSTRA: This particular 50 acres that 9 I'm talking about is not at the edge -- it's on the 10 side, but it's not at the end, it's just a chunk taken 11 out of the middle, and that's what I don't understand. 12 THE PRESIDING MEMBER: Okay. Thank you very 13 much. I will try to address that concern. 14 Is there anyone else? 15 Thank you very much for coming, and I thank 16 all the people who came forward to make presentations. 17 We have appreciated your comments. 18 Now I think that -- are there any other 19 preliminary matters? 20 If not, Ms Lea, are you recalling your panel? 21 MS LEA: Yes, thank you. 22 --- Pause 23 MS LEA: I think we are waiting for a panel 24 member. 25 MR. LESLIE: Oh, I'm sorry. I thought you 26 were calling somebody. 27 MS LEA: No. 28 PREVIOUSLY SWORN: JOSEPH MARUSIC 219 UNION GAS PANEL 2 1 PREVIOUSLY SWORN: STEVEN PARDY 2 PREVIOUSLY SWORN: JIM EGDEN 3 MR. LESLIE: Madam Chair, before we start 4 again with Ms Lea's questions, there are two matters I 5 thought I should raise so that people know that this is 6 the panel that can deal with them, and I had discussions 7 with Ms Lea. 8 There was a route change that resulted in part 9 of the route for transmission facilities moving for what 10 has been described to me as the environmentally 11 preferred route to an environmentally accepted route -- 12 acceptable route, and the extent that that involves 13 operational considerations, Mr. Marusic is the person 14 who can explain Union's thinking. 15 In addition, you mentioned yesterday, Madam 16 Chair, that the Panel was interested in preconstruction 17 activity. 18 I think the preconstruction activity that you 19 would be interested in concerns wells and access roads, 20 and again this is the panel that would be able to help 21 you with that and not the next panel. 22 If you like, I could now ask Mr. Egden to deal 23 with Mr. Feenstra's concern about the removal of 24 50 acres from the proposed DSA. I believe Mr. Egden is 25 aware of the circumstances. 26 THE PRESIDING MEMBER: Thank you, Mr. Leslie. 27 Mr. Egden? 28 MR. EGDEN: The lands that Mr. Feenstra is 220 UNION GAS PANEL 2 1 referring to were lands that Union Gas wanted to have 2 included in the DSA and in our meetings with the MNR we 3 restated our position, which was the same position as we 4 had had in Phase I of Century Pools development, it's 5 the same position we had that you were referring to 6 yesterday, that if there is an original production unit 7 that the lands of that production unit should be 8 included in a DSA, that in the case that there was 9 excessive lands, then that may be a different situation. 10 But the pools that we have brought forward to the Board 11 have not had excessive lands associated with them. 12 There was a small 25 acre parcel on the north 13 end of the Mandaumin Pool, the owner of which had 14 expressed interest to not have it included, but the 15 lands that Mr. Feenstra is referring to, we had 16 originally proposed to have these in the GSA and we 17 could not get support for that from the Ministry of 18 Natural Resources. 19 THE PRESIDING MEMBER: Thank you, Mr. Egden. 20 EXAMINATION (Continued) 21 MS LEA: Thank you, Mr. Egden. 22 So it's MNR's fault? 23 MR. EGDEN: Yes. Actually I have a copy of 24 the map that I had brought into the meeting with the MNR 25 that shows those lands included in the DSA. So it's an 26 issue that all people involved have been aware of right 27 from the start. In the landowner meeting that we had 28 held with the landowners after we had shot our seismic 221 UNION GAS PANEL 2, ex (Lea) 1 and gave them an indication of what lands we thought 2 should be included is the same map that I have here. 3 So I would concur with everything that 4 Mr. Feenstra has said. 5 MS LEA: Mr. Egden, can you look at section 3, 6 Schedule 26. 7 --- Pause 8 MS LEA: In that schedule, what is the dark 9 line surrounding the two formation -- oh, maximum -- 10 pardon me, it is. Maximum extent of reef debris it's 11 labelled there. 12 MR. EGDEN: That's correct. 13 MS LEA: Does that line also represent the 14 maximum extent of porosity, in your best judgment? 15 MR. EGDEN: Yes. I think those terms are near 16 interchangeable. 17 MS LEA: The 50 acres that Mr. Feenstra was 18 talking about are on the right-hand side. They are 19 Tract 2 and 3, labelled -- that are unlabelled actually 20 and Mr. Mackie has been kind enough to fill them in for 21 me. It's Lot 2. You can see the little -- the jog that 22 has been taken out there on the right-hand side? 23 MR. EGDEN: That is correct. 24 MS LEA: That's what we are talking about. 25 Okay. 26 Just looking at this map it would appear that 27 from a geological perspective merely -- merely a 28 geological perspective -- it's not necessary to include 222 UNION GAS PANEL 2, ex (Lea) 1 those tracts for protection of the reservoir. Am I 2 correct? 3 MR. EGDEN: I think that could be a point of 4 discussion among a couple of people if we had a number 5 of geologists looking at this and trying to decide where 6 the protection should be. I think it's quite reasonable 7 to expect that some would argue that those tracts could 8 be included and some would say that they could be out. 9 In actual fact, in discussions we had with the Ministry, 10 that is pretty much where it was split. 11 The Union geological perspective was that it 12 was probably important to happen, and the Ministry of 13 Natural Resources said "No, we don't think it 14 should be." 15 The placement of the line of maximum extent of 16 reef debris was the debate that was taking place. My 17 original maps had the line extended further to the east, 18 which would have included those tracts, and the 19 Ministry's geological perspective was that that line was 20 being moved too far out from the reef and they thought 21 that it should be moved in closer. 22 So if we took a look at my original work, I 23 had the maximum extent of the reef being further to the 24 east and those two tracts should have been included. 25 And it was a point of discussion with the ministry and 26 we ceded to their desires to have the line brought in 27 closer to the reef, and when that was done it 28 effectively took these two tracts out. 223 UNION GAS PANEL 2, ex (Lea) 1 We did have a discussion on the impact on a 2 landowner with it, that there would be 50 acres removed 3 from any of the compensation issues as well. 4 So all of these issues were on the table. 5 MS LEA: All I want to talk about, sir, is the 6 geological issues. My question was limited to that. 7 And I'm presuming that since Union has put forward this 8 map with these 50 acres removed, that it is not Union's 9 position that the reservoir will be endangered by the 10 removal of those 50 acres. 11 I'm merely talking about geology, sir. I'm 12 certainly going to deal with landowner issues in a 13 moment, but I want to hear about geology. 14 MR. EGDEN: Okay. Perhaps I can clarify. I 15 don't want to try and confuse the issue. 16 The placement of the maximum extent of reef 17 debris is somewhat subjective in this area of the pool. 18 My original argument was to have the line further to the 19 east and the ministry would not support us on that. We 20 ceded to the ministry's direction to bring it back in 21 further to the west and the effect was that we have the 22 maps that were put forward in Schedule 26. 23 MS LEA: Mr. Egden, is Union's application, as 24 it is presently filed, which has these tracts removed, 25 are you telling the Board that you believe there is a 26 danger that this reservoir will be compromised with the 27 application as it is filed? If there is, then maybe you 28 should change your application. 224 UNION GAS PANEL 2, ex (Lea) 1 MR. EGDEN: I believe the risk to be low and 2 acceptable. So I would stand by Schedule 26 as it 3 stands. 4 And let me just expand on this somewhat. I'm 5 not trying to be difficult, but some time ago we had a 6 meeting with these landowners. We met with them face to 7 face. They had what I believe to be legitimate 8 concerns. I met with them in the basement of one of the 9 landowners' homes and said, "I will give you a personal 10 commitment here that we will try and make sure that the 11 production unit is looked after." And I tried to do 12 that and I have outlined that in my Addendum No. 1, and 13 I was overridden by the Ministry of Natural Resources. 14 I feel that it is important that Mr. Feenstra, he knows 15 that I'm not backing off that issue at this point. 16 From a geological perspective, it is a 17 subjective placement of the line on the maximum extent 18 of reef debris in there. There is a sound scientific 19 argument that could be made to have the line placed 20 further east or west, as I have it, in Schedule 26. I 21 think both of those maps are reasonable and valid. But, 22 at the end of the day, Schedule 26 is what we have 23 applied for. We think it is acceptable from a 24 geological perspective, but I think it would be -- it 25 wouldn't be appropriate for me to say that there isn't 26 an alternative interpretation and that that alternative 27 interpretation was presented. 28 MS LEA: Mr. Egden, all I'm trying to get from 225 UNION GAS PANEL 2, ex (Lea) 1 you, or at least understand better, Union knows very 2 well that it is not the Ministry of Natural Resources 3 that decides on the boundaries of the designated storage 4 area but this Board. 5 MR. EGDEN: Correct. 6 MS LEA: I'm sure that if your opinion was 7 that a reservoir was endangered by a boundary proposed 8 by MNR, you would not come forward before this Board and 9 present a boundary that you felt compromised the 10 reservoir. 11 MR. EGDEN: You are absolutely correct. 12 MS LEA: All right. 13 Then let's turn to the question of 14 Mr. Feenstra's interest. I have heard what you have 15 said about that, and I only had one question arising out 16 of what you have said. 17 Now, I gather that there it is still a 18 question -- and this may be a question for Mr. Leslie 19 rather than yourself -- there is still a question open 20 to whether negotiation of settlement by this Board of 21 how outside acres, such as these of Mr. Feenstra, I 22 presume, will be compensated, whether they would be 23 compensated the same as acres inside the DSA. 24 First of all, would this acreage that has been 25 excluded from Union's application be considered outside 26 acres within the meaning of what is going to be debated 27 with the Lambton County Storage Association? 28 MR. EGDEN: It is my understanding that they 226 UNION GAS PANEL 2, ex (Lea) 1 would be considered outside acres. 2 MS LEA: Okay. 3 Just reading the agreement with the Lambton 4 County Storage Association, it reads: 5 "Boundaries with DSA 6 Outside acres should be compensated the 7 same as inside acres..." (As read) 8 And that issue is listed as a section 38 9 hearing. 10 I just wanted to make sure that Mr. Feenstra's 11 acres, that his interest in that compensation would form 12 part of that debate. 13 MR. EGDEN: It's my understanding that that 14 would happen. 15 MS LEA: All right. 16 Well, if anybody has any different 17 understanding, they can let us know. It is my 18 understanding also, but I just wanted to make sure that 19 he wasn't going to be excluded from that for any reason. 20 MR. LESLIE: Ms Lea, that turns, I think, on 21 whether he has land that -- where a part of his land is 22 within the DSA and part out. 23 MS LEA: Yes. 24 Is part of his land within the DSA? 25 MR. LESLIE: I will seek confirmation on that 26 and if it is different from what we have told you, I 27 will let you know. 28 MS LEA: Thank you. 227 UNION GAS PANEL 2, ex (Lea) 1 According to our map, he does have acres in 2 the DSA. 3 MR. LESLIE: No. That's -- 4 MS LEA: If you could confirm it, that would 5 be very helpful. Thank you very much. 6 Did the Panel have any further questions it 7 wanted to deal with on that area? I'm going to move to 8 a different area. 9 THE PRESIDING MEMBER: No, I think that we are 10 fine. Thanks. 11 MS LEA: Okay. Thank you. 12 Turning, then, to a different topic, and that 13 is the proposed location of wells. 14 In your updated evidence and in your evidence 15 in-chief you have explained that the location of several 16 of the wells in the Mandaumin Pool have changed and you 17 gave us some explanation. Can you just briefly recap 18 the reason for the change in the locations of the wells? 19 MR. EGDEN: Yes. When we drilled the two 20 stratigraphic test wells to gain more information on 21 this reservoir, the results from that, those two wells, 22 needed to be brought back into the analysis of how to 23 best develop this reservoir. As a result of that 24 iterative step, there was some modification to well 25 locations. Primarily, the well core that was taken in 26 Union Mandaumin No. 4 gave us important information with 27 respect to what targets we should be trying to avoid in 28 the subsurface. In short, there were places to be and 228 UNION GAS PANEL 2, ex (Lea) 1 places not to be. And prior to the core being taken, it 2 was difficult to try and differentiate between those two 3 spots. 4 MS LEA: Do you expect a change in 5 deliverability from the evidence previously filed as a 6 result of relocating these wells? 7 MR. EGDEN: Your question actually is one 8 that, for it to be a complete answer, really requires I 9 think some comment from myself and some from Steve 10 Pardy. 11 MS LEA: Certainly. Certainly. 12 MR. EGDEN: From a geological perspective, we 13 don't expect the deliverability to change in the 14 material sense, and that is on the basis of how we were 15 trying to determine the deliverability in the first 16 place. But those deliverability numbers that we have 17 come up with and the methods by which we determine what 18 we think will be our best estimates are done in 19 conjunction between the geologists and the reservoir 20 engineering staff. So I think that this answer wouldn't 21 be complete without Steve's comments as well. 22 MS LEA: Certainly. 23 MR. PARDY: Yes. I would have to concur with 24 Mr. Egden that the deliverability of substance for this 25 project do not change based on the geological 26 information that he has presented to us and all the 27 information that we have to date. 28 So we still feel that these wells can perform 229 UNION GAS PANEL 2, ex (Lea) 1 up to expectations. 2 MS LEA: Was there an increase in the cost of 3 your well-drilling program as a result of the relocation 4 of the wells as opposed to, say, the decision to do 5 rotary drilling? 6 MR. PARDY: There was an increase in the cost 7 due to changing the methods, as you have pointed out, 8 from rotary drilling, but as a result of the targets 9 that were identified from the new geological 10 interpretation, I guess, the new geological model that 11 we have, there are targets that we would now access with 12 horizontal drilling which also increases the cost. 13 MS LEA: Where do we see that increase in 14 costs? I probably asked Panel 1, this. I just wanted 15 to get a confirmation. 16 MR. PARDY: I'm referring to the addendum -- 17 MS LEA: Yes? 18 MR. PARDY: -- that was sent in as an update 19 to the evidence, page 3 of 5. 20 MS LEA: Yes? 21 MR. PARDY: It details the cost breakdown 22 there as what was filed and what our revised costs are. 23 MS LEA: Okay. 24 MR. PARDY: And there are comments regarding 25 what causes those costs to change. 26 MS LEA: In terms, then, of the -- and I'm 27 just asking you to deal with what you can deal with, 28 that is, the change in the location of the wells and the 230 UNION GAS PANEL 2, ex (Lea) 1 orientation of the wells, if I can talk about the 2 horizontal drilling there. 3 Do you believe this increase in cost is 4 justified if you are not having any change in 5 deliverability as a result? 6 MR. PARDY: Yes, I do think the increase in 7 cost is justified. 8 MS LEA: Tell me why. 9 MR. PARDY: Because if we didn't put the wells 10 in, those prices, the deliverability would be less. 11 MS LEA: So to achieve the deliverability that 12 you had originally anticipated from this pool, it was 13 necessary to relocate the wells to the best site. 14 MR. PARDY: Yes, and it wasn't as much as 15 looking to achieve what we originally anticipated as 16 looking to achieve what we needed to achieve basically. 17 I don't know if I'm being confusing there, but -- 18 MS LEA: No. I think I understand. You 19 needed to achieve the deliverability to provide the 20 storage service that you had contracted to do. 21 MR. PARDY: That's correct. 22 MS LEA: So the increase in cost really goes 23 back to the need to service the storage that you 24 contracted for. 25 MR. PARDY: That's correct. 26 MS LEA: Can you tell me just a little bit 27 about UMB 6 which intrigued us because it looked like it 28 was a horizontal well. Perhaps someone could explain to 231 UNION GAS PANEL 2, ex (Lea) 1 us. Will there be contact with the reef throughout the 2 horizontal length or merely at the end of the well? 3 Pardon the layman's question, but I think you know what 4 I'm getting at. 5 MR. PARDY: There will be contact, I guess, 6 throughout the reefs. 7 MS LEA: I don't mean contact in that it is 8 going through the reef. I mean accessing the reef. 9 MR. PARDY: If I could refer to schedule A as 10 part of the addendum. 11 MS LEA: Yes. 12 MR. PARDY: Which shows the path of the 13 horizontal well and I am making some estimates here. 14 MS LEA: Just give me a moment to find that. 15 Actually, I was looking at schedule C, but -- 16 MR. PARDY: Actually I think schedule A is a 17 better schedule. 18 MS LEA: Okay. That's fine. 19 MR. PARDY: And the reason is on schedule C 20 it's a projection of what it would kind of look like, 21 but it's not that accurate as far as where it enters the 22 reef and where it stops. 23 MS LEA: I understand. Yes. Okay. 24 MR. PARDY: So I think on schedule A what we 25 would see is the triangle position labelled UMB 6 as 26 where the wellhead location of that well would be. 27 MS LEA: Yes. 28 MR. PARDY: We would drill down and after we 232 UNION GAS PANEL 2, ex (Lea) 1 have set our intermediate casing, which I think is 2 subject to check here, 300 to 400 metres below the 3 ground, from that point we would kick off and start to 4 build on an angle. We would enter the reef at an angle. 5 That would approximately -- if you look at the contour 6 line, I see it's 70 there. I'm not sure what else is 7 supposed to be there as you go along the horizontal well 8 path. 9 MS LEA: Yes. 10 MR. PARDY: Just across from the 68.2 and then 11 there's a number 70. Approximately in that location 12 right there, somewhere around there, that's kind of 13 where the well enters the reef. It would continue to 14 build and it would eventually go horizontal in the reef 15 and continue out to the end location, which is labelled 16 as a circle at the end of the line. 17 It may not be exactly horizontal. It may be 18 88, 89, 91, 92 degrees, so we would -- we haven't nailed 19 that down exactly yet, but yes, it will traverse through 20 the reef, that entire section. 21 MS LEA: And I don't know how to express this 22 properly, but will it be active throughout -- I don't 23 know -- what I'm asking is where does the casing end so 24 that gas begins to flow into the well? 25 MR. PARDY: The casing will end at the cap 26 rock. 27 MS LEA: Okay. 28 MR. PARDY: Ordinarily when we drill our 233 UNION GAS PANEL 2, ex (Lea) 1 vertical wells, we case the wells in the cap rock. 2 That's where our production casing ends and then it's an 3 open hole section from there on. This well will be the 4 same. The casing will end at the cap rock and it will 5 be open hole from there on. As much as there's 6 porosity, the well is intersecting and permeability, 7 there will be flow along that path. 8 MS LEA: Okay. One moment, please. 9 MR. EGDEN: There is a point of clarification 10 that I would like to add on that well bore. The zone 11 that the well bore is targeting is linear in nature. We 12 see the edge of it being where the well bore, near where 13 the well bore is going to be entering the reef. The 14 termination of that well bore path is at the other side 15 of that target. 16 We are projecting to drill through the hole 17 target. The target -- if we were drilling a vertical 18 well, the best place to locate that would have been more 19 or less in the area that is represented by the road. 20 The horizontal or directional drill is the appropriate 21 tool for us for this particular situation. 22 MS LEA: Thank you. Now, the Board received a 23 revised letter from the Ministry of Natural Resources 24 dated February 4, 2000, listing five locations. I just 25 want to confirm that those are the locations for these 26 five wells in this pool. 27 MR. PARDY: Yes, that's correct. 28 MS LEA: So you have applied for the licences 234 UNION GAS PANEL 2, ex (Lea) 1 that are listed here. 2 MR. PARDY: Yes. 3 MS LEA: Now, do you have letters of consent 4 from the landowners to the locations, the new locations 5 of these wells? 6 MR. PARDY: Yes. It's my understanding that 7 we do. Mr. Lowe would be best to speak to that, but 8 yes, we do. 9 MS LEA: So those will be before the Board at 10 some point today. 11 MR. PARDY: Yes. 12 MS LEA: Okay. Just one moment, please. 13 --- Pause 14 MS LEA: How many wells are you drilling in 15 Mandaumin-Bluewater and Oil City DSAs? There are five 16 listed here. There are more, though, aren't there that 17 you are drilling? 18 MR. PARDY: As part of this application, there 19 will be -- 20 MS LEA: This is just for Mandaumin, right, 21 what we are looking at? 22 MR. PARDY: Yes. 23 MS LEA: Okay. 24 MR. PARDY: The Oil City and Bluewater 25 locations did not change, so there were no new 26 applications. 27 MS LEA: Okay. And are there any other wells 28 that you are drilling in Mandaumin whose location didn't 235 UNION GAS PANEL 2, ex (Lea) 1 change so therefore they are not listed on this 2 reference? 3 MR. PARDY: No. 4 MS LEA: Okay. Thank you. One moment. What 5 about the stratigraphic test wells you have spoken of? 6 You drilled two wells there. Did you get letters of 7 consent from the landowners for the four stratigraphic 8 test wells in the project area? 9 MR. PARDY: The four stratigraphic test wells 10 across the three pools, yes, there was. 11 MS LEA: There were letters of consent. Okay. 12 --- Pause 13 MS LEA: Mr. Mackie reminds me of what my 14 confusion was with respect to this reference. If 15 Mandaumin's four has already been drilled, is that going 16 to be changed and deepened to make it an 17 injection/withdrawal well or why is it on this licence? 18 MR. PARDY: Yes. I think that is a change 19 from what we originally proposed. We had drilled in the 20 Mandaumin bore as a stratigraphic test well with the 21 intent to convert it to an I/W well once the project was 22 approved. 23 Because of the results that we got there, Mr. 24 Egden pointed out the S.A.L.T. plugging. We were not 25 able to use that well as an I/W well, so our proposal is 26 to basically plug back up higher into the well and kick 27 off -- I guess the term we would use would be would kick 28 off the cement plug that we would set there and go 236 UNION GAS PANEL 2, ex (Lea) 1 directionally to an area where we feel there is good 2 crop, so basically we are doing some work to make it a 3 good well, make it an I/W well. 4 MS LEA: Okay. So I see that this is a 5 horizontal well. That helps explain that. Now, at what 6 depth would the plug then be set? 7 MR. PARDY: It would be set just below the 8 intermediate casing, which would be similar to Union 9 endowment No. 6. 10 MS LEA: Thank you. 11 MR. PARDY: I think it's interesting or I 12 should point out here too that when we drilled that 13 well, there is no production casing set in that well 14 yet, so only the intermediate casing is set, so there is 15 not a problem with going horizontal or going directional 16 up at that point, so we don't have that restriction 17 there. 18 I mean there are ways of kicking out a casing 19 too, but in this case we don't have that problem. 20 MS LEA: Okay. Thank you. That's helpful. 21 Now, you mentioned in answer to a Board staff 22 interrogatory, I think it was 129.1, two alternative 23 well locations, UMB 7 and 8. You don't intend to drill 24 those wells, do I understand correctly? 25 MR. PARDY: That's right. 26 MS LEA: We have noticed that Consumers Gas 27 occasionally includes a contingency well site in its 28 applications. I guess it's a just in case well, no pun 237 UNION GAS PANEL 2, ex (Lea) 1 intended, and the costs of that extra well are included 2 in the DCS analysis. Are you aware of that practice? 3 Have you considered whether it would be a useful 4 practice for Union? 5 MR. PARDY: I guess in this case with the 6 application we have put forward, we don't feel that we 7 need a contingency well. If there is a future time 8 where we feel we need another well, we would just come 9 back to the Board and that would be under their 10 consideration, whether we would drill it or not. 11 MS LEA: Okay. Thanks. Let's turn now to 12 deliverability, please. For the Mandaumin and Bluewater 13 pools, I gather that you have based your estimated or 14 projected deliverability on results achieved in the 15 Enniskillen 28 pool. Did I understand that evidence 16 correctly? 17 MR. PARDY: Yes, that is correct. 18 MS LEA: And can you tell the Board why you 19 did that? First, do you have any data for these pools 20 otherwise, and secondly, why did you pick Enniskillen 21 28? 22 MR. PARDY: Again, it is a two part answer. 23 MS LEA: Please go ahead. 24 MR. PARDY: In the initial planning stages for 25 the Mandaumin Pool we looked at the geology on the 26 Mandaumin reservoir and we tried to compare that to 27 existing pools and establish which pool that we have 28 ourselves or does somebody else have that we think would 238 UNION GAS PANEL 2, ex (Lea) 1 be representative of what the Mandaumin Pool would be 2 like when it was fully developed. The Enniskillen 28 3 pool was the pool we selected as our best analogy. 4 Coincidentally that pool is fairly close to 5 the Mandaumin Pool. And although it wasn't our intent 6 to have salt plugging in Mandaumin, although it was one 7 of the considerations, but the Enniskillen 28 pool also 8 had a well that had extensive salt plugging in it. So I 9 suppose in hindsight right now we would consider it to 10 20/20 vision to say that Enniskillen 28 indeed was a 11 good comparator. 12 MS LEA: Just before you proceed on -- Mr. 13 Egden, what criteria or characteristics were you hoping 14 to match between the Enniskillen 28 and the other pools? 15 What was it about Enniskillen 28 that looked good to you 16 on the map? 17 MR. EGDEN: The Mandaumin -- the Mandaumin 18 reef, if we look at the seismic image of that in the 19 subsurface, it does not match with other reefs in terms 20 of how much gas should be in a container of that size. 21 And the Enniskillen 28 pool has a similar type of 22 characteristic if we do some volumetric comparisons 23 between them. 24 So our initial thought was that the Mandaumin 25 reef could actually have separate compartments in it 26 similar to different rooms in a house and that we would 27 actually need two stratigraphic test wells into that 28 pool to test the theory. Either there was an untapped 239 UNION GAS PANEL 2, ex (Lea) 1 compartment and there may be some native gas yet to be 2 produced or we could have fairly substantial variations 3 in the quality of the reservoir across the whole reef. 4 As it turned out with the test well drilling, 5 that it was the latter case we had substantial 6 variations in reservoir quality. And again comparing 7 back to Enniskillen 28 that was what we had seen in 8 there. 9 In the Enniskillen 28 case, and just building 10 on that contingency well case, in Enniskillen 28 we had 11 drilled partially through the program, realized what 12 implications the rocks were telling us we would have to 13 deal with and we suspended the development of that pool 14 until we could come to the -- to the Board and present a 15 case to move wells at that point. 16 So there are a lot of similarities between the 17 development and drilling in Enniskillen 28 and what we 18 are seeing here in the Mandaumin Pool. 19 MS LEA: Thank you. Before we leave your part 20 of this answer, just looking at the cross-section of the 21 Bluewater reef and the Mandaumin reef, which appears for 22 example at page -- section 3, page 11 in the prefiled 23 evidence, if you look at it, the two pools appear to be 24 slightly different. The crest of the Bluewater Pool is 25 sort of typical of a pinnacle reef and the Mandaumin 26 Pool has more of a flat and a wide crest to it. 27 Are these two pools similar enough to be 28 analogized to one another and therefore to Mandaumin -- 240 UNION GAS PANEL 2, ex (Lea) 1 to Enniskillen? Pardon me. Enniskillen 28. 2 MR. EGDEN: A point of clarification there. 3 Both those pools would classify as typical -- 4 MS LEA: Okay. 5 MR. EGDEN: -- typical type reefs. One has a 6 larger footprint than the other. But they are both very 7 typical garden variety type pinnacle reefs in this part 8 of the world in terms of vertical development and aerial 9 extent. Mandaumin is a bit bigger than Bluewater. 10 The physical characteristics that were seen in 11 the well bore of the original well in Mandaumin, the 12 Imperial Union 36-1 of I well, was not as similar to the 13 Bluewater True Sarnia 5-3 of II well which was the 14 discovery well in the Bluewater Pool. It was more 15 similar to characteristics that we had seen in the 16 development of the Enniskillen 28 pool which is why we 17 had taken ourselves down that path. 18 However, I believe, and subject to further 19 comment by my colleague, Mr. Pardy, that the 20 deliverability numbers that were finalized for both 21 Mandaumin and Bluewater are very similar. 22 MS LEA: Thanks. Now, Mr. Pardy, you were 23 going to contribute to this evidence or has Mr. Egden 24 said it all? 25 MR. PARDY: No, I think the information 26 received by myself from the geological review of these 27 pools and the drilling of the stratigraphic test wells 28 too, I think, confirms this with respect to the 241 UNION GAS PANEL 2, ex (Lea) 1 porosities and the permeabilities that we would expect. 2 And what we have in the Enniskillen 28 pool we do feel 3 that our assumptions that we have made there are very, I 4 guess, they are prudent and we are very comfortable with 5 those decisions. 6 I guess to put it in a little bit of context 7 too of how the deliverability of Enniskillen 28 compares 8 to our other pools, we have approximately 150 wells 9 across our system. About 100 wells in our system are 10 better than that deliverability; about 50 of them are 11 less than that deliverability, of that average 12 Enniskillen 28 deliverability. 13 So we are by no means being overly optimistic. 14 However, based on the results that we have seen from our 15 drilling, we don't think we are -- we think, I mean, the 16 assumptions that we have made are very prudent. 17 MS LEA: Mr. Pardy, what was the average 18 deliverability that you measured for the Enniskillen 28 19 pool? 20 MR. PARDY: I believe that was given in one of 21 the interrogatory responses. 22 MS LEA: Thank you. 23 MR. PARDY: Board Staff Interrogatory No. 36 24 gives that information. The deliverability of an 25 average well in the Enniskillen 28 pool is 287 10(3)m(3) 26 and that is at delta P(2). 27 MS LEA: Okay. Thank you. And did you assume 28 the same average deliverability for the Mandaumin Pool? 242 UNION GAS PANEL 2, ex (Lea) 1 MR. PARDY: Yes. 2 MS LEA: Okay. And that -- is that what led 3 you to believe that you would need four 4 injection/withdrawal wells for the Mandaumin Pool? 5 MR. PARDY: That is correct. 6 MS LEA: Okay. Thanks. Now, tell me about 7 this salt plugging. I understand that it was found in 8 Mandaumin or a well has some salt plugging in Mandaumin. 9 Were any wells in the Bluewater part of the reef 10 examined and was there any evidence of salt plugging 11 there. 12 MR. PARDY: Yes, there is salt plugging to 13 some extent in both reefs. 14 MS LEA: Can someone explain to me what salt 15 plugging is and what effect it might have on the 16 deliverability? 17 MR. EGDEN: Over geological time if there is 18 pore space in the rock, Mother Nature likes to plug it 19 back up and that can be accomplished by a number of 20 different geochemical reactions taking place again over 21 geological time. One of the common mechanisms is that 22 the formation fluids that are there, the water has 23 dissolved solids or ions in solutions and as pressure 24 and temperature conditions change, some of those 25 chemicals can precipitate out. In this case we have 26 rock salt or halite that has been deposited into the 27 pore space. 28 Now, if that -- what is deposited at one point 243 UNION GAS PANEL 2, ex (Lea) 1 in time can be solutioned out at another point in time 2 and then could be redeposited again, it is a fairly 3 dynamic situation. But we are talking about over long 4 stretches of time. We are talking in terms of 5 geological times. Millions of years. 6 And current geological theory on the pinnacle 7 reefs in southwestern Ontario is that they started out 8 with a lot of the normal type critters and animals that 9 live on a coral reef, and as they die there was pore 10 space available. In a very short period of time that 11 pore space would have been plugged with the type of 12 chemical reactions that take place in today's modern 13 Caribbean sea type of thing, the type of thing we would 14 see down in the Bahamas. 15 Those types of rocks that are being deposited, 16 plugging up the pore space are unstable and so they are 17 commonly dissolved out with the next generation of 18 fluids that move through the rocks. But the Guelph 19 pinnacles had this phenomena of salt plugging that was 20 quite extensive over all of the Michigan Basin. And in 21 some of these reefs, at the point in time when the salt 22 was dissolved out, oil and gas migrated in, and once the 23 oil and gas was in place, it was displacing the fluids 24 that would have these potential precipitates present in 25 the formation water. 26 So in the case of the Mandaumin Reef, the oil 27 and gas or the hydrocarbons did not come into the reef 28 at a point when most of the porosity had been opened up 244 UNION GAS PANEL 2, ex (Lea) 1 again and salt was being removed. And in the case of 2 the Bluewater reef, there is more of the pore space that 3 was open at the particular time that the hydrocarbons 4 arrived on the scene. 5 MS LEA: So what effect would salt plugging, 6 or the processes described, have on deliverability; and 7 have you taken this into account? 8 MR. EGDEN: Well, it has a negative impact on 9 deliverability; and, yes, it has been taken into 10 account. 11 MS LEA: Can you describe how it has been 12 taken into account? 13 MR. EGDEN: By using our Enniskillen 28 Pool 14 analogy where this salt plugging was --it was the pool 15 where we had the most control -- I shouldn't say 16 control -- where we had the most scientific data with 17 which to work from, both in cores that had been obtained 18 during the drilling process of the Enniskillen 28 Pool 19 and in our deliverability measurements that are done by 20 Steve's people. 21 MS LEA: Mr. Pardy, did you presume the same 22 deliverability for the injection withdrawal wells in the 23 Bluewater Pool as for the Mandaumin Pool? 24 MR. PARDY: Yes, that's correct. 25 MS LEA: And you are using two injection 26 withdrawal wells in the Bluewater portion of the reef? 27 MR. PARDY: That's correct. 28 MS LEA: The number of injection withdrawal 245 UNION GAS PANEL 2, ex (Lea) 1 wells, you have four in Mandaumin and two in Bluewater. 2 Am I right? 3 MR. PARDY: Yes, we have four I/W wells 4 proposed for the Mandaumin Pool and two for Bluewater. 5 However, I should note that there are two observation 6 wells in the Mandaumin Pool, one of which we had the 7 option of using as an I/W well for the period when we 8 had been injecting and withdrawing gas, and we can use 9 it for an obs well while the pool is shut in on 10 stabilization. 11 MS LEA: It has sufficient casing and so on to 12 be used for injection/withdrawal? 13 MR. PARDY: That's correct. 14 MS LEA: The reason that I asked you that 15 question is that there is 30,000 10(3)m(3) per well 16 being pulled if we divide the capacity of the reefs and 17 about 27,000 10(3)m(3) per well for Bluewater, but you 18 have explained also that you do have this option of an 19 additional injection/withdrawal well for Mandaumin. 20 Okay. 21 What about the Oil City Pool? Did you assume 22 the same deliverability for it as you did for the other 23 two pools? 24 --- Pause 25 MR. PARDY: I'm pretty sure I know the answer. 26 I just want to check it. 27 MS LEA: Okay. Thank you. 28 --- Pause 246 UNION GAS PANEL 2, ex (Lea) 1 MS LEA: I think you had open flow rates 2 actually to assist you in estimating the deliverability 3 of Oil City. Is that right? 4 MR. PARDY: I believe, yes. There is the 7-17 5 of V well. The deliverability of that well was used to 6 estimate the deliverability of the pool. 7 MS LEA: Okay. 8 And you consider the flow from that well to be 9 a good indicator of the deliverability for the pool? 10 MR. PARDY: Yes. 11 MS LEA: And did you find the number? 12 MR. PARDY: No. 13 MS LEA: Sorry, sir. 14 --- Pause 15 MR. PARDY: I think it is on page 3-9, 16 paragraph 21. The AOF would be 5654 10(3)m(3) as 17 discovery pressure. 18 MS LEA: As discovery pressure. Okay. 19 You are going to be using two 20 injection/withdrawal wells in the Oil City Pool? 21 MR. PARDY: That's correct. 22 MS LEA: Why is ME 7-17-IV, the one you just 23 talked about, to be used as an observation well rather 24 than an injection/withdrawal well? 25 MR. PARDY: It's based on -- the information 26 we have on that well and the configuration or the 27 completion, the location in the reef with respect to the 28 geology, we thought it would be a good well that could 247 UNION GAS PANEL 2, ex (Lea) 1 be used for an obs well. And we would drill two new I/W 2 wells up to our specifications that we would have for a 3 I/W well. 4 MS LEA: Let's have a look, please, at 5 page 3-7, so I think section 3, page 7 of the prefiled 6 evidence, which shows the cross-section of the Oil City 7 Pool. That is page 7 of section 3. 8 You will see that HE -- we are talking about 9 2-17 -- yes, 2-17-IV, it almost appears to miss the best 10 part of the reef. Is that one of the reasons -- it is 11 at least hard for me to understand whether that well is 12 in a good position. Is that one of the reasons you 13 decided to use it as an observation well? 14 MR. PARDY: I think you just changed wells 15 there. 16 MS LEA: Oh, I'm sorry. 17 What one -- 18 MR. PARDY: It was ME 7-17 of V. 19 MS LEA: 7-17. Okay. 20 So that one you are using as an observation 21 one is the well in the middle? 22 MR. PARDY: Yes. And the 2-17 of IV well, 23 which you referred to, will be our A1 observation well. 24 MS LEA: Okay. Now, I understand. Thank you. 25 Did you use the deliverability from 2-17-IV to 26 assist you in determining what the deliverability of 27 your pool would be? 28 MR. PARDY: We did look at the deliverability 248 UNION GAS PANEL 2, ex (Lea) 1 of -- basically, any deliverability information that was 2 available would be considered, and I think from our 3 analysis the 7-17 of V well was deemed to be more 4 appropriate for a deliverability estimate. 5 MS LEA: Good. Thank you. 6 Now, just the last matter here with respect to 7 wells and geology, I think. You have indicated in 8 several interrogatories that well interference should 9 not be a factor with respect to these wells. Can 10 anybody tell me what the minimum distance between the 11 injection/withdrawal wells is for these pools and how it 12 compares to the minimum distances in Union's other 13 pools, just to understand whether we are closer, farther 14 or average here? 15 MR. PARDY: I think there was an interrogatory 16 that gave those distances, if I can just find it here. 17 MS LEA: Oh, that's right. Yes. 18 Perhaps you can just assist us, then, in 19 finding that one. I think I might have it. 20 --- Pause 21 MS LEA: The attachment to Interrogatory 49 22 gives us the minimum distances. Did you also provide us 23 with a comparison to Union's other pools? 24 MR. EGDEN: Just while we are looking for 25 that, whatever the answer comes out to be on it, it is 26 an answer that is ambiguous at best, simply because the 27 method by which wells have been placed has changed 28 substantially in the last few years. It used to be that 249 UNION GAS PANEL 2, ex (Lea) 1 wells were where they were as the pool went from its 2 production phase into storage. Then we went to a set 3 distance that was based on an assumption that reservoirs 4 were relatively homogeneous. Now, at this point in 5 time, with the increased resolution that we get in 6 mapping the internal characteristics of the reservoir 7 vis-a-vis 3D seismic for the most part we have much more 8 precise targets that we are trying to place the well 9 bores into, and the measurements that have been made on 10 some of the old development designs where wells were 11 further apart, we found that if they were in the target 12 zones in some of these older pool developments that well 13 interference became a non-issue because communication 14 between wells right across the pool is sometimes 15 measured in minutes where we might have been expecting 16 it to be measured in days. 17 So the point becomes almost a moot point. 18 MS LEA: So, as I understand your evidence, 19 then, with the new information and data that you were 20 able to obtain as to the variation in deliverability 21 abilities, if I can put it that way, within the reef, 22 the question of the spacing of wells is not really an 23 issue. 24 MR. EGDEN: That's correct. 25 MS LEA: Thank you. 26 --- Pause 27 MS LEA: There is one matter that has arisen, 28 I think because of the questions brought forward by 250 UNION GAS PANEL 2, ex (Lea) 1 Mr. Feenstra, and I would just like to go back and have 2 a look at the attachment to Interrogatory No. 50, which 3 again shows the designated storage area for the 4 Mandaumin and Bluewater Pools. This isn't actually 5 related to Mr. Feenstra's concerns, but in looking at 6 this interrogatory we think there may be just something 7 that is missing that we need to have. That is IR-50. I 8 think it is one of yours, Mr. Egden, I'm presuming. 9 Have you found it, sir? 10 MR. EGDEN: M'hm. 11 MS LEA: We notice that you have provided the 12 minimum clearance distances for the approach of the 13 maximum extent of the porosity here at the corners of 14 these various areas. The smallest distance of all seems 15 to be right at the bottom on the left-hand side, Lot 3, 16 Concession 1, I guess it's -- no, it's Tract 3? Lot 3. 17 Okay. Thanks. 18 So it is at the bottom there, right where the 19 loop seems to approach the southern boundary. There is 20 no measurement there and it looks like it is the 21 shortest distance of all. Would you be able to provide 22 the distance there between the boundary of the DSA and 23 the maximum extent of the porosity? 24 MR. EGDEN: Yes, I could. I could probably go 25 on the record now, and I'm just eyeballing that. I 26 would say it's something in the order of 25 metres. 27 MS LEA: About 25 metres. 28 MR. EGDEN: Yes. 251 UNION GAS PANEL 2, ex (Lea) 1 MS LEA: I wonder if you could undertake just 2 to get that number for us? I'm presuming it's not 3 difficult for you to get that number. 4 MR. EGDEN: Yes, I can get that number. 5 MS LEA: Thank you very much. We will call 6 that undertaking -- I think we are at 16.4. One moment. 7 So that is giving distance between maximum 8 extent of porosity and proposed boundary at southern end 9 for Interrogatory No. 50. 10 UNDERTAKING NO. 16.4: Mr. Egden to give 11 distance between maximum extent of 12 porosity and proposed boundary at 13 southern end for Interrogatory No. 50 14 MS LEA: These maps are sometimes deceiving, 15 Mr. Egden. I don't know what the degree of exactitude 16 is, so I just was wanting that, please. 17 Turning, then, to proposed facilities and 18 operational questions -- 19 MR. EGDEN: Going back to your question -- 20 MS LEA: Yes, please. 21 MR. EGDEN: -- if you look to IR No. 63. 22 MS LEA: IR No. 63. Let's have a look at 23 that. 24 MR. EGDEN: I stand corrected. 25 MS LEA: Don't we all at some point. 26 MR. EGDEN: My eyeball measurement was out by 27 .2 of a metre. 28 MS LEA: That's pretty good, Mr. Egden. 252 UNION GAS PANEL 2, ex (Lea) 1 Okay. So thank you very much for providing 2 that distance. That is 25.2 metres. 3 You have completed your answer to 4 Undertaking 16.4, thank you. 5 Now turning to proposed facilities and 6 operations, and I would like to deal with the question 7 that has been raised on several occasions, and that is 8 access roads and their preconstruction. 9 Now, I understand that Union entered into 10 agreements with some landowners to preconstruct certain 11 facilities. I gather it was mostly access roads and 12 drilling pads last fall. 13 Because this evidence, at least to me, seems 14 to have changed a little bit with time, or perhaps I 15 don't understand it fully, can you take us through the 16 maps and tell us where any preconstruction occurs? 17 Let's start, if it please you, with the 18 Mandaumin Bluewater Pools. 19 We are looking at section 4, Schedule 5, which 20 is the big map. Unless you have a better one. We will 21 go with whatever you have, but that is what we are 22 looking at. 23 --- Pause 24 MR. PARDY: In the Bluewater Pool -- 25 MS LEA: Yes. 26 MR. PARDY: -- UBW 1, which is a stratigraphic 27 test well, has been drilled and completed. 28 MS LEA: Yes. 253 UNION GAS PANEL 2, ex (Lea) 1 MR. PARDY: In order to drill that well the 2 access road was built. So the Pink Road coming off 3 Churchill going south and into the UBW 1 location, that 4 obviously has been built since the well is drilled. 5 We have also gone ahead and built the access 6 road UBW -- 7 MS LEA: Just one moment. Just one moment. 8 We are making a lot of noise with our maps so the 9 reporter needs to wait until that is done. 10 Please go ahead, yes. 11 MR. PARDY: Would you like me to start over? 12 MS LEA: No, we have heard about UBW 1, it's 13 just UBW 2 we are working on. 14 MR. PARDY: Since then we have also built the 15 access road and I believe the pad to UBW 2, and we have 16 also gone down, I think, to 5-3 of II well, BPS 5-3 of 17 II. So we have built the access roads that we need for 18 the Bluewater Pool. 19 MS LEA: You have built all the access roads 20 you need for Bluewater? 21 MR. PARDY: Yes. 22 MS LEA: Now, have you also built the drilling 23 pad for BPS 5-3 II? 24 MR. PARDY: Subject to check, I would say yes. 25 MS LEA: Okay. I understand that this access 26 road, at least the north/south portion, was an existing 27 farm lane and that you upgraded it. Am I correct? 28 MR. PARDY: Yes. That existing farm lane came 254 UNION GAS PANEL 2, ex (Lea) 1 partially down -- I think at some point it did end and 2 become farm property, but with access to the BPS 5-3 3 of II well. 4 MS LEA: With respect to UBW 1, as it has 5 already been drilled, have you removed the drilling pad 6 and cleaned up the well site? 7 MR. PARDY: I believe that work has been 8 started. I can't say 100 per cent that it has been 9 completed. 10 MS LEA: Okay. Would it be completed this 11 season? I'm just trying to understand. We are now in 12 February, would you complete it this season or would you 13 wait for -- 14 MR. PARDY: If it's not completed it will be 15 completed when the other work is done. 16 MS LEA: When is that work anticipated to be 17 done, following this Board's order? 18 MR. PARDY: Following well drilling. 19 MS LEA: Following well drilling. So that 20 would be probably next summer? 21 MR. PARDY: This summer. 22 MS LEA: Yes, the coming summer. 23 MR. PARDY: Yes. 24 MS LEA: Pardon me. All right. Thank you. 25 Now, for the Mandaumin? 26 MR. PARDY: Yes. For the Mandaumin Pool -- 27 MS LEA: I'm sorry, before I go on to 28 Mandaumin, I think you said yesterday that the property 255 UNION GAS PANEL 2, ex (Lea) 1 owner for the Bluewater facilities, the access roads, 2 consented to the location of all those facilities? 3 MR. PARDY: That's correct. 4 MS LEA: Please go ahead, then, with respect 5 to the Mandaumin Pool. 6 MR. PARDY: With respect to the Mandaumin 7 Pool, Union Mandaumin No. 1 has been drilled on the 8 north side of Churchill Road there off Mandaumin and the 9 access road has been built to that well. 10 MS LEA: Okay. So that access road comes 11 off -- this is Mandaumin Road? 12 MR. PARDY: Yes, Mandaumin Sideroad. 13 MS LEA: And goes west and then turns north? 14 MR. PARDY: That's correct. 15 MS LEA: Okay, so that has been constructed. 16 Yes? 17 MR. PARDY: The access Road for Union 18 Mandaumin No. 4 coming south of Churchill Road, jogging 19 east and continuing south to the Union Mandaumin 4 well. 20 That has been built. 21 MS LEA: Does that go through the bush or does 22 it go around it? 23 MR. PARDY: It goes around the bush. 24 MS LEA: Yes, I couldn't quite tell. There 25 seems to be some marking through the bush, I didn't know 26 what it was. 27 MR. PARDY: No, it isn't. 28 MS LEA: So you are saying that the access 256 UNION GAS PANEL 2, ex (Lea) 1 road to UMD 5 and UMD 4 has been constructed? 2 MR. PARDY: The access road to UMD 4 has been 3 constructed and obviously UMD 5 is pretty much on the 4 access road. 5 MS LEA: Okay. Thank you. 6 What about the pads for each of these two? 7 MR. PARDY: No, the pads for UMD 5 -- 8 obviously the one for UMD 4 has been constructed because 9 we have drilled the well. UMD 5 has not been 10 constructed because we just picked the location last 11 week. 12 MS LEA: Right. Okay. 13 So UMD 1 and 4, obviously the wells aren't 14 moving, you are merely upgrading No. 4. 15 MR. PARDY: Correct. 16 MS LEA: Okay. For UMD 4 and 1 then, since 17 these wells have been drilled, have those drilling pads 18 been removed and the area restored? 19 MR. PARDY: UMD 4 has not been removed because 20 we will be doing more work there, so we will be 21 utilizing that drill pad again. 22 UMD 1, I believe some work has been done, 23 because I know there is some -- the gravel that is piled 24 there, and we will use that to build, for instance, 25 UMD 6. 26 So some of it has started. It's not 27 completed. 28 MS LEA: All right. What landowner was 257 UNION GAS PANEL 2, ex (Lea) 1 affected by these access roads and the drilling pad? 2 Was it merely Kember Farms or was it also Mr. McCrie -- 3 or the McCrie property, pardon me, to the right? 4 MR. PARDY: Kember Farms, the well is on his 5 property and the access road is on his property. 6 I do believe that the drilling pad goes across 7 both lands. 8 MS LEA: Did you obtain the consent of these 9 landowners before proceeding to do this construction? 10 MR. PARDY: Yes. 11 MS LEA: For both landowners? 12 MR. PARDY: That's my understanding, yes. 13 MS LEA: Turning back up, then, to UMD 1 14 and 6, you have said that the access road to UMD 1 has 15 been constructed, UMD 6 is on the way. What about 16 UMD 2, the access road to that? 17 MR. PARDY: That has not been constructed. 18 MS LEA: And drill pads for 6 and 2, not yet 19 done? 20 MR. PARDY: Correct. 21 MS LEA: What about UMD 3? 22 MR. PARDY: That has also not been 23 constructed. 24 MS LEA: Okay. Thank you. 25 The Rawlings property, did the landowners 26 there consent to the locations of those facilities 27 before you began your work? 28 MR. PARDY: Yes, they had. 258 UNION GAS PANEL 2, ex (Lea) 1 MS LEA: One moment, please. 2 All right. Let's then move, thank you, to the 3 Oil City Pools. 4 THE PRESIDING MEMBER: Excuse me, if I could 5 just ask a question before we leave this. 6 Can you show me on the map that is schedule -- 7 the one we have been looking at, in any event. 8 UMD 5, the location is changing. Can you help 9 me as to -- 10 MR. PARDY: This is the revised location. It 11 was in a different location before. It was a little 12 further west and a little further south. 13 THE PRESIDING MEMBER: South. Okay, thank 14 you. 15 MS LEA: Change to the Oil City Pool map, 16 please. 17 --- Pause 18 MS LEA: Could you assist us then with what 19 preconstruction has been completed in the Oil City Pool 20 area? 21 MR. PARDY: The Union Oil City No. 1 well, 22 which is the stratigraphic test well, has been drilled 23 and the access road to that well has been built, so 24 coming off of Highway 80 going north on the abandoned 25 railway there and heading east. That all has been 26 built. 27 The access roads to Union Oil City No. 2 and 28 717 of 5 has also been built, going north up Highway 8. 259 UNION GAS PANEL 2, ex (Lea) 1 MS LEA: But not the drills pads yet. 2 MR. PARDY: I believe the drill pads have been 3 done. 4 MS LEA: Have been done. 5 MR. PARDY: Yes. 6 MS LEA: Has UOC No. 1 drill pad been removed, 7 the site cleaned up yet? 8 MR. PARDY: I believe the drill pad has been 9 removed. I would think the cleanup would continue until 10 the land dries. 11 MS LEA: Okay. Did you receive the consent of 12 the landowner for this construction? 13 MR. PARDY: Yes, we did. 14 MS LEA: Now, is it common practice for Union 15 to preconstruct these facilities prior to an application 16 being reviewed by the Board? 17 MR. PARDY: I think in the case where we have 18 drilled the stratigraphic test wells, obviously we would 19 want to build our access roads and pads to prevent any 20 damage to the landowner property. Depending on the time 21 of our hearings and when our construction will be, that 22 work may be done upfront and the reason would be we want 23 to build the roads in the best field conditions to do 24 it. If we get out there in a time when the fields are 25 thawed and everything is wet and muddy, we don't want to 26 have to be building roads in those conditions. 27 From the land standpoint, the best time to 28 build it is when the field is in the best condition to 260 UNION GAS PANEL 2, ex (Lea) 1 do it, so when it's dry. For those reasons, it's best 2 to have it done upfront. 3 MS LEA: I would presume that if the Board 4 decided not to approve this application, it would be 5 Union's shareholder who would bear the cost of that 6 preconstruction and not its ratepayers. Am I right? 7 MR. PARDY: That's my understanding. 8 MS LEA: Now, if the Board decided not to 9 approve these applications or not to approve all of 10 them, would you be able to remove the roads and the 11 drill pads if you were requested to do so by the 12 landowner? 13 MR. PARDY: Yes. I think any cleanup that we 14 do in reducing the size of the drill pads would be the 15 same as -- we could do the same thing and remove the 16 whole thing if that was the case. 17 MS LEA: Would you believe that you were 18 obligated to do so if there was a failure to approve an 19 application and the landowner requested this removal? 20 MR. PARDY: I would think so, yes. 21 MS LEA: Okay. You say "I would think so". 22 You haven't had to do it yet? 23 MR. PARDY: Exactly. 24 MS LEA: Okay. Now, you explained at the 25 technical conference that access roads are constructed 26 on geotextile fabric like drilling pads. Is that the 27 approach that you took with the access roads here? 28 MR. PARDY: Yes, that's correct. 261 UNION GAS PANEL 2, ex (Lea) 1 MS LEA: Does that include the access road 2 that was originally a farm lane or was that improved in 3 some other fashion? 4 MR. PARDY: All of our access roads are built 5 the same. The ones that were prebuilt and the ones that 6 we still have to build will be built to the same 7 specification. 8 MS LEA: So you are able to remove the gravel 9 or aggregate that you put down using this fabric. 10 MR. PARDY: Yes, but the fabric is underneath 11 the gravel in all cases. 12 MS LEA: Underneath. Okay. Now, what about 13 returning the area occupied by these access roads to its 14 original condition? Do you strip the topsoil? What 15 about soil compaction under the roads? Heavy machinery 16 passes across them. What happens there? 17 MR. PARDY: When we build our access roads, 18 the topsoil is stripped if it's on agricultural land and 19 that is stockpiled, I guess. If we were to reduce it, 20 it could go back there again. As far as compaction, we 21 would deal with that the same way we would deal with it 22 in reducing the size of the drill pads and any other 23 work that we would be doing on the field. 24 MS LEA: I understood that the topsoil that 25 was taken from the top of access roads that the 26 landowner had the option to take that use it and 27 elsewhere on his property. Are you aware of that? 28 MR. PARDY: Yes. I think we do give them that 262 UNION GAS PANEL 2, ex (Lea) 1 option. 2 MS LEA: And if that option was taken up by 3 the landowner and then you had to restore the access 4 road, would you bring in topsoil to do that? 5 MS LEA: I am pretty sure we would leave the 6 landowner whole whatever it took. I mean if we had to 7 bring in topsoil, we would bring in topsoil, yes. 8 MS LEA: Is there someone else in the company 9 who deals with these sorts of restoration matters that I 10 should ask about that because in theory the landowner 11 has already taken the topsoil. I don't know whether you 12 would be bringing in any more. 13 MR. PARDY: I'm not sure they have taken it 14 but, yes, I would think the land people -- 15 MR. LESLIE: Members of what will be the last 16 panel -- 17 MS LEA: The last panel, okay. 18 MR. LESLIE: -- will be able to deal with 19 that, specifically Mr. Payne and Mr. Wachsmuth. 20 MS LEA: Thank you very much. Just one 21 moment, please. I'm just trying to figure out what the 22 cost of the preconstruction of these facilities was. We 23 came up with a figure of about $212,000. I will tell 24 you how we got there. 25 We added up the cost for the wells that have 26 been predrilled, as we understood it from interrogatory 27 No. 86, as $252,000. Then we deducted restoration costs 28 of $5,000 per well, which was $40,000, so we assumed 263 UNION GAS PANEL 2, ex (Lea) 1 preconstruction was about $212,000. Can you assist us 2 as to what the cost of the preconstruction has been? 3 MR. PARDY: I don't have any exact numbers as 4 to what we have spent for those. I would say that 5 that's a very good estimate, and that's preconstruction 6 with respect to building roads and access pads and that 7 does not include the cost of the stratigraphic test 8 well. 9 MS LEA: So that doesn't include the cost of 10 the drilling of any wells you have already drilled. 11 MR. PARDY: Correct. Those costs are 12 included. Cost estimates are included in the evidence 13 also. 14 MS LEA: Do you know how much it would cost 15 Union to remove these access roads and other 16 preconstructed facilities if that became necessary? 17 MR. PARDY: No, I don't have those exact 18 numbers. 19 MS LEA: Okay. You said you did not have the 20 exact numbers. Do you have a best guess? As you say, 21 you may not have experienced this before, so you may not 22 know, but can you give me an estimate? You can 23 undertake to do that if you prefer or think about it for 24 a while. 25 MR. PARDY: I would say half the cost that it 26 cost to put them there it would cost to take them away. 27 So if they cost $40,000 to put it there, I think it's 28 fair to assume that it would cost $20,000 to take it 264 UNION GAS PANEL 2, ex (Lea) 1 away. A lot of the cost is in labour. 2 MS LEA: Okay. Thank you. 3 MR. PARDY: That's my best guess. 4 MS LEA: One moment please. Madam Chair, I 5 have three more topics to deal with this panel. Each of 6 them are not very long. I didn't know whether you 7 wanted to take a break or for me to keep going for a 8 while. 9 THE PRESIDING MEMBER: How long do you think 10 you will be for these two topics? 11 MS LEA: There are three topics. 12 THE PRESIDING MEMBER: Three topics. Sorry. 13 MS LEA: It's hard to say. Maybe another 45 14 minutes in total. 15 THE PRESIDING MEMBER: In which case I think 16 now might be an appropriate time to take a break. We 17 will be back in 15 minutes. 18 --- Upon recessing at 1035 19 --- Upon resuming at 1055 20 THE PRESIDING MEMBER: Ms Lea, would you like 21 to continue. 22 MS LEA: Yes. Thank you. 23 A few questions, please, about the drilling 24 schedule and construction schedule. You filed 25 undertaking No. 7 after the technical conference, giving 26 us a revised construction schedule. Thank you. 27 I gather from that evidence that you are 28 intending to complete drilling by July 15, 2000, rather 265 UNION GAS PANEL 2, ex (Lea) 1 than October 1, 2000. Is that right? 2 MR. PARDY: Based on the information that we 3 had at that time, that was our plan. 4 MS LEA: Tell us more about that. 5 MR. PARDY: I would think the revised schedule 6 that we have come out with and in light of what we think 7 is going to be realistic timing of when we can start, we 8 have decided that in the Mandaumin pool and we use all 9 rotary joints, our anticipated date for completion of 10 well drilling is in the June 15 timeframe. 11 MS LEA: So it's even sooner. 12 MR. PARDY: Yes. 13 MS LEA: Are you starting earlier or are you 14 just doing it faster? 15 MR. PARDY: Our estimated start date is April 16 17. April 17 is a Monday as opposed to the fifteenth. 17 MS LEA: I think we heard yesterday that there 18 is at least one well that you are cable tool drilling. 19 Am I right? 20 MR. PARDY: Yes. Our plan is still in the Oil 21 City Pool to drill that well with cable tool and in the 22 Mandaumin pool to drill that with cable tool. Sorry, in 23 the Bluewater pool. We will drill that with cable tool. 24 MS LEA: Okay. Now, you have indicated in the 25 undertaking that three cable tool and one rotary drill 26 will be required. Has that changed now? 27 MR. PARDY: Yes. 28 MS LEA: And what is the status now? 266 UNION GAS PANEL 2, ex (Lea) 1 MR. PARDY: Our plan right now is to use two 2 rotary drilling rigs in the Mandaumin Pool. There would 3 also be a cable tool rig required to set surface casing 4 in those cases and then there will be a cable tool rig 5 in the Bluewater Pool and a cable tool rig in the Oil 6 City Pool. That is a total of three cable tool rigs and 7 two rotary rigs. 8 Now, there is also some workovers and 9 abandonment that need to be done. So depending on how 10 the scheduling of all that works out there may be a 11 requirement for a workover rig there too and that may 12 be -- that is probably likely the cable tool rig. 13 MS LEA: As at the time of the undertaking you 14 indicated that the drilling costs would increase by 15 about $200,000. Now, that you are going to be using two 16 rotary rigs, have the drilling costs increased further? 17 MR. PARDY: I think in the addendum the 18 revised drilling costs are there and there is a total 19 increase of $618,000 with all the changes that we have 20 made. 21 MS LEA: All right. So that is still current 22 then? 23 MR. PARDY: Yes. 24 MS LEA: Okay. Good. One moment. 25 I am just going through some questions that I 26 had earlier and I think they have been explained by 27 earlier evidence. Yes. 28 Now, Mr. Egden, I seem to recall -- we recall 267 UNION GAS PANEL 2, ex (Lea) 1 some of the Century Pools I, I think it was that case, 2 that you said that cable tool drilling was less damaging 3 to the formations, that is the subsurface formations, 4 because it did not rely on high pressure drilling mud. 5 Can you comment on the use of two rotary drills here? 6 Are you still of the view that the cable tool rig is 7 less damaging? And if yes, how do we justify the use of 8 rotary drills in this circumstance? 9 MR. EGDEN: Well, it would be important not to 10 take my comments from Phase I out of context. There is 11 a difference between damage and irreparable damage. 12 The condition that the rocks are in after the 13 drilling is completed with a rotary rig is something 14 that can be restored with standard well treatments 15 afterwards. So there is damage, but it is damage that 16 can be -- that can be repaired. 17 MR. PARDY: I think it is important to note 18 too the drilling fluid that will be used in either case. 19 So the drilling fluid that is used in rotary drilling 20 means we can drill with air, we can drill with gas, we 21 can drill with foam, we can drill with brine. So there 22 is a lot of options there and those haven't been nailed 23 down yet exactly how we will drill each well. So those 24 things will have an impact on the amount of damage that 25 you do too. 26 MR. EGDEN: Further to that, in Phase I when I 27 was being asked about the rotary drilling, the nature of 28 the target and the expected manner in which the gas 268 UNION GAS PANEL 2, ex (Lea) 1 would be coming into the wellbore is substantially 2 different from what we are expecting in Mandaumin. And 3 again, as I say, it is very critical not to take my 4 comments out of context. Taking my comments with 5 regards to the Bentpath East Pool where we were looking 6 at a high deliverability, a possibly factured part of 7 the reef and comparing that to what we are expecting at 8 Mandaumin would be comparing apples to oranges; not an 9 apple to apple comparison. 10 MS LEA: Can I ask you where -- are you 11 drilling several vertical wells using a rotary drill 12 rig? 13 MR. PARDY: Yes. 14 MS LEA: And is that because of the desire to 15 drill more quickly? 16 MR. PARDY: That is a timing issue. The 17 reason we are doing that we would like to get two of the 18 vertical wells drilled before we start our horizontal 19 wells and that will give us an opportunity to gain more 20 information about the reef before we jump into the 21 horizontal drilling. 22 MS LEA: Thank you. Now, other than the 23 drilling costs which is the 618,000 -- $618.6 thousand 24 increase that we have already talked about, are there 25 other constructions costs that will be increased as a 26 result of the desire to complete this drilling program 27 quickly and use two rotary rigs besides the drilling 28 cost of 618.6.? 269 UNION GAS PANEL 2, ex (Lea) 1 MR. PARDY: All the costs associated with 2 drilling have been captured in that $618,000. 3 MS LEA: And there aren't other costs such as 4 remediation or access road costs that are increasing as 5 a result of these factors? 6 MR. PARDY: No. 7 MR. LESLIE: Thank you. I would like to turn 8 for a moment then to the issue of the abandonment of 9 facilities. And this is a matter brought to our 10 attention in part by the evidence of the Lambton County 11 Storage Association and also what we have heard from 12 landowners here in Sarnia. 13 Can you tell me what Union's procedure is with 14 respect to the abandonment of facilities, and that is 15 either pipelines or wells? 16 MR. PARDY: I can speak to the well side of 17 that. I think in this application we proposed to 18 abandon two wells. 19 MS LEA: Where are they? 20 MR. PARDY: There is a well in the Mandaumin 21 Pool. In the addendum, I guess in schedule A there 22 again -- 23 MS LEA: Yes. 24 MR. PARDY: -- IU 36-1-I well will be 25 abandoned as a part of this project. And also in the 26 Oil City Pool the 1-16 of IV well will be abandoned as a 27 part of this project. 28 MS LEA: Are those wells that Union originally 270 UNION GAS PANEL 2, ex (Lea) 1 drilled? 2 MR. EGDEN: We were not the operator of those 3 wells when they were originally drilled. 4 MS LEA: Okay. Thanks. But you are 5 performing the abandonment procedures on them now? 6 MR. PARDY: Yes, we are. 7 MS LEA: What do you do to abandon a well? 8 MR. PARDY: To abandon a well basically -- I 9 mean there is regulations set forth by the Ministry of 10 Natural Resources on what we have to do and basically we 11 have to provide isolation between all the zones down 12 below the ground. So if we got a gas zone, we have 13 water zones, the Detroit River is there which is kind of 14 murky water, a blackish water. So we would have to 15 provide isolation by using setting plugs of all those 16 zones. And if there is any casing in the hole, we would 17 have to ensure that there is isolation behind that 18 casing also. 19 MS LEA: And what about the surface facilities 20 with respect to an abandoned well, what is done about 21 the surface? 22 MR. PARDY: When -- once all the plugs are set 23 and we have tested that there is no gas or nothing -- 24 nothing leaking, we would cut off the well head and 25 casing, remove the well head, cut off the casing, I'm 26 not sure of the exact measurement, one to two metres 27 below surface level so there will be nothing left on the 28 surface. 271 UNION GAS PANEL 2, ex (Lea) 1 MS LEA: And what do you do to plug the top of 2 that well? 3 MR. PARDY: The well would be plugged from 4 bottom to top basically. I'm not sure what you mean by 5 it. We do put a cap on there and we do -- it is our 6 practice to put a valve there also. So that if there 7 was ever anything leaking as you can imagine if you 8 didn't put a valve on, you would be cutting into gas 9 that is under pressure and it wouldn't be very easy to 10 do that. So we do put a valve there. If in the future 11 there was a leak or something, we do have the option of 12 bleeding that gas off and then going in and doing any 13 remedial work. 14 MS LEA: And going in and sorry? 15 MR. PARDY: Doing any remedial work that would 16 be required. 17 MS LEA: Okay. Thank you. 18 MR. PARDY: And we don't anticipate that. 19 MS LEA: The reason I ask, of course, is that 20 we heard some fairly questionable plugging practices 21 talked about in terms of the historical remediation of 22 wells. Now, is there a hole left in the ground or do 23 you fill in where the well was? What do you do about 24 that? 25 MR. PARDY: After the casing is cut off, the 26 ground will be basically filled in again and from a 27 surface standpoint it will be restored back to farmland. 28 MS LEA: Now, who can help me with respect to 272 UNION GAS PANEL 2, ex (Lea) 1 the abandonment of pipelines? Is it someone on this 2 panel or would it be Panel No. 4? 3 MR. PARDY: I believe Mr. Mallette can address 4 that. 5 MS LEA: Mr. Mallette and he will be back in 6 Panel No. 4? Thank you. 7 Just keeping with wells then for the moment, I 8 wonder if someone, and I don't know whether it is 9 yourself or Mr. Leslie can help me with respect to part 10 of the agreement with the Lambton County Storage 11 Association. On page 8 there is a section entitled 12 "Abandonment." And at page 8, did we give an exhibit 13 number to this? 14 MR. LESLIE: It is 11.2, I believe. 15 MR. LESLIE: Thank you very much. The 16 Schedule, the resolved issue, 11.2. 17 Page 8, then, of Exhibit 11.2, there is a 18 section there labelled "Abandonment". What is the 19 C.C.L.? The C.C.L, what is that? 20 MR. LESLIE: Sorry. That is an acronym for 21 Construction Commitment Letter. And I propose to file 22 that with the Board as part of my examination-in-chief 23 of the next panel. 24 MS LEA: Thank you. 25 MR. LESLIE: And the intent of that document, 26 just to complete the story for now, is to give 27 landowners whose property will be affected by the 28 storage construction assurances with respect to 273 UNION GAS PANEL 2, ex (Lea) 1 construction practices on their lands. 2 MS LEA: Thank you. That's helpful. 3 Mr. Pardy, I'm just going to read to you a 4 brief bit of this and ask you if you believe that you 5 can comply with this. It reads: 6 "Union will revise the C.C.L. to provide 7 that upon the abandonment of any 8 pipelines, wells..." (As read) 9 Et cetera, and I'm asking you to speak to 10 wells, obviously: 11 "...the affected lands shall be returned 12 as close as possible to its prior use and 13 condition and so far as it is possible 14 with no tangible changes in appearance or 15 productivity." (As read) 16 Do you think you can comply with that 17 condition with respect to wells? 18 MR. PARDY: Yes, that sounds reasonable. 19 MS LEA: Thank you. 20 MR. PARDY: I would think with respect to 21 that, too, we would restore the land to what is being 22 used for now because some of these wells were drilled 23 back in the twenties, thirties, forties, so what it was 24 used for then may be different than what it is used for 25 now. So it is not necessarily a prior use but -- 26 MS LEA: You would consult the landowner about 27 what -- 28 MR. PARDY: Yes. We would restore it to what 274 UNION GAS PANEL 2, ex (Lea) 1 is there now. 2 MS LEA: Okay. 3 MR. PARDY: If it is in the middle of a farm 4 we will make it farmland. 5 MS LEA: Thank you. 6 With respect to access roads, I think you have 7 already indicated that you would return those to the 8 original condition. With respect to what I have read 9 out to you, that would also apply to access roads? 10 MR. PARDY: That's correct. 11 MS LEA: Thank you. 12 You say that you are going to abandon some 13 wells here. Do you have an abandonment plan or an 14 abandonment policy within the company? 15 MR. PARDY: We would develop a program for 16 each well to be abandoned using the MNR regulations. 17 Obviously, it is our desire to do it right the first 18 time because the second time it costs a lot more money. 19 MS LEA: Okay. So will you be developing a 20 company policy or will you merely be developing a plan 21 for each of these wells? 22 MR. PARDY: As in the past, what we have 23 done -- this is not, obviously, our first well that we 24 have every abandoned. There was some abandonments as a 25 part of Phase I and over time we have abandoned wells. 26 There is an individual program design for each well. 27 And I should note that an inspector, that an MNR -- it 28 is not an MNR inspector, it has to be an approved -- 275 UNION GAS PANEL 2, ex (Lea) 1 examiner, I'm sorry, is the word I'm looking for, by the 2 MNR to do these abandonments, and Union has two of our 3 field supervisors that have certifications to do these 4 abandonments, so they would be certified by the MNR to 5 develop these programs. The programs will be developed, 6 the wells abandoned, the information is sent to the MNR 7 and it would be their option -- if they felt that we 8 didn't do something up to specifications they would 9 force us to go back and fix it. 10 MS LEA: Now, I think that you participated -- 11 not you personally, but Union participated on a 12 technical advisory committee that was convened by the 13 former Fuels Safety Branch of the Ministry of Consumer 14 and Commercial Affairs, which is now the Technical 15 Standards and Safety Authority, and there was developed 16 from that a pipelines abandonment checklist. Are you 17 familiar with that? 18 MR. PARDY: No, I'm not. 19 MS LEA: Okay. 20 We have some copies here. I'm sorry that I 21 didn't provide this to you in advance. I should have 22 done this. You might want to have a look at this. If 23 you don't want to deal with it now, I would be happy to 24 give you some time to do that. 25 MR. LESLIE: Ms Lea, it may not make any 26 difference to you, but I think Mr. Mallette is more 27 familiar with the pipeline procedures, if this is -- 28 MS LEA: Okay. So if it is a pipelines 276 UNION GAS PANEL 2, ex (Lea) 1 checklist and it doesn't include wells, then perhaps we 2 should wait for Mr. Mallette. 3 Just one moment. 4 --- Pause 5 MS LEA: Then let's leave it for Mr. Mallette 6 and perhaps he can have a look at it at his leisure. 7 I think I will wait to assign it an exhibit 8 number until we determine if Mr. Mallette has any 9 knowledge or recollection of it at all. 10 Okay. One moment, please. 11 --- Pause 12 MS LEA: I gather that Union Gas has to post a 13 bond with the Ministry of Natural Resources to cover the 14 possible cost of plugging wells, just in case it 15 abandons a well without plugging it according to a 16 standard. Am I correct? 17 MR. PARDY: That's correct. 18 MS LEA: What is the amount of that bond? 19 MR. PARDY: If I can refer you to the drilling 20 licence. 21 MS LEA: The drilling licence. Yes. Where do 22 I find that in the evidence? 23 MR. PARDY: If you look at section 3, 24 Schedule 13, which is the licence for Union Oil City 25 No. 2 -- 26 MS LEA: Okay. 27 MR. PARDY: -- point No. 9 on their well 28 securities gives the information on our trustee and our 277 UNION GAS PANEL 2, ex (Lea) 1 current balance, as far as the bond that we had to post. 2 MS LEA: Okay. 3 Is the balance set by a certain amount per 4 well or something? 5 MR. PARDY: In this case, we have a $70,000 6 maximum, so -- 7 MS LEA: That was $70,000? 8 MR. PARDY: Yes. The current balance was 9 $70,000 that we have in trust. That is the maximum that 10 is required by the Ministry of Natural Resources. 11 MS LEA: No matter how many wells you may be 12 operating -- 13 MR. PARDY: That's correct. 14 MS LEA: -- $70,000 is the maximum? 15 MR. PARDY: Yes. 16 MS LEA: And do you know what it costs to plug 17 a well on average? 18 MR. PARDY: I would say somewhere between five 19 and $15,000. 20 MS LEA: Five to $15,000. 21 So if Union was derelict in its duty, the 22 ministry would be able to plug about five wells? 23 MR. PARDY: I think that would assume Union 24 Gas didn't exist any more. 25 --- Laughter 26 MS LEA: Okay. Thank you. Not to assume you 27 would be derelict. 28 Another matter that was raised with respect to 278 UNION GAS PANEL 2, ex (Lea) 1 this abandonment issue was some comments raised in the 2 Lambton County Storage Association's evidence and also 3 today about the zone pool. Does anyone on this panel 4 have any knowledge of what that is all about and whether 5 Union has any responsibility now for that facility? 6 You may not know, I don't know, but -- 7 MR. PARDY: No, we had no -- 8 MR. LESLIE: Ms Lea, I believe that that is -- 9 it's not a storage facility, it's a production facility 10 that is being discussed there. It's not a storage -- 11 the problems that are being discussed don't relate to 12 storage facilities but rather to production facilities. 13 MS LEA: Okay. I understood that the zone was 14 still a designated gas storage area and that Union held 15 the authorization to inject, store and withdraw 16 because -- it is not that Union may not still be active 17 but that the authority still exists on the record for 18 Union to do that. 19 MR. LESLIE: That may well be, but I think, 20 and we can confirm this, that the facilities that were 21 subject to comment are: one, production facilities, 22 and, two, I'm being told we no longer have the right to 23 inject or withdraw. 24 MS LEA: Okay. 25 I wonder perhaps, because this issue has been 26 raised, if you could just undertake to have someone let 27 us know what the status is with respect to that. The 28 real interest that I have here is does Union have any 279 UNION GAS PANEL 2, ex (Lea) 1 responsibility if it is still using those wells, if that 2 would be agreeable. If you could confirm your 3 understanding. 4 MR. LESLIE: Yes. 5 MS LEA: That would be Undertaking 16.5 6 UNDERTAKING NO. 16.5: Someone from Union 7 Gas to advise of Union's operating 8 authority and responsibility for wells in 9 the zone pool 10 MS LEA: And the Undertaking 16.5 is to 11 explain Union's operating authority and responsibility 12 for wells in the zone pool. 13 Just one moment. 14 Now, Mr. Pardy, as we suggested, I think, in 15 the technical conference, Board staff is interested in 16 the development of a policy by Union which would address 17 appropriate abandonment procedures for both pipelines 18 and for wells. With respect to wells, do you know if 19 Union would object to developing a company policy in 20 this regard, not as a condition of approval on this 21 project but something that the Board could review once 22 that policy has been completed, for example, within a 23 year? 24 MR. LESLIE: Ms Lea, if I can interject? I 25 mean, I'm listening. 26 MS LEA: Yes. 27 MR. LESLIE: The witness has said that they 28 comply with all the MNR requirements in this regard, 280 UNION GAS PANEL 2, ex (Lea) 1 that they have licensed examiners to oversee the work. 2 Frankly, I'm at a little bit of a loss as to how this 3 policy would amplify what is already in place. If you 4 have something specific in mind, maybe we could talk 5 about it, but it seems to me they did have a policy and 6 that there is no reason to believe that it isn't 7 effective. 8 So I don't know what more it is you are 9 looking for there. 10 MS LEA: I guess what I was thinking of, and 11 maybe someone can assist me -- maybe this already 12 exists -- is, somewhere, how is it written down that you 13 deal with the abandonment of facilities, in other words, 14 "We go to the MNR and we get the right inspectors and we 15 restore the lands"? Part of this may be covered by your 16 agreement with the Lambton County Storage Association. 17 It's more -- 18 MR. LESLIE: No. This pre-exists that. 19 MS LEA: Okay. 20 Is there a documentation of the steps that 21 Union follows and an undertaking that they restore the 22 land to its original condition and that facilities are 23 safely abandoned? That may exist I don't know. Perhaps 24 you could inquire? 25 MR. LESLIE: Yes. Certainly. 26 MS LEA: Thank you. 27 Perhaps, then, we will just make -- just so I 28 don't forget to ask again -- that Undertaking 16.6, to 281 UNION GAS PANEL 2, ex (Lea) 1 inquire into -- 2 MR. PARDY: I think the Oil and Gas Resources 3 Trust Act pretty much sets out what we have to do and 4 what our obligations are with respect to the law. 5 MS LEA: Right. 6 MR. PARDY: And we are professional engineers, 7 so we are obligated to follow that. 8 MS LEA: It is not so much that I doubt your 9 ability, willingness, capability or commitment to follow 10 that, it is just that if I were a landowner in one of 11 these pools and I said to Union, "Can you show me what 12 you do if you ever abandon these facilities", it would 13 be nice to have a document saying, "This Act governs 14 what we shall do here and we are going to follow this 15 Act, and then this is going to happen, this is going to 16 happen, and this is going to happen." 17 It is not that I want you to change the 18 procedures, it is merely to document them. 19 MR. PARDY: I guess in that case we would give 20 them the Act, "This is what we are going to do." 21 MS LEA: I don't know how helpful that would 22 be to folk who are not used to reading legislation. 23 In any event, I think you are willing to 24 undertake to inquire as to whether such a policy exists, 25 and perhaps you can let us know what your views are as 26 to whether there should be such a policy. 27 MR. EGDEN: That Act is a fairly easy to read 28 document. It was written specifically with that type of 282 UNION GAS PANEL 2, ex (Lea) 1 intention in mind. It is not a huge document. It is 2 something that my own kids could read and have some idea 3 as to what was going on with it. I'm just pointing that 4 out for clarity on this. 5 MS LEA: Does it deal only with wells, that 6 particular piece of legislation? 7 MR. EGDEN: Fuelling of wells, abandonment of 8 wells, production. It's fairly -- 9 MS LEA: Okay. So it may be, then, that a 10 reference to that Act will be sufficient in terms of 11 well abandonment, as long as that is provided also. We 12 would have to find out more about pipelines, and I 13 gather Mr. Mallette, the witness is going to deal with 14 that. 15 UNDERTAKING NO. 16.6: Union Gas to 16 submit a reference to the Act and 17 documented procedures to be followed in 18 terms of well abandonment 19 MS LEA: My last issue with respect to this 20 panel, I believe -- no. Pardon me. I have a couple of 21 little things. 22 You are probably aware that CanEnerco Limited 23 has an application before the Board for a designation of 24 the Sarnia Airport Pool. Are you aware of that? 25 MR. PARDY: Yes, we are. 26 MS LEA: Okay. Is this is the panel to ask 27 about the lines that might be suitable for service of 28 CanEnerco's needs here? 283 UNION GAS PANEL 2, ex (Lea) 1 MR. MARUSIC: Yes, it is. 2 MS LEA: Thank you, Mr. Marusic. 3 When do you anticipate that discussions will 4 commence -- in fact, they have commenced -- with 5 CanEnerco, concerning the deliverability requirements 6 from Union's system to service Sarnia Airport Pool? 7 MR. MARUSIC: Union has been in discussion 8 with CanEnerco, concerning the Airport Pool, since 9 approximately last summer. 10 MS LEA: Yes? 11 MR. MARUSIC: And those negotiations, or 12 discussions, continue presently. 13 MS LEA: Have you built into the facilities on 14 the Mandaumin at Bluewater NCS-16 pipeline enough 15 capacity to deal with the Sarnia Airport volume? 16 MR. MARUSIC: No changes to the facilities 17 design for the Century Phase II Project have been 18 undertaken as a result of the discussions with 19 CanEnerco. 20 MS LEA: Can you help me a little bit further 21 with that answer. 22 What diameter line did you need merely to 23 serve Union's needs? 24 MR. MARUSIC: Sixteen-inch. 25 MS LEA: How much space -- forgetting about 26 CanEnerco's volumes, for the moment -- how much space, 27 or capacity, in addition to what you need immediately, 28 would there be in that pipeline? 284 UNION GAS PANEL 2, ex (Lea) 1 MR. MARUSIC: I don't have that information at 2 hand. 3 MS LEA: Could you not have used a 12-inch 4 line? 5 MR. MARUSIC: No, we could not have. 6 MS LEA: How much extra capacity would you 7 need above and beyond what a 12-inch line can provide? 8 MR. MARUSIC: I don't know. 9 MS LEA: Well, can you find out? It's just 10 that I mean you are telling me that Union is 16-inch 11 line, and I don't disbelieve you, but I'm not getting 12 much understanding as to why, you know, how much more do 13 you need than a 12-inch line can provide. 14 MR. MARUSIC: Sure. We can undertake to do 15 that. 16 I would just like to add, if I can -- 17 MS LEA: Just one moment. Mr. Mackie is 18 telling me something that may assist and not require 19 that undertaking. Just a moment. 20 MR. MARUSIC: Okay. 21 MS LEA: Thanks. 22 --- Pause 23 MS LEA: Thank you. I think that Mr. Mackie 24 has assisted us there. Forgetting about the 25 undertaking, for the moment -- he indicates that it's 26 his understanding that there's no incremental pipeline 27 capacity needed to serve the CanEnerco lines but there 28 might be additional compression required. 285 UNION GAS PANEL 2, ex (Lea) 1 Do you know if that's the case? 2 MR. MARUSIC: A detailed facilities design 3 hasn't been completed to incorporate the Sarnia Airport 4 Pool volumes. We are working on that right now. 5 Compression is an option that we are 6 considering. As well as incremental pipeline 7 facilities. 8 MS LEA: Where would those pipeline facilities 9 run if they were going to be constructed? 10 MR. MARUSIC: We are contemplating an 11 extension of this 16-inch line that's proposed in this 12 application, from the Dawn 156 compressor station back 13 to the Dawn compressor station. 14 And, again, I would just like to say that 15 these are very preliminary results. We haven't 16 finalized a design. We are still looking at various 17 options. 18 MS LEA: Okay. So, in terms, then, of what 19 this Board is approving for this case, has there been 20 any consideration given to accommodate in the CanEnerco 21 volumes in the facilities that you are proposing before 22 the Board in this case? 23 MR. MARUSIC: We have not changed the 24 facilities of the Phase II project as a result of us 25 becoming aware of CanEnerco's Airport Project. 26 MS LEA: You are saying that with or without 27 the CanEnerco Airport Project the facilities that you 28 propose would be the same? 286 UNION GAS PANEL 2, ex (Lea) 1 MR. MARUSIC: That's correct. 2 MS LEA: Do you know when you will be making 3 the decision as to what facilities might be appropriate 4 for that Airport Project? 5 MR. MARUSIC: I would expect those to be 6 completed sometime during calendar 2000. 7 MS LEA: I guess you can understand the 8 reasons for my questions. There's a couple of issues 9 here: If you have included any incremental facilities, 10 we want, perhaps, to disaggregate those costs from the 11 general costs of this project; or, if you have not added 12 any facilities, is it an imprudent thing to wait until 13 later and then maybe have to increase the capacity of a 14 pipeline you have built. 15 I just want to understand that you know about 16 those considerations and have taken them into account. 17 So, it's sort of a "you're damned if you do, 18 damned if you don't" scenario. 19 In other words, have you included any extra 20 costs? And if so, maybe we want them out. And if you 21 have not, have you failed to anticipate a need which 22 will require additional construction that should have 23 been completed earlier? 24 MR. MARUSIC: We don't feel that it would be 25 wise to include the incremental facilities in this 26 project since we have no firm arrangement with 27 CanEnerco. We have no formal contract that says we will 28 provide service to them; we are merely in negotiations 287 UNION GAS PANEL 2, ex (Lea) 1 to provide such a service. 2 MS LEA: Thank you. That's helpful. 3 The last -- 4 THE PRESIDING MEMBER: Excuse me, Ms Lea. 5 MS LEA: Yes. 6 THE PRESIDING MEMBER: I may have lost track. 7 Do we have an undertaking? Or -- 8 MS LEA: No. 9 THE PRESIDING MEMBER: -- have the questions 10 all been answered? 11 MS LEA: No. As far as Board staff are 12 concerned, we understand the answers and we do not 13 require Undertaking 16.7. 14 THE PRESIDING MEMBER: Thank you. 15 Just one moment. 16 --- Pause 17 THE PRESIDING MEMBER: Thank you. 18 MS LEA: Thank you. 19 Mr. Marusic, lastly -- I'm asking you on this 20 panel because of Mr. Leslie's comment this morning -- in 21 terms of the route of the Mandaumin transmission line -- 22 I will be asking the environmental panel to give us a 23 rundown as to the reasons for the change in route from 24 the one the consultant suggested to the one that Union 25 has finally chosen -- I understand that there were 26 construction costing and engineering considerations that 27 you would be able to speak to. 28 Can you help us with the reasons for the 288 UNION GAS PANEL 2, ex (Lea) 1 change in the location of that transmission line? 2 MR. MARUSIC: Certainly, I can. 3 When designing storage facilities, pipelines 4 in particular, shorter is better than longer -- and 5 that's the very simple answer to that question -- and I 6 would like to use an analogy to elaborate on that. 7 A storage pipeline is somewhat like when you 8 have to fill up a swimming pool using a garden hose. In 9 the case of the swimming pool, the pressure in your 10 house is limited and you have only got 30 pounds, or 11 whatever your supply pressure is at that point; at the 12 swimming pool side, you have got an atmospheric 13 pressure. So if you had two garden hoses that were 14 otherwise equal, one being 50 feet in length and one 15 being 100 feet in length, you could fill the swimming 16 pool more quickly with the shorter piece of hose. And 17 that analogy applies to design of storage pipelines, in 18 that it's desirable to have a shorter length of pipeline 19 than longer. 20 In this particular case, if we were to replace 21 the capacity we lose as a result of the longer route, 22 approximately 3.2 kilometres of that 16-inch pipeline 23 would have to be upsized to 20-inch -- I'm not 24 suggesting that we intend to do that, but just to give 25 you some idea of what the impact is of the longer 26 length. 27 MS LEA: How much longer was the 28 environmentally-preferred route than the one that Union 289 UNION GAS PANEL 2, ex (Lea) 1 is putting forward for approval? 2 MR. MARUSIC: I don't have that information 3 right at hand, but we can certainly get that for you. 4 MS LEA: I think probably Panel 4 can tell me. 5 Perhaps you could let them know that, just to have them 6 give your answer. 7 MR. MARUSIC: Certainly. 8 MS LEA: Thanks. 9 All right. Thank you for the information 10 about the necessary upsizing. That's helpful. 11 Would there also be incremental costs, then, 12 if the environmentally-preferred route were used? 13 MR. MARUSIC: Yes. The 14 environmentally-preferred route was some $1.1 million 15 more expensive than the route that we are recommending. 16 MS LEA: Would that be due to both longer pipe 17 lengths and the upsizing of some part of that length? 18 MR. MARUSIC: It's only due to the longer 19 length. We are not -- we would not intend on upsizing a 20 section of the longer route; I just used that for 21 demonstrative purposes, to show you what the impact was 22 of the longer length. 23 MS LEA: I'm not sure I understand. If you 24 were to construct the pipeline on the 25 environmentally-preferred route, you would not need to 26 upsize to 20? 27 MR. MARUSIC: We would not do that. What the 28 shorter route gives us is more flexibility, in terms of 290 UNION GAS PANEL 2, ex (Lea) 1 the injection and withdrawal seasons for these Mandaumin 2 and Bluewater Pools. 3 MS LEA: Thank you. I think I understand. 4 One moment. 5 --- Pause 6 MS LEA: Thank you very much. 7 --- Pause 8 MS LEA: Mr. Marusic, when your environmental 9 consultants were considering this possible route, did 10 they have an understanding of the factors that you have 11 explained to us? In other words, was that a constraint 12 that was given to the environmental consultant, we need 13 a shorter rather than a longer pipeline? 14 MR. MARUSIC: I think you should ask that 15 question of Mr. Payne or Mr. Wachsmuth. 16 MS LEA: Thank you. In that case then, 17 gentlemen, thank you very much for all your answers over 18 today and yesterday. 19 Thank you, Madam Chair, for your patience. 20 THE PRESIDING MEMBER: Thank you, Ms Lea. 21 Ms Simon. 22 MEMBER SIMON: Just a follow-up question 23 regarding the Sarnia Airport pool potential project. I 24 think there was a reference to -- is there any impact of 25 that potential project on this change in the actual 26 route location that was made? Was the choice on the 27 Fairweather route better for any potential future 28 CanEnerco project or does that have no bearing on it? 291 UNION GAS PANEL 2 1 MR. MARUSIC: The end point was the 2 Mandaumin-Bluewater measurement and control station 3 location in both routes. That is also the tie-in 4 location for the Sarnia Airport pool pipeline, so there 5 really was no -- that didn't impact our decision at all. 6 MEMBER SIMON: That's very helpful. Thank 7 you. 8 THE PRESIDING MEMBER: Mr. Leslie, any 9 redirect? 10 MR. LESLIE: No, I don't. Thank you. 11 THE PRESIDING MEMBER: Thank you very much. 12 Thank you, panel. You are excused. Board 13 staff I think has done an extensive job of 14 cross-examination and we appreciate your indulgence. 15 Mr. Leslie, we are trying to work out the 16 timing. We were wondering if it might be appropriate 17 for the next panel to be brought forward, sworn and you 18 can introduce the direct evidence. 19 MR. LESLIE: This direct will take a little 20 while simply because it involves putting some documents 21 before you and giving you some assurances and 22 descriptions, some of which you asked for last night in 23 terms of where we stand with landowners. 24 THE PRESIDING MEMBER: I appreciate that. How 25 long do you think it will take them? 26 MR. LESLIE: About a half hour. 27 THE PRESIDING MEMBER: Then that will be fine. 28 Thank you. 292 UNION GAS PANEL 2 1 MR. LESLIE: Madam Chair, while we are waiting 2 for that panel, I have had -- there's a modification to 3 the remedy for one of the transmission lines in the 4 Mandaumin Pool, a change in the location of the meter 5 station. 6 I had planned to describe those changes to you 7 simply as a matter of an overview, largely because there 8 are two panels that will have to deal with this. I 9 thought if I gave you the overview then I could ask the 10 panels to deal with the parts that they are responsible 11 for. 12 In that connection, I think you are going to 13 need to refer to, I know you are going to need to refer 14 to, schedule 5, I think section 4, schedule 5. It's a 15 revised map. That's a map of the Mandaumin-Bluewater 16 Pools. It's dated January 27, 2000. 17 In addition, I have got a blowup or an 18 enlargement of part of the facility that is being 19 affected so you can see what's going on in more detail. 20 I believe Mr. Gagner -- Mr. Gagner is about to give you 21 that. 22 THE PRESIDING MEMBER: Now, I know Ms Lea will 23 give this an exhibit number. 24 MR. LESLIE: Sorry? 25 THE PRESIDING MEMBER: Would you like to give 26 the new enlargement an exhibit number, please? 27 MS LEA: We are in the 9 series then. I have 28 it as 9.5. 293 UNION GAS PANEL 2 1 EXHIBIT NO. 9.5: Document entitled 2 Measurement Station Location 3 MR. LESLIE: With your permission -- we are 4 waiting for Mr. Lowe. 5 THE PRESIDING MEMBER: Did you get a copy for 6 the reporter? Can the reporters have a copy? It's the 7 measurement station location is the title of this 8 exhibit. 9 MR. LESLIE: We are waiting for Mr. Lowe. I 10 think I could do this while he is getting here. 11 If you look at that schedule 5, there is 12 really in the centre of the map, and it's the centre of 13 the Mandaumin Pool, a road called Mandaumin Road. There 14 is a box to the right that says "Proposed NTS 12 15 Mandaumin Pool Line". Have you got that? 16 MS LEA: First of all, north is not at the top 17 of this new exhibit, correct? It's on the right hand 18 side. 19 MR. LESLIE: Well, no. North is at the top. 20 The legend that's showing north is on the right hand 21 side. I'm sorry, perhaps we are looking at different 22 maps. I'm looking at the big map and I will come to the 23 little map. 24 MS LEA: Okay. Thanks. 25 MR. LESLIE: You are right about the little 26 map. 27 MS LEA: Okay. I just got confused. 28 MR. LESLIE: If you have located that, and you 294 UNION GAS PANEL 2 1 can do this at your leisure, there were wells, or at 2 least one well, on the easterly side of Mandaumin Road. 3 It was located in lot No. 1. That is the well that is 4 being moved such that the entry point will be now on the 5 left side of Mandaumin Road. I believe this is well No. 6 6. It will be directionally drilled. 7 As a result of that and other changes in the 8 locations of wells, it became possible to locate the 9 transmission line -- because all the wells are now on 10 the westerly side of Mandaumin Road, it became possible 11 to locate the transmission line on that side of the road 12 as well. That is now proposed. I might say that we 13 have apprised Board staff of these changes. 14 In addition, there was a measurement station 15 proposed, and I think this map shows it in its original 16 location. It's on a property owned by a Mr. Vokes 17 called "Proposed Mandaumin and Bluewater Measurement and 18 Control Station". 19 Mr. Vokes did not want that facility on his 20 property if that could be avoided. He requested that 21 Union consider moving both the pipeline and that 22 facility to the other side of the road. 23 If you now go to the smaller of the two maps, 24 which is the enlargement, Ms Lea is quite right. North 25 is not at the top. You have to turn it 26 counterclockwise, I guess. To get it oriented, the 27 hatched red facility should be on the left hand side, or 28 the right hand side I should say. 295 UNION GAS PANEL 2 1 What is being proposed now -- I should say the 2 red hatched facilities are the old proposed facilities 3 and the new proposed facilities are black lined. You 4 will see that that measurement station is now coming 5 across Mandaumin Road to the westerly side and will be 6 located on property which belongs to people named 7 Elliott. 8 In conjunction with that change, it was also 9 possible to move the proposed route of the transmission 10 line, which runs from the Bluewater Pool down on to the 11 Elliott's property, and that avoids having any part of 12 that line on the property belong to Mr. William Robert 13 McCrie, which was also his desire. The Elliotts were 14 agreeable to all this and we do have the necessary 15 consents from them. I will have Mr. Haley confirm that. 16 In summary, the measurement station has been 17 moved from the Vokes property to the Elliott's property. 18 The transmission line for the Mandaumin Pool has been 19 moved to the westerly side of Mandaumin Road and the 20 transmission line to the Bluewater Pool has been moved, 21 in this area at least, south so that it traverses the 22 Elliott property rather than Mr. McCrie's property. 23 I hope I have made that somewhat clear. 24 THE PRESIDING MEMBER: Thank you. 25 --- Pause 26 MR. LESLIE: If you have any questions, I 27 would be happy to -- 28 THE PRESIDING MEMBER: No. I think we 296 UNION GAS PANEL 2 1 understand the proposal. 2 Mr. Leslie, could you on the big map just 3 point out for me where the proposed MPS gas transmission 4 line will cross. You go from the Elliott property on 5 the south. I assume it will now go into the -- it 6 avoids the McCrie property and will go into the Kember 7 farm property. Is it about half way across the westerly 8 part of lot one? 9 MR. LESLIE: Excuse me for just a minute. 10 THE PRESIDING MEMBER: Sure. 11 MS LEA: The location of the bush on the south 12 side and trees on the north side seem to be a fairly 13 good indication. Is that fair? 14 MR. LESLIE: I think you are approximately 15 correct. 16 THE PRESIDING MEMBER: Approximately half. So 17 we don't have any environmental problems with bush on 18 the south side. 19 MR. LESLIE: I propose with this panel -- I 20 simply want to confirm that they have all the necessary 21 consents. The next panel includes the environmental 22 people and I am going to ask them those questions. 23 THE PRESIDING MEMBER: Okay. That's fine 24 then. Thank you, Mr. Leslie. Is the panel ready to be 25 sworn? 26 MR. LESLIE: Yes. It's Mr. Lowe and Mr. Haley 27 and could they be sworn. 28 THE PRESIDING MEMBER: Thank you. 297 UNION GAS PANEL 2 1 SWORN: DAVID LOWE 2 SWORN: BYRON HALEY 3 EXAMINATION-IN-CHIEF 4 MR. LESLIE: Mr. Lowe, if I could start with 5 you. You are Union Gas' Storage Business Manager? 6 MR. LOWE: Yes, that is correct. 7 MR. LESLIE: And your evidence for purposes of 8 these proceedings has been prefiled in section 9 dealing 9 with storage land matters and section 10 dealing with 10 well and roadway matters, land matters pertaining to 11 wells and roadways? 12 MR. LOWE: That is correct. 13 MR. LESLIE: And do you adopt that evidence, 14 sir? 15 MR. LOWE: Yes, I do. 16 MR. LESLIE: Mr. Haley, you are Union Gas' 17 Senior Lands Agent, Lands Department? 18 MR. HALEY: Yes, that is correct. 19 MR. LESLIE: And your evidence for the 20 purposes of these proceedings has been prefiled in 21 section 8 dealing with pipeline land matters? 22 MR. HALEY: Yes, it has. 23 MR. LESLIE: And do you adopt that evidence, 24 sir? 25 MR. HALEY: I do. 26 MR. LESLIE: Thank you. Madam Chair, I wanted 27 to ask Mr. Haley first about the status of landowner 28 consent as it relates to the transmission lines and 298 UNION GAS PANEL 3, in-ch (Leslie) 1 easements required in connection with those lines. 2 Mr. Haley, my understanding is that you 3 currently have all the consents required in connection 4 with those easements but for three and those three are 5 the three that Mr. Vogel will be delivering through his 6 client we expect shortly. Is that correct? 7 MR. HALEY: That is correct. 8 MR. LESLIE: Madam Chair, we do have in that 9 connection an update of a schedule that was filed at 10 section 8, schedule 1 and it gives the names and 11 locations of all the landowners that are affected and it 12 shows that we now have easements for all these 13 properties. As I have said, three of those we haven't 14 got in hand yet, but that is part of the understanding 15 with Mr. Vogel -- on Mr. Vogel's part. 16 THE PRESIDING MEMBER: Thank you, Mr. Leslie. 17 MS LEA: That is great. Thank you. 18 THE PRESIDING MEMBER: Now, Ms Lea, since this 19 is an update of a -- 20 MS LEA: We probably don't need a -- 21 THE PRESIDING MEMBER: We don't need another 22 exhibit number? 23 MS LEA: I shouldn't think so. I just wanted 24 to look at it. 25 THE PRESIDING MEMBER: Certainly. 26 MR. LESLIE: No, this is an update of existing 27 evidence. 28 THE PRESIDING MEMBER: Okay. Thank you. 299 UNION GAS PANEL 3, in-ch (Leslie) 1 MR. LESLIE: Now, in addition, and I will give 2 Mr. Gagner a minute to give these documents, I wanted to 3 file through Mr. Haley documents that are referred to in 4 the settlement, the record of the settlement with the 5 Lambton County Storage Association, which has been 6 filed, I believe it is Exhibit 11.2. Yes, 11.2 7 There are three of those documents. The first 8 is the letter of understanding and that letter records 9 the basis on which work is done on the pipeline 10 easements. And that was originally filed, the original 11 version of that was filed in response to Board staff -- 12 an undertaking that was given to Board staff at the 13 technical conference and it was given the number 31. So 14 there will be an earlier version of that letter of 15 understanding filed in conjunction with a response to 16 Undertaking 31. 17 MS LEA: However, I think this probably does 18 need an exhibit number. Would you agree, Mr. Leslie? 19 MR. LESLIE: That is fine. 20 MS LEA: 9.6, please, 9.6, letter of 21 understanding. 22 EXHIBIT NO. 9.6: Letter of understanding 23 THE PRESIDING MEMBER: Excuse me, Ms Lea, is 24 it package 9.6? 25 MS LEA: I believe the whole package stapled 26 together would be 9.6. There are letters -- letter and 27 attachments. 28 THE PRESIDING MEMBER: Thanks. 300 UNION GAS PANEL 3, in-ch (Leslie) 1 MR. LESLIE: As I say, that document which is 2 known as an LOU in the trade deals with the construction 3 of the pipeline in the pipeline easements. And this 4 version of it has been revised to incorporate I think 5 most of the undertakings that were given as part of the 6 negotiations with the Lambton County Storage Association 7 as recorded in Exhibit 11.2. 8 Now, I hope this doesn't lead to confusion but 9 there are some additional changes that need to be made 10 and they are being made and we thought it might be 11 helpful for you to have this in its current form so you 12 can familiarize yourself with it. We will give you the 13 ultimate version as soon as it is ready. Mr. Vogel will 14 have to review it as well before we can finalize it. 15 Next, there is an easement agreement and that 16 has also been revised slightly to incorporate elements 17 of the settlement. That agreement is found in section 8 18 of the evidence, schedule 2 and this is truly an update. 19 That is in its final form. No further changes 20 will occur to the easement. And your statute requires 21 that you have that document and be satisfied that we are 22 making that available to everyone affected, which we 23 are. 24 MS LEA: Sorry, Mr. Leslie, this is an update 25 to what exhibit? 26 MR. LESLIE: It is section 8, schedule 2, I 27 think, the original easement. 28 MS LEA: Thank you. 301 UNION GAS PANEL 3, in-ch (Leslie) 1 MR. LESLIE: And this is the revised version. 2 MS LEA: Thank you. Section 8, schedule 2 3 update. 4 MR. LESLIE: And finally I will ask Mr. Gagner 5 to pass around the construction commitment letter that 6 we have referred to earlier. And that document is, I 7 believe, unique to these proceedings. It is not one of 8 these documents that has become standard. 9 Its purpose is to deal with construction 10 matters and other matters affecting lands within the 11 storage area. So it is in a way a parallel to the 12 letter of understanding. The letter of understanding 13 deals with pipeline easements; the construction 14 commitment letter will deal with work on the lands that 15 are within the designated storage area. 16 MS LEA: Can we give this Exhibit No. 9.7, 17 please, construction commitment. 18 MR. LESLIE: Thank you. 19 EXHIBIT NO. 9.7: Construction commitment 20 MR. LESLIE: Again, that is not in its 21 absolutely final form. It incorporates most of our 22 negotiations but there was some negotiation the last few 23 days which has not been recorded. As soon as we have 24 finalized it with Mr. Vogel's having looked at it, we 25 will deliver it to the Board. But again, I thought it 26 would be helpful if you could -- if you had it, you can 27 familiarize yourself with it. 28 THE PRESIDING MEMBER: Mr. Leslie, the letter 302 UNION GAS PANEL 3, in-ch (Leslie) 1 of understanding and the construction commitment are not 2 final but they are final to the -- except for the 3 negotiations with Mr. Vogel? 4 MR. LESLIE: Well, no, they are -- we have 5 reached final agreement with Mr. Vogel. 6 THE PRESIDING MEMBER: Right. 7 MR. LESLIE: We have to record parts of that 8 agreement in these documents and that hasn't been done. 9 THE PRESIDING MEMBER: The agreements haven't 10 been amended to reflect the agreement with Mr. Vogel. 11 MR. LESLIE: They have been amended to reflect 12 about three-quarters of it. 13 THE PRESIDING MEMBER: I appreciate the 14 negotiations -- 15 MR. LESLIE: And I'm sorry. I knew this would 16 be confusing. 17 THE PRESIDING MEMBER: No, that is all right. 18 MR. LESLIE: I debated whether I should do it 19 at all until we had the final ones. But we may not get 20 the final ones while the hearings are going on so I 21 thought I should give you something. 22 And if you look at 11.2, you will see that the 23 past tense is used some times and the future tense is 24 used some times. Wherever you see the past tense, it is 25 in here. 26 THE PRESIDING MEMBER: Okay. 27 MR. LESLIE: If you see the future tense, it 28 means we are working on it. The agreement is there. It 303 UNION GAS PANEL 3, in-ch (Leslie) 1 is a question of recording it in these documents. 2 THE PRESIDING MEMBER: That has been very 3 helpful. Thank you. 4 MR. LESLIE: Thank you. 5 Mr. Haley, can you confirm that those are the 6 documents that have been or will be revised in order to 7 request the agreement with Mr. Vogel? 8 MR. HALEY: As you have just outlined, in 9 their present form, you have, Mr. Leslie, identified it 10 quite well. If you look for the past tense in the 11 settlement document, those provisions are in the new 12 document; if it is the future tense, we will be working 13 on those with Mr. Vogel over the next little while to 14 finalize the documents. 15 MR. LESLIE: I believe you already have 16 confirmed that you have all the easements required, 17 subject to getting three additional easements through 18 Mr. Vogel? 19 MR. HALEY: That is correct. 20 MR. LESLIE: Mr. Lowe, if I could turn to you. 21 Madam Chair, yesterday, you asked us to update 22 you on the status of land management. I think with 23 respect to transition easements what you have now does 24 that. 25 I wanted to deal now with the situation as it 26 pertains to storage. For that purpose, we have taken 27 excerpts out of the evidence and put them in a separate 28 bundle just for convenience. I will ask Mr. Gagner if 304 UNION GAS PANEL 3, in-ch (Leslie) 1 he could pass those excerpts around and I will ask 2 Mr. Lowe to take you through them. 3 Do you have those, Mr. Lowe? 4 MR. LOWE: Yes, I do. 5 --- Pause 6 MS LEA: Mr. Leslie, despite the fact that 7 these are actually -- 8 MR. LESLIE: If you want to call this an 9 exhibit, then -- 10 MS LEA: Yes. Just for ease of reference. 11 MR. LESLIE: Yes. 12 MS LEA: Then that way we know what we are 13 referring to. 14 That will be 9.8, please, bundle of documents 15 of previous filings, I guess. 16 EXHIBIT NO. 9.8: Bundle of documents of 17 previous filings 18 MR. LOWE: I would just point out that these 19 maps that are in this bundle were part of the addendum 20 package. 21 MS LEA: Yes. 22 MR. LOWE: And rather than have the Board 23 panel scramble through all three of the binders to 24 locate the maps, we thought it was more convenient to do 25 it in this form. 26 MS LEA: Thank you. 27 THE PRESIDING MEMBER: We appreciate that. 28 Thank you. 305 UNION GAS PANEL 3, in-ch (Leslie) 1 MR. LESLIE: Mr. Lowe, the first map should be 2 "Oil City Pool, PNG leases". It is section 9, Schedule 3 2, and there are two pages. 4 MS LEA: Can you hang on just a second. I'm 5 going back to the map that I was working with. 6 Go ahead. Sorry. 7 MR. LESLIE: You have the bundle, have you, 8 Ms Lea? 9 MS LEA: I have the bundle. I just had made 10 notes on the original map. 11 MR. LESLIE: No, that's fine. 12 MS LEA: Please go ahead. Thank you. 13 MR. LESLIE: Do you have that: Oil City, PNG 14 Leases, page 1 of 2? 15 MR. LOWE: Yes, I do have it now. 16 MR. LESLIE: All right. 17 My understanding is that where there are green 18 hatched lines you have PNG leases. 19 MR. LOWE: That is correct. 20 MR. LESLIE: And where I see white it means 21 that you don't have PNG leases. 22 MR. LOWE: That's correct. 23 MR. LESLIE: Based on that map, it looks like 24 you are missing the Management Board Secretariat. The 25 property belongs to someone named Brown. 26 MR. LOWE: Yes. 27 MR. LESLIE: And if you turn the page, my 28 understanding is page 2 of 2 is an enlargement of the 306 UNION GAS PANEL 3, in-ch (Leslie) 1 upper left corner of the designated storage area, and 2 that allows you to see that there are, in addition, 3 properties belonging to MacKenzie, Charlton and 4 Cunningham that are not subject to PNG leases at this 5 point. Is that correct? 6 MR. LOWE: That is correct. 7 MR. LESLIE: Could you tell the Board what the 8 status of your discussions with those people is, if any, 9 with respect to PNG leases? 10 MR. LOWE: With respect to the three house 11 lots for MacKenzie, Charlton, Cunningham -- and I have 12 it as Mac Brown, but it is listed here as Brown -- those 13 house lots have been approached at least twice with 14 respect to leasing their property for both P&NG gas 15 storage, and in each case the landowners have declined. 16 The purpose for them not executing lease 17 agreements is a combination of they don't feel the 18 compensation is adequate because the acreage is small, 19 and we generally do a multiplication of the lease 20 acreage time our lease rental package, as well as not 21 wishing to have a lease encumbrance on the land. 22 With respect to the Management Board 23 Secretariat, that is a government held property. That 24 division of the Ontario government is currently in a 25 restructuring process and I have the letters here 26 required to indicate that they have no objection to 27 leasing. It is merely a matter, at this point, of 28 finding out who the appropriate signing authority is for 307 UNION GAS PANEL 3, in-ch (Leslie) 1 that group. 2 MR. LESLIE: There are no facilities proposed 3 for any of these properties, as I understand it. Is 4 that correct? 5 MR. LOWE: That's correct. 6 MR. LESLIE: The third map is the Oil City 7 Pool again, and this says "Storage Leases", section 9, 8 Schedule 3, page 1 of 2. Again, you see the Management 9 Board and the landowners we have just mentioned. There 10 is, in addition here, a property belonging to Cascaden 11 that is apparently not under lease. 12 Could you describe the status of your 13 negotiations with Mr. Cascaden and the other property 14 owners that are not subject to storage leases? 15 MR. LOWE: Yes. Again, in the northwest 16 corner of the proposed DSA boundaries, they are the same 17 for house lots Brown, Charlton, Cunningham and 18 MacKenzie, who have declined to lease for the same 19 reasons I mentioned on the P&NG side of things, as well 20 as the Management Board Secretariat for that same 21 purpose. 22 Respecting Mr. Cascaden, he also has been 23 approached to lease on a number of occasions and has 24 also chosen to decline. 25 MR. LESLIE: His property is subject to a 26 petroleum and natural gas lease, though, is it? 27 MR. LOWE: Yes, it is. 28 MR. LESLIE: I take it from what you have said 308 UNION GAS PANEL 3, in-ch (Leslie) 1 that you have offered your standard lease and your 2 standard terms to all of these property owners? 3 MR. LOWE: At this point in time we have 4 offered our standard compensation with respect to P&NG 5 and gas storage leases. They have still not been 6 approached with respect to offering our standard gas 7 storage compensation. That follows the Board order. 8 MR. LESLIE: That is to say you would offer 9 them that compensation once the Board is designated? 10 MR. LOWE: That is correct, prior to 11 injection, yes. 12 MR. LESLIE: I take it that is in part because 13 the amount of compensation changes once that happens? 14 MR. LOWE: That is correct. It changes from I 15 guess you would call it a production type of scenario as 16 far as lease payments is concerned to our standard gas 17 storage compensation package, which is filed in 18 section 9. 19 MR. LESLIE: All right. 20 And the next two pages, the last two pages, 21 both deal with Bluewater and Mandaumin Pools. The first 22 deals with the PNG leases. This is section 9, 23 Schedule 6. 24 I understand that again where there are 25 hatched lines you have PNG leases. And the two 26 properties that are proposed to be in the DSA that are 27 not subject to lease are the property belonging to 28 MacRae shown in white, and a little square, on this map 309 UNION GAS PANEL 3, in-ch (Leslie) 1 at least, which is part of a property belonging to 2 someone named Harris. Is that correct? 3 MR. LOWE: Actually, there are three 4 properties there, Mr. Leslie. 5 There are two properties, as you can see, on 6 the MacRae property. They have different title 7 interests: the house lot at the top listed here as two 8 acres, and the 47.91 acres has a different title 9 interest. 10 MR. LESLIE: Now, what is the status of your 11 negotiations with those three landowners over PNG 12 leases? 13 MR. LOWE: Mr. Bruce Harris has been 14 approached by a Union Gas land agent with respect to 15 leasing his property and he has declined. As I 16 understand, he is a member of the Lambton Storage 17 Association and, I guess, wishes to wait for the outcome 18 of these proceedings and the section 38 application 19 which is before the Board prior to agreeing to lease. 20 MR. LESLIE: And how about MacRae? 21 MR. LOWE: We have received an assignment of 22 the lease agreements previously held by CanEnerco. Upon 23 a full title review for this proceeding we identified a 24 discrepancy in the title interest that had been 25 assigned, and we have to declare those leases invalid. 26 I am a bit uncertain as to whether they have 27 actually been reapproached to lease. But they, again, 28 are also Lambton County Association members and my 310 UNION GAS PANEL 3, in-ch (Leslie) 1 suspicion is that they would hold pat for the time 2 being. 3 MS LEA: I'm sorry, I didn't hear the end 4 of -- 5 MR. LOWE: They would stand firm on their 6 position not to lease. We had approached them in April 7 to pay them under the CanEnerco lease and they had 8 refused. 9 MS LEA: This is the MacRae property? 10 MR. LOWE: Yes. 11 MR. LESLIE: Is that both MacRae's or just 12 one? 13 MR. LOWE: Both MacRae properties. 14 MR. LESLIE: I take it these people are 15 related, are they? 16 MR. LOWE: Yes. I believe they are husband 17 and wife. I think the daughter is co-named on the house 18 lot with the mother, Edith, and the son is co-title 19 holder on the MacRae farmland acreage with the father, 20 Louis. 21 MR. LESLIE: And you mentioned you had taken 22 an assignment of the leases from CanEnerco on those 23 properties. Was that PNG and storage leases? 24 MR. LOWE: Yes, it was. 25 MR. LESLIE: What was the reason for the 26 defect in the leases? 27 MR. LOWE: Both the two-acre parcel and the 28 47.91-acre parcel were described on title, and they 311 UNION GAS PANEL 3, in-ch (Leslie) 1 should have been separated out into two separate lease 2 documents for the purpose of the separate title 3 interests. 4 MR. LESLIE: But the MacRae's had signed 5 leases with CanEnerco, they simply didn't comply with 6 the planning, I guess. 7 MR. LOWE: Correct. Both Louis MacRae and 8 Edith MacRae had signed off on the lease, but their 9 siblings had not. 10 MR. LESLIE: All right. 11 The storage lease situation appears to be 12 similar or the same. 13 MR. LOWE: Yes. Yes, it is. 14 MR. LESLIE: Have you offered your storage 15 package to the MacRae's and Mr. Harris? 16 MR. LOWE: I believe Mr. Harris has. I do not 17 believe that Louis MacRae had. 18 MR. LESLIE: Is there any reason not to make 19 that offer to Louis MacRae? 20 MR. LOWE: I guess we were waiting to see what 21 the results of the negotiations were with Mr. Vogel, and 22 have had that included as one of the items for 23 discussion in that process. 24 We were also in discussions with Mr. Vogel, as 25 is representative with respect to the easement 26 agreements. So that process was the one that was chosen 27 to resolve this, the situation on the leases. 28 MR. LESLIE: All right. But if the MacRae's 312 UNION GAS PANEL 3, in-ch (Leslie) 1 were prepared to sign a storage lease with Union Gas, 2 you would give them your standard storage terms, would 3 you? 4 MR. LOWE: That is correct. 5 MR. LESLIE: And compensation? 6 MR. LOWE: Absolutely, yes. 7 MR. LESLIE: I apologize for this, but I think 8 I need to burden you with a few additional documents. 9 The next one is a storage lease which I am 10 told was recently signed. I think the name of the 11 landowner is Archibald Hardy, and I gather it is also a 12 petroleum and natural gas lease. 13 Is that correct, Mr. Lowe? 14 MR. LOWE: Yes, it is. 15 For the purposes of the Board Panel and Board 16 Staff, it is again -- if you look at Schedule 7 at the 17 back of the package, there is a small two acre parcel 18 called "Hardy 2 acres" just north of the -- I guess it 19 would be in the east half of Lot 3, Concession 2, just 20 above the name "Hardy" 97.99 acres. The corner of that 21 parcel is the one that I'm referring to now. 22 MR. LESLIE: Those are leases you have 23 recently acquired and they would be filed in the normal 24 course, as I understand it, at BW-12-2 of the prefiled 25 evidence. Is that correct? 26 MR. LOWE: BW-12-2, yes. 27 MS LEA: I'm sorry, what was that number? 28 MR. LOWE: It's Tab BW-12-2. 313 UNION GAS PANEL 3, in-ch (Leslie) 1 MS LEA: BW-12-2. So these are updates to 2 that filing? Is that right? 3 MR. LESLIE: No. I think they are -- they 4 would be additions to that. 5 MS LEA: Additions, okay. So this all refers 6 to the Hardy property, this entire package? 7 MR. LESLIE: Yes. 8 MS LEA: All right. I'm sorry, I'm just 9 making sure I keep track here. 10 So that doesn't need an additional exhibit 11 number, it now becomes part of BW-12-2 in the lease 12 agreement section of the evidence. 13 MR. LOWE: That is found at Volume 4. 14 MS LEA: Volume 4, thank you. 15 Just remind us where the Hardy property is. 16 MR. LOWE: It's in the northwest corner of the 17 east half of Lot 3, Concession 2. 18 MS LEA: Which pool? 19 MR. LOWE: In the Bluewater pool. 20 MS LEA: Okay. We're not even at the right 21 pool yet. You have to give us time. 22 Okay. Thank you, that's fine. 23 I'm sorry, Mr. Leslie. 24 MR. LESLIE: That is really in the nature of a 25 housekeeping matter. I don't think we need to do 26 anything more with it. I just wanted to file it and I 27 thought this would be convenient. 28 MS LEA: That's fine. Thank you. 314 UNION GAS PANEL 3, in-ch (Leslie) 1 MR. LESLIE: In a similar vein, Mr. Lowe, I 2 understand we have acknowledgments and these 3 acknowledgements relate to well locations from 4 landowners named Rawlings and Kember, is it? 5 MR. LOWE: Kember Farms, yes. 6 MR. LESLIE: My further understanding is that 7 with those acknowledgements you now have the necessary 8 acknowledgement for the location of all the wells? 9 MR. LOWE: All the permanent facilities, yes. 10 MR. LESLIE: Including the access routes? 11 MR. LOWE: Yes, correct. 12 MR. LESLIE: And that the Rawlings and Kember 13 acknowledgements were obtained to deal with the shifts 14 in the well locations that have been described earlier? 15 MR. LOWE: That is right. We had 16 acknowledgements presigned on the previous locations and 17 the new locations the Board Staff's direction suggested 18 that we obtain new acknowledgements for the revised 19 locations. 20 MR. LESLIE: Thank you. 21 Just to complete the picture there -- 22 MS LEA: Just a moment, Mr. Leslie. 23 MR. LESLIE: I'm sorry. 24 MS LEA: I'm not quite up to speed here. 25 So this is letters of acknowledgement -- 26 letters of acknowledgements -- oh, there are two 27 separate pieces? Two pieces, thank you. 28 --- Off record discussion 315 UNION GAS PANEL 3, in-ch (Leslie) 1 MS LEA: Thank you. 2 We have how many letters of acknowledgement? 3 MR. LOWE: There should be two. 4 MS LEA: Two, all right. That's fine. 5 Then there is also an application for a well 6 licence? 7 MR. LOWE: That should be attached -- 8 MS LEA: It should be attached. 9 MR. LOWE: -- to one of the documents. I 10 think it's the Kember one. 11 MS LEA: Okay. It has become detached. 12 MR. LOWE: I'm sorry. The Kember property, 13 yes. 14 MS LEA: I'm sorry, where should the 15 application for a well licence go? It became detached, 16 that's all. 17 MR. LOWE: I believe the Rawlings package is 18 complete and the attachment should go with the Kember. 19 MS LEA: I have it, okay. Thanks. 20 So I have in front of me, then, a complete 21 package for Rawlings and a two-piece package for Kember, 22 consisting of the letter of acknowledgement and the 23 application for a well licence. Thank you. 24 MR. LOWE: That is correct. Landowners were 25 shown the complete package of licences and survey 26 drawings to support the acknowledgement. 27 MS LEA: Thank you. 28 Now, are these part of the filing, Mr. Leslie? 316 UNION GAS PANEL 3, in-ch (Leslie) 1 Do they need an exhibit number now? 2 MR. LESLIE: I think they probably should have 3 exhibit numbers. I don't appear to have any copies. 4 MS LEA: Okay. 5 Let's call, then, the package for Rawlings 6 Exhibit No. 9.9. 7 EXHIBIT NO. 9.9: Rawlings package of 8 documents 9 MS LEA: Let's put the Kember package, plus 10 well licence, those two -- they are separate for me but 11 I understand they should be together -- 9.10. 12 EXHIBIT NO. 9.10: Kember package of 13 documents with application for well 14 licence 15 MS LEA: Just let me make a note of that. So 16 9.9 is Rawlings, 9.10 is Kember complete. 17 THE PRESIDING MEMBER: Excuse me, the Board 18 are missing the applications -- 19 MS LEA: The well licence? 20 THE PRESIDING MEMBER: Thank you. 21 MR. LESLIE: So Kember was 9.10 and Rawlings 22 is 9.9, is that right? 23 MS LEA: Correct. And 9.10 includes the 24 application for well licence, which for some reason in 25 some of our copies is detached. 26 MR. LESLIE: I think that is just bad 27 stapling. 28 MS LEA: Yes. That may well be. 317 UNION GAS PANEL 3, in-ch (Leslie) 1 THE PRESIDING MEMBER: Those two pieces were 2 Exhibit 9.10? 3 MS LEA: Yes. The two pieces are 9.10 4 together. 5 THE PRESIDING MEMBER: Okay. 6 MS LEA: Thank you. 7 MR. LESLIE: Just for certainty, Mr. Lowe, I 8 wanted to confirm that those acknowledgements deal with 9 the well locations that have been subject to change that 10 we discussed earlier. 11 MR. LOWE: That is correct. 12 MR. LESLIE: Finally in this area, can you 13 confirm that prior to injection, if the Board grants you 14 Union's application, all landowners will receive the 15 same offer for storage compensation? 16 MR. LOWE: Yes. The landowners in the 17 Mandaumin Pool, Bluewater Pool and the Oil City Pool 18 will be receiving Union Gas' standard compensation 19 package as it was issued in January of 2000 to the 20 balance of the 271 landowners in our other pools. 21 MR. LESLIE: That compensation package is 22 described in the updated evidence that was filed on 23 January 31st, I believe. 24 MR. LOWE: Yes. That information can be found 25 in section 9 on pages 1 and 2 -- 9-1 and 9-2, I'm sorry. 26 MR. LESLIE: That compensation is the same 27 compensation that is currently paid to landowners within 28 storage areas generally, by Union Gas that is? 318 UNION GAS PANEL 3, in-ch (Leslie) 1 MR. LOWE: Compensation that has been issued 2 by us and accepted by them, yes. 3 MR. LESLIE: On another topic yesterday, I 4 think -- there was no undertaking but there was a 5 discussion of the cost of acquiring gas rights in these 6 mills -- I should say in the Oil City, Bluewater and 7 Mandaumin Pools. 8 MS LEA: Yes. Go ahead, I'm sorry. 9 MR. LESLIE: The point of reference here was 10 Union Gas' response to Undertaking No. 27, which gives 11 the original purchase costs, construction 12 work-in-progress, and then a total storage rights cost. 13 There were some questions put as to the total cost for 14 the acquisition of storage rights, and I think Ms Lea 15 wanted confirmation that the total cost, including 16 construction work-in-progress or IDC -- IDC is interest 17 during construction -- 18 MR. LOWE: Yes, it is. 19 MR. LESLIE: -- was $920,000 for the Oil City 20 Pool that is. Is that correct? 21 MR. LOWE: Yes. As indicated in Undertaking 22 No. 27, the original purchase cost for the storage 23 rights was $765,500 with an internal accounting IDC 24 charge of $154,500, for total storage rights purchase 25 costs of $920,000. 26 These are fees that are paid to the partners 27 of the production facilities and holders of the storage 28 rights and it can be expressed probably best in terms of 319 UNION GAS PANEL 3, in-ch (Leslie) 1 a finders fee. That is what the intention of this 2 payment is. 3 MR. LESLIE: All right. Questions that were 4 directed yesterday reduce these costs to an amount per 5 10(3)m(3). In the case of Oil City I think that 6 amounted -- if you take the total the amount is $18.96. 7 If you just look at the original purchase cost for Oil 8 City the amount would be $15.78 per 10(3)m(3) and the 9 comparables for Bluewater and Mandaumin are $6.74 and 10 $4.91. 11 The point of the questioning, as I understood 12 it, was: Why would Oil City cost that much more than 13 the other two pools. Can you explain that, please? 14 MR. LOWE: Yes. I guess I would like to take 15 two tacks at that. The first one is we received 16 exceptional value in our purchases of the Mandaumin and 17 Bluewater Pools and they were purchased at a substantial 18 discount to market prices. I have been doing this work 19 for 12 years now and been before the Board staff panel, 20 Mr. Mackie and Ms Lea, and they would be aware of the 21 fact that previous purchases of this kind have come 22 before the Board in excess of $28.08 a ten cubed, M 23 cubed. 24 MS LEA: Sorry, was that 28 or 20? 25 MR. LOWE: $28.08 per ten cubed, M cubed. You 26 might recognize it more familiarly as a dollar an MCF, 27 if that is helpful. 28 Obviously at $5 and $6.74 respectively for 320 UNION GAS PANEL 3, in-ch (Leslie) 1 Mandaumin and Bluewater, it's obvious to see that those 2 were discounted prices. The Mandaumin Pool was 3 purchased as part of a purchase from Imperial which 4 involved the Bickford Pool. They were liquidating their 5 assets in Ontario that were non-core businesses. They 6 put very little value on the Mandaumin asset due to its 7 location and perceived poor deliverability and long time 8 horizon for that to be developed for storage. That's 9 the reason that it was able to be purchased at such a 10 discount. 11 With respect to the Bluewater Pool, it had 12 similar scenarios around it with respect to location and 13 deliverability and the size was perceived to be much 14 smaller than it ended up being and the holder of those 15 storage rights was looking for its retirement. They 16 wanted also to liquidate its assets. So Union took 17 advantage of those opportunities and was able to secure 18 those rights at discounted prices. 19 The economics of Mandaumin and Bluewater have 20 improved significantly with some innovating engineering 21 and integration of those facilities into Union's system, 22 the primary reason being the Bentpath-Rosedale pipeline 23 system and the Dawn 156 compressor. 24 Those have helped move these pools up in the 25 portfolio of development. That's about all that needs 26 to be said on that, I think. 27 With respect to Oil City, you know, when the 28 expected market price is $28 and we are still able to 321 UNION GAS PANEL 3, in-ch (Leslie) 1 bring in the Oil City Pool at Board staff's number of 2 $18.96, that's again still not quite 50 per cent of the 3 cost. The primary reason for that level of discount on 4 that pool is the fact that Union had a significant 5 interest or was able to secure a significant interest in 6 the pool. Part of our accounting process is not to 7 assign any value on the component that Union is bringing 8 to the development. 9 MR. LESLIE: All right. Just one last 10 question, I think. This relates to the appearance 11 yesterday by Mr. and Mrs. Vokes and specifically the 12 access road to the well which is designated UVW 1. 13 There was some discussion of the fact that that access 14 road they had understood was originally proposed to go 15 down Waterworks Road into the well from the west whereas 16 in the end the access road runs through the Hardy 17 property. 18 There was evidence that that change occurred 19 because it wasn't possible to get land rights from the 20 landowner that would have been involved in bringing the 21 access road in from Waterworks Road. Do you know 22 anything about that, Mr. Lowe? 23 MR. LOWE: Yes, I can elaborate on that. 24 Initially, Mr. Hardy had refused to use the farm lane 25 for the access, so as a contingency plan I had 26 approached Mr. Josh, who is the adjacent owner in lot 27 three, con two. I had a site meeting with him and a 28 construction supervisor from my Dawn operations centre 322 UNION GAS PANEL 3, in-ch (Leslie) 1 to review how the road would be filled, in what manner 2 it would come into the property. 3 He had tile drawings available to us. We 4 reviewed that in quite a bit of detail. At the end of 5 the day, Mr. Josh decided that he did not want to have 6 the access road come in from that side of the property. 7 There was quite a bit of disruption that would result to 8 his tile system as well as he raises and rears horses 9 and he was concerned about traffic disrupting his horse 10 operation as well. 11 At the end of the day it became a matter of -- 12 primarily the tile was his biggest concern, I think. We 13 had approached him and he declined. 14 MR. LESLIE: There was a suggestion yesterday 15 that the change took place because it was cheaper to do 16 it the way it was ultimately done. Is that correct? 17 MR. LOWE: No, that's not correct. In fact, 18 it would have been cheaper to come in off of Waterworks 19 Road. 20 MR. LESLIE: Thank you. 21 Those are all my questions, Madam Chair. 22 THE PRESIDING MEMBER: Thank you, Mr. Leslie. 23 MS LEA: Madam Chair, I have a request. 24 There's just a couple of clarifying questions I would 25 like to ask before lunch so I can think about all these 26 documents we filed over lunch. Would that be possible? 27 THE PRESIDING MEMBER: I have got no 28 objection. 323 UNION GAS PANEL 3, in-ch (Leslie) 1 MS LEA: Thank you. 2 EXAMINATION 3 MS LEA: Exhibit 9.9, which is the Rawlings 4 well matter, I have in my copy of this exhibit the 5 letter of acknowledgement and I have what I would expect 6 to see as attachments to the well licence, but I don't 7 actually have the page application of the well licence 8 in my package. I wonder if it was intended that the 9 well licence application be included in that package. 10 Am I the only one that's missing it or is it missing 11 throughout? 12 I have the attachments that I would expect to 13 go with the application, but I don't have the actual 14 piece of paper that says "Application for Well Licence" 15 on it. Is it already filed? 16 MR. LESLIE: Apparently it has been filed and 17 it may be that the application for well licence which 18 you have got is part of the package relating to Kember 19 was included by mistake in the sense that it wasn't 20 really necessary to do that. 21 MS LEA: All right. That's fine. As long as 22 it's somewhere -- 23 MR. LESLIE: You are looking for symmetry. 24 The symmetry may be to throw away this one. 25 MS LEA: That's fine. One of the reasons I 26 was asking is that we always check to determine that the 27 description in the consent letter, the letter of 28 acknowledgement which comprises paragraphs 1 through 4 324 UNION GAS PANEL 3, ex (Lea) 1 are the same in the description in the well licence. I 2 have done that for the Kember property. There is no 3 problem. 4 Can someone confirm that the letter of 5 acknowledge that is on the front of Exhibit 9.9 does in 6 fact contain the same locations as is in the well 7 licence application? 8 MR. LESLIE: I'm sorry, I missed that 9 question. 10 MS LEA: Yes. You may want to do this over 11 lunch. 12 MR. LESLIE: Yes. 13 MS LEA: Can someone confirm that the 14 description of the location of the wells in Exhibit 9.9, 15 which is paragraphs 1 through 4 there, are consistent 16 with the well licence application which I think Mr. 17 Mackie has located at section 3, schedule 25 of page 1. 18 If someone could do that over the lunch break and 19 confirm that for us. 20 MR. LESLIE: Yes. 21 MS LEA: I have been able to do it with the 22 one you gave me. 23 MR. LESLIE: Yes. We will endeavour to do 24 that. 25 MS LEA: Secondly, with respect to the 26 exhibit, section 8, schedule 1, Mr. Haley, I just wanted 27 to clarify a couple of things with you. This contains 28 all the landowners who are affected by the transmission 325 UNION GAS PANEL 3, ex (Lea) 1 lines in terms of having transmission line easements on 2 their property? 3 MR. HALEY: That is correct. 4 MS LEA: There were two folks who were listed 5 in an interrogatory, 74, from Board staff. I just 6 wanted to make that crystal clear. The McCrie property 7 and the Vokes property, which were numbered 6 and 7 on 8 that IR, I gather they are no longer affected by the 9 transmission lines because of the relocation of the 10 measurement station and the line leading to it. 11 MR. HALEY: That is correct. 12 MS LEA: Okay. So there is no longer a need 13 for an easement from either McCrie or Vokes. 14 MR. HALEY: The requirement from Mr. Vokes was 15 the station property, not an easement, just to clarify 16 that. 17 MS LEA: Right. But you no longer need that 18 station property? 19 MR. HALEY: No. That is right. 20 MS LEA: Thank you. For the reporters, McCrie 21 is spelled M-c-C-R-I-E. 22 And which were the three -- do you have actual 23 option agreements with the people listed in this 24 schedule, section 8, schedule 1? 25 MR. HALEY: Yes, we do. 26 MS LEA: Except I gather for the three which 27 you expect from Mr. Vogel? 28 MR. HALEY: That is correct. 326 UNION GAS PANEL 3, ex (Lea) 1 MS LEA: And which three are those or can you 2 tell me? 3 MR. HALEY: The second property, a Duncan John 4 MacRae. 5 MS LEA: Yes. 6 MR. HALEY: The third property, Lewis 7 Alexander McCrie. 8 MS LEA: Yes. 9 MR. HALEY: And the fourth property, Frederick 10 Noorloos and Louise Margaret Noorloos. 11 MS LEA: Thank you. My last clarifying 12 question is I think again something we may have to do at 13 the lunch break. 14 The new section 8, schedule 2 which is the 15 easement for transmission pipelines, as you pointed out, 16 Mr. Leslie, the Board has to be satisfied with this form 17 of easement. And is there someone who can, now or over 18 the break, tell me what the differences are between the 19 old one and the new one? 20 MR. HALEY: I believe I could do that very 21 quickly. 22 MS LEA: Sure. Go ahead. 23 MR. HALEY: On page 3. 24 MS LEA: Yes, one moment. Go ahead. Yes. 25 MR. HALEY: Section 8 or clause 8. 26 MS LEA: Okay. Yes. 27 MR. HALEY: The fourth line. 28 MS LEA: Okay. One moment. I'm confused 327 UNION GAS PANEL 3, ex (Lea) 1 because we don't have a page 1, but that is fine. So it 2 is page 3. 3 MR. HALEY: I'm sorry. 4 MS LEA: Section 8, yes. Go ahead. 5 MR. HALEY: The fourth line. 6 MS LEA: Yes. 7 MR. HALEY: Starting with the word "with": 8 "... with mechanical equipment or 9 explosives..." 10 MS LEA: Yes. 11 MR. HALEY: The next change is -- 12 MS LEA: Yes, but what is the change? 13 MR. HALEY: Those are additional words that 14 were not in the prior easement. 15 MS LEA: Got it. Thank you. 16 MR. LESLIE: The effect of that, if I might, 17 is that it allows the landowner to dig without having to 18 notify Union so long as the landowner is not using 19 mechanical equipment or explosives. So if he is putting 20 a shovel in the ground, he doesn't have to let us know. 21 MS LEA: Thank you. Okay. And, sorry, Mr. 22 Haley. 23 MR. HALEY: The next -- the next change is 24 about six lines further down, six or seven. The middle 25 of the line, "...at least three" -- 26 MS LEA: Yes. 27 MR. HALEY: The word "three" and 3 in brackets 28 replaces "five" and 5 in brackets. 328 UNION GAS PANEL 3, ex (Lea) 1 MS LEA: Yes. Thank you. 2 MR. HALEY: And the final change is in clause 3 9. 4 MS LEA: Yes. 5 MR. HALEY: The third last line starting with 6 "the transferee". 7 MS LEA: Yes. 8 MR. HALEY: "The transferee agrees to make 9 all reasonable efforts to locate such 10 facilities adjacent to lot lines and 11 public road allowances." (As read) 12 MS LEA: And that is an addition? 13 MR. HALEY: That is an addition -- that is 14 additional wording. 15 MS LEA: Thank you. Does that complete the 16 changes? 17 MR. HALEY: Yes. 18 MS LEA: Thank you. Thank you very much for 19 your indulgence, Madam Chair. 20 THE PRESIDING MEMBER: Thank you, Ms Lea. 21 Ms Lea, in light of the additional documents 22 that have just been filed, would you require more time 23 than the traditional lunch hour to -- 24 MS LEA: No. 25 THE PRESIDING MEMBER: -- or an hour and a 26 half to go -- 27 MS LEA: No, thank you. Frankly I am eager to 28 press on so that we can minimize the hearing time. So I 329 UNION GAS PANEL 3, ex (Lea) 1 am going to look at these documents over the lunch hour 2 and I think I can complete what I need to do during that 3 time. 4 MR. LESLIE: Ms Lea, we have -- Ms Patterson 5 has very quickly checked and we believe that the well 6 locations as described in the letter of acknowledgement 7 9.9 are -- do conform to the location descriptions in 8 the well licenses. 9 MS LEA: Thank you. Okay. I checked the 10 other ones. So that is great then. 11 THE PRESIDING MEMBER: Thank you. Well, then 12 now may be an appropriate time to break for lunch. So 13 we will reconvene at two o'clock. Thank you. 14 MS LEA: Thank you. 15 --- Luncheon recess at 1230 16 --- Upon resuming at 1400 17 THE PRESIDING MEMBER: Please be seated. 18 Before we begin this afternoon, are there any 19 preliminary matters? 20 PRELIMINARY MATTERS 21 MR. LESLIE: I have, I think, two preliminary 22 matters, Madam Chair. 23 First, we received a letter -- a copy of the 24 letter that was sent to the Board, from Mr. Card, 25 confirming that Dawn-Euphemia are withdrawing their 26 intervention. 27 I have one more -- at least it was not part of 28 the original evidence filing, and with your permission, 330 Preliminary Matters 1 I will ask Mr. Gagner to pass it around and perhaps we 2 could file it now. It doesn't need an exhibit number; 3 it would go in the prefiled evidence, under "OC", for 4 Oil City, 4-24". It's a lease. It's section 9. 5 THE PRESIDING MEMBER: Just before we move on 6 to the lease, does the Board have copies of the letter 7 from Mr. Card? I'm not sure that I do. 8 MS LEA: No, we don't. 9 THE PRESIDING MEMBER: Okay. It may be, Mr. 10 Leslie, that you are the only one in possession of that 11 letter. 12 MR. LESLIE: I will get copies made. I only 13 have the one, at this point. 14 THE PRESIDING MEMBER: Thank you. 15 Does it put any -- I just need to understand. 16 Does it put any conditions -- 17 MR. LESLIE: I will read it to you. 18 THE PRESIDING MEMBER: Thank you. 19 MR. LESLIE: It says: 20 "Further to my letter of February 7th, 21 2000, I am pleased to advise that the 22 Township of Dawn-Euphemia and Union Gas 23 have resolved all outstanding matters 24 and, accordingly, the Township hereby 25 withdraws its intervention in the 26 aforementioned matter." (As read) 27 THE PRESIDING MEMBER: Is there a settlement 28 agreement to be filed, as a result of that agreement, 331 Preliminary Matters 1 Mr. Leslie? 2 MR. LESLIE: There is an agreement. I have 3 just, by fax, one that's got handwriting on it. It has 4 a clause in it that requires the parties to keep it 5 confidential unless directed to do otherwise by the 6 Board. 7 --- Pause 8 THE PRESIDING MEMBER: All right. The reason 9 I ask, Mr. Leslie, is that -- I don't know, of course, 10 the nature of the agreement because I haven't seen it -- 11 MR. LESLIE: I didn't negotiate this with 12 them, by the way, so I'm a bit -- I don't know the 13 background. 14 THE PRESIDING MEMBER: I just don't know if 15 there are issues covered in that agreement that are 16 relevant to the public interest, either in this hearing 17 or, possibly, in future hearings for the Board. 18 It would be of assistance if, in some manner, 19 you could tell me what the subject matter is of that 20 agreement so that we may be assisted in judging whether 21 the Board needs to see it or whether I could -- 22 MR. LESLIE: Would you direct me to do that, 23 Madam Chair. 24 --- Laughter 25 THE PRESIDING MEMBER: Yes. 26 MR. LESLIE: Thank you. 27 I mean the controversy, as I understood it -- 28 and as I say, I wasn't directly involved -- was as to 332 Preliminary Matters 1 Dawn-Euphemia wanted Union to move the transmission 2 lines, in the future, if the space that they were taking 3 up was required for other purposes and -- 4 THE PRESIDING MEMBER: I'm sorry. 5 Transmission lines you have already laid? 6 MR. LESLIE: No, no; the ones that would be 7 laid, as part of this project. 8 THE PRESIDING MEMBER: Okay. 9 MR. LESLIE: They were anxious to have some 10 assurance that if, in the future, the municipality 11 required that portion of the road allowance for other 12 purposes that Union would seek to move the transmission 13 lines to accommodate them. This is all prospective. 14 And the agreement deals with that. 15 There was also controversy between 16 Dawn-Euphemia and Union as to whether or not the 17 franchise agreement, which was entered into in, I 18 believe, 1981, allowed Union to use the road allowance 19 or whether -- for transmission lines -- or whether it 20 did not make such provision. And that's dealt with in 21 the agreement, as well. 22 And there was also an understanding reached as 23 to Union's -- recovery of costs by Dawn-Euphemia for 24 their intervention. 25 I think those are the three major elements. 26 MS LEA: Would it be Union's understanding 27 that the agreement reached would apply to other 28 situations where Union is constructing in Dawn-Euphemia? 333 Preliminary Matters 1 MR. LESLIE: If they were laying transmission 2 line, or wanted to lay transmission line, in 3 Dawn-Euphemia, in the future, they would require 4 Dawn-Euphemia's permission to do that, I think. In some 5 circumstances; perhaps not in others. But I don't think 6 it affects anyone other than Dawn-Euphemia. 7 MS LEA: Unless other townships like the look 8 of that agreement, also. 9 Let us think on that. Thank you. 10 THE PRESIDING MEMBER: Mr. Leslie, perhaps you 11 could help me about the confidentiality. 12 Is it that Union and Dawn-Euphemia are 13 concerned that the document is made public on the public 14 record? Or is Dawn-Euphemia concerned that the Board 15 not have access to this document? 16 As you are aware, under the provisions of our 17 Rules, documents that are confidential may be filed with 18 the Board if, in fact, they are of a confidential nature 19 and there's a procedure to keep them from the public 20 record so the Board can see them, be confident of the 21 nature of the document -- 22 MR. LESLIE: I think that would probably be 23 the preferred course. As I say, I don't really know the 24 background, but I think that would be the preferred 25 course. 26 THE PRESIDING MEMBER: And then, depending if 27 the Board determined -- then there's a procedure, under 28 the Rules of Practice, whether the document is in fact 334 Preliminary Matters 1 confidential or it should be made on the public 2 record -- 3 MR. LESLIE: Yes. 4 THE PRESIDING MEMBER: -- but I think that 5 that might be a good first step so that we could at 6 least -- the Board Members could see the document -- 7 MR. LESLIE: You would like me to file it in 8 confidence with the Board, initially? 9 THE PRESIDING MEMBER: Yes, please. 10 MR. LESLIE: I do not have the final 11 document -- 12 THE PRESIDING MEMBER: I appreciate that. 13 MR. LESLIE: -- at this point, but I will do 14 that. 15 THE PRESIDING MEMBER: Thank you. 16 --- Pause 17 THE PRESIDING MEMBER: I would just point out, 18 Mr. Leslie, that I have been in contact with the Board 19 and I understand that in the model franchise agreement 20 negotiations that progress has been made to deal with 21 removal -- or movement of transmission lines and 22 payments for -- 23 MR. LESLIE: Yes, and I think some of that may 24 make some of this academic, but I don't know; I haven't 25 been keeping track of the model franchise agreement. 26 THE PRESIDING MEMBER: As I said, as of 27 yesterday, I understand some movement has been made that 28 I don't -- 335 Preliminary Matters 1 MR. LESLIE: I understand that, as well, but I 2 don't know exactly what's happening. 3 THE PRESIDING MEMBER: Thank you. 4 Are there any other preliminary matters? 5 MR. LESLIE: The only other thing, I was 6 asking questions about the zone pool and I have some 7 additional information that I can give -- this was 8 Undertaking 16.5. 9 THE PRESIDING MEMBER: Please do. 10 MR. LESLIE: That area was designated some 11 time ago, but there were never any injection or 12 withdrawal rights sought or granted. It was simply a 13 matter of having it designated. And I believe there was 14 some effort made to have it undesignated, if that's 15 possible. It is a production -- the area that's being 16 discussed is a production property, or was a production 17 property, and that was sold by Union Gas, in January of 18 1992, to a company called Lakeville Holdings Inc. and, 19 so far as I'm aware, they are still the owners of the 20 production facility. 21 That's all I had. Thank you. 22 THE PRESIDING MEMBER: Ms Lea, any preliminary 23 matters? 24 MS LEA: I think this might be called a 25 preliminary matter. 26 Mr. Leslie, I did not assign an undertaking 27 number, and I probably should have, to Mrs. Galbraith's 28 undertaking to provide us with the storage contracts 336 Preliminary Matters 1 that were correct, and I think that that's because I 2 thought that they would be imminently available, but do 3 you want to assign an undertaking number now so that we 4 don't lose track of the fact that -- 5 MR. LESLIE: No, we haven't lost track. I 6 gather they are being delivered now. It took them 7 awhile to assemble them but I was told, at the lunch 8 break, that they were in transit. 9 MS LEA: I wonder, just for my peace of mind, 10 if we could assign that Undertaking 16.7 and then it can 11 be complied with, then. 12 So, 16.7: the storage contracts. 13 MR. LESLIE: That's fine. 14 MS LEA: Thank you. 15 UNDERTAKING NO. 16.7: Mrs. Galbraith 16 undertakes to provide storage contracts 17 MS LEA: That's all I have, in terms of 18 preliminary matters. Thank you, Madam Chair. 19 THE PRESIDING MEMBER: Thank you. 20 I'm not sure if this by way of a preliminary 21 matter or not, but I'm looking to see -- is Mr. Egden 22 still around? 23 MR. LESLIE: No, he's left, I'm told. 24 THE PRESIDING MEMBER: He's left. 25 MR. LESLIE: We can reach him by telephone. 26 THE PRESIDING MEMBER: I may have -- based on 27 what this panel had to say, I may have a few questions 28 that I would like to ask him on further clarification. 337 Preliminary Matters 1 Would it be possible for him to return this 2 afternoon? No? 3 MS LEA: Cold we communicate the questions to 4 him and have him answer in written form? Or -- 5 MR. LESLIE: Yes, I expect we can reach him 6 somehow and if it can be dealt with that way, fine, if 7 not, then we will make arrangements -- 8 THE PRESIDING MEMBER: That's fine. If you 9 were -- as I said, I was looking out in the crowd and I 10 couldn't see him; so if he's imminently available, we 11 might have him come back and just answer the questions, 12 but if not, I may have some further questions to ask -- 13 MR. LESLIE: For some reason, these people all 14 seem to want to leave -- 15 THE PRESIDING MEMBER: I don't understand why. 16 --- Laughter 17 THE PRESIDING MEMBER: The landowners are all 18 still here. 19 --- Laughter 20 THE PRESIDING MEMBER: That having been said, 21 Ms Lea? 22 MS LEA: Thank you. 23 EXAMINATION (CONTINUED) 24 MS LEA: I need to go, gentlemen, to some of 25 the documents that you provided us before the lunch 26 break. We have a couple of follow-up questions with 27 those, as you can imagine. 28 Could we look at Exhibit 9.9, first of all. 338 UNION GAS PANEL 3, ex (Lea) 1 That is the letter of acknowledgement regarding the 2 Rawlings property. 3 The reason -- we see that this deals with 4 various wells, 1, 2, 3 and 6. We thought that UMB No. 5 5 was also on this property. Are we wrong about that? 6 And if we are not wrong, where is the letter of consent 7 with respect to that location? 8 MR. LOWE: UMB No. 5 is on the Kember 9 property. 10 MS LEA: The Kember property. 11 Let's just have a look at that map. 12 --- Pause 13 MS LEA: Okay. I think what we are looking 14 at -- and perhaps you can assist us -- is the updated 15 version of Section 3, Schedule 25. It will probably 16 take you a minute to find that. 17 MR. LOWE: Unfortunately I gave my copies for 18 copying this morning for distribution. 19 MS LEA: Okay. We were looking at an 20 application for a well license, schedule 3, section 21 25 -- pardon me -- section 3, schedule 25 updated as of 22 January 28th 2000, and that lists UMB 5 on the Rawlings 23 property. 24 MR. LOWE: Yes, I understand there was an 25 error made in the landowner information on that. It 26 should actually be Kember. 27 MS LEA: Okay. So do we have -- so this well 28 license then is -- application for well license is 339 UNION GAS PANEL 3, ex (Lea) 1 incorrect in terms of who is named as the owner? 2 MR. LOWE: That is correct. I don't think 3 anything turns on that. That is more of an information 4 issue but we are -- we will make efforts to resend that 5 for correction into the ministry. 6 MS LEA: Okay. Now, however, do you have the 7 consent then from the landowner that has this well on 8 their property? 9 MR. LOWE: Yes, we do. 10 MS LEA: Okay. Where do we find that? 11 MR. LOWE: That is in the acknowledgement form 12 for Mr. Kember. 13 MS LEA: And was that given to us this morning 14 also, Exhibit 9.10 15 MR. LOWE: Yes, it was. That is correct. 16 MS LEA: Okay. While Mr. Mackie is looking at 17 that for us, the next thing we were curious about was 18 the agreement -- this microphone seems awfully loud. Am 19 I -- anyway. 20 The third gas storage lease agreement and the 21 P&NG leases for the Hardy property, which was an 22 addition to BW 12-2. If we look at that gas storage 23 lease agreement, it is -- the description of the lands 24 says containing in all three acres. And when you look 25 at the maps of the Hardy property, you will see that the 26 small portion of this, which appears to be two to three 27 acres and then there is a large portion which appears to 28 be about another 97 acres. 340 UNION GAS PANEL 3, ex (Lea) 1 Now, was this lease intended to cover all of 2 the Hardy property or just that small bit? 3 MR. LOWE: It just covers the house lot. 4 MS LEA: Just the house lot. And what about 5 the gas storage lease and P&NG lease for the rest of 6 that property? 7 MR. LOWE: That is contained in another tab. 8 MS LEA: Another tab. Which tab is that 9 contained in, sir? 10 MR. LOWE: It should be in Volume 4 at Tab BW 11 12-1. 12 MS LEA: 12-1. Okay. We will look at that. 13 Thank you. 14 Now, the new transmission easement agreement, 15 easement for transmission pipeline, thank you for your 16 help in identifying the changes, Mr. Haley, but is this 17 to the extent to all persons who now sign the 18 transmission easement agreements with Union Gas or was 19 this specifically set up for those landowners in this 20 application and their transmission easement agreements? 21 MR. HALEY: For the time being it is 22 specifically for this project. Last year you may 23 remember that the transmission easement was updated as a 24 result of EBRO 267 Dawn/Enniskillen and we adopted that 25 easement for future transmission purposes. I don't 26 think we are to that state at this time to say that it 27 will be extended. But I assume it probably will be. 28 MS LEA: All right. 341 UNION GAS PANEL 3, ex (Lea) 1 MR. HALEY: We haven't put our minds to that 2 yet. 3 MS LEA: So that certainly people who sign 4 transmission easements in future with Union could 5 certainly request this form of transmission easement 6 agreement and find it acceptable to Union? 7 MR. HALEY: Yes, that would be the case. 8 MS LEA: I have a similar question with 9 respect to Exhibits 9.6 and 9.7, that is a letter of 10 understanding, and the construction commitment. Are 11 these intended to be of general application or merely to 12 apply to the landowners in this particular application 13 and that belong to Lambton County Storage Association? 14 MR. HALEY: Based on past history, I would say 15 that the letter of understanding is a document that is 16 negotiated between each individual group of landowners, 17 and I suspect it might be a form that we would -- we 18 would present as a point of start as far as future 19 negotiations. But every -- every area and every group 20 of landowners seems to have different -- different 21 concerns in relation to the negotiation of the letter of 22 understanding. 23 So I can't say with certainty that it would be 24 the letter of understanding for all future transmission 25 projects. Other groups -- I don't think we would want 26 to tie any group of landowners' hands to a particular 27 form. Certainly based on experience with negotiations 28 with various landowner groups, they seem to have ready 342 UNION GAS PANEL 3, ex (Lea) 1 access to various forms of letters of understanding and 2 they form the basis of discussion. So -- 3 MS LEA: For the purpose of all landowners 4 involved with transmission pipelines in this 5 application, whether they are members or not of the 6 Lambton County Storage Association, this letter of 7 understanding will apply to them? 8 MR. HALEY: Yes, it will. I should point out 9 that to date in negotiations with the various 10 landowners, as you can appreciate, the form of the 11 letter of understanding has evolved over the course of 12 the negotiations. So landowners that have signed to 13 date have signed -- some have signed the initial form 14 that was filed with the original application. Some have 15 signed the form that was signed as a result of the 16 changes made after the technical conference and 17 certainly we are now working towards finalizing the 18 letter of understanding based on the settlement document 19 that was filed yesterday. 20 When we go back to finalize with all the 21 landowners on this project, they will be offered this 22 form as a final document. 23 MS LEA: And what about the construction 24 commitment form which outlines your construction 25 commitment, will that be applied to all persons on this 26 project to whom it could apply? 27 MR. HALEY: Yes, it will. 28 MS LEA: And I gather from what you have said 343 UNION GAS PANEL 3, ex (Lea) 1 then that although you do not yet have a firm view as to 2 whether these will be the very documents offered to 3 landowners in the future, do I understand you to be 4 saying that you would be willing to offer this form of 5 documentation to landowners in the future should they so 6 desire it? 7 MR. HALEY: I'm not sure I would go so far as 8 to say that because there are concerns reflected in this 9 letter of understanding that are specific to Lambton 10 County. I mean we might be building a pipeline on, you 11 know, the other side of London or, you know, in 12 Waterloo, Region of Waterloo, I'm just throwing out some 13 examples, where the concerns might not be exactly the 14 same. 15 So I think we would want to reserve the 16 opportunity to negotiate letters of understanding with 17 future transmission groups that are -- that are specific 18 to those people. They might have other concerns. I 19 don't know that we would want to tie their hands. I am 20 sure this forum would be part of the negotiations. But 21 to say that we would automatically say that it is the 22 document that has to be used by a future landowner 23 group, I don't think that would be appropriate. 24 MS LEA: You must have heard my question, sir. 25 It was not whether you were going to tie landowners' 26 hands. I was trying to tie Union's hands. Okay. 27 All I am asking you is and I think you have 28 answered it in that answer. Other landowner groups 344 UNION GAS PANEL 3, ex (Lea) 1 would at least have access to these forms so they know 2 what other people have negotiated in the past in 3 negotiations. 4 MR. LESLIE: Ms Lea, I think you can assume 5 that Mr. Vogel will make these documents available to 6 anyone who is interested. 7 MS LEA: Thank you, Mr. Leslie. I am sure 8 also that your client would behave in negotiations such 9 that there was a free-flow of information with regards 10 to past agreements also. 11 MR. LESLIE: That has been the history so far. 12 MR. HALEY: If I may just from my own personal 13 experience, I was involved in a project in Eastern 14 Ontario three years ago and we used a form of letter of 15 understanding that had been used in Southwestern Ontario 16 and adapted it to the specific needs of the landowners 17 in that Eastern Ontario project. 18 So that is what I was trying to convey that, 19 you know, it is a document that, you know, that is 20 worked out with each individual group. And you know, 21 those groups seem to have easy access to all the various 22 forms and try to incorporate those things that are 23 important to them in the document. I think it is 24 different than the easement document if I may make that 25 distinction. 26 MS LEA: Thank you. Let's move to something 27 that you were discussing, Mr. Lowe, and that has to do 28 with the purchase of the Oil City Pool leases and 345 UNION GAS PANEL 3, ex (Lea) 1 storage interests. Did Union have a working interest in 2 the Oil City Pool before it purchased the balance of the 3 assets. There was that purchase for $988,000. Did you 4 have any working interest in the pool before then? 5 MR. LOWE: Yes, we did. 6 MS LEA: What percentage was that working 7 interest? 8 MR. LOWE: I don't have the exact number in 9 front of me, but my recollection it was in the order of 10 magnitude of 16.7 per cent. 11 MS LEA: Sixteen-point-seven, okay. 12 MR. LOWE: Just going by memory. 13 MS LEA: All right. 14 So the amount that you paid for the storage 15 interest covered what percentage of the storage 16 interests in the pool, was it 100 minus 16.7 or are 17 there still some storage interests outstanding? 18 MR. LOWE: All the storage interests have been 19 purchased from previous partners. 20 Prior to the purchase -- I'm sorry. 21 MS LEA: All right. The reason -- all right, 22 I will go first. 23 The reason that I asked you that is that in 24 Undertaking 28 you had a statement that percentage DSA 25 acres for the Oil City Pool for which Union hold the gas 26 storage rights is 80.7 per cent. 27 So I guess that is a different matter. That 28 is a gas storage right matter, that is not the -- 346 UNION GAS PANEL 3, ex (Lea) 1 MR. LOWE: That's the gas storage lease 2 interest. It's different. 3 MS LEA: So we are turning back to the working 4 interest then. All right, so that covered 73.7 per 5 cent, the amount that you paid -- 83.7 per cent it would 6 be, wouldn't it -- .3 per cent, right. I'm getting my 7 7s and 3s mixed up. 8 So given that you had a 16.7 per cent working 9 interest in the pool, you purchased 83.3? 10 MR. LOWE: That's correct, yes. 11 MS LEA: You have told us how much was paid 12 actually for the gas storage rights portion of the 13 amount that you paid the previous holders. How could 14 you determine how much was for assets and how much was 15 for gas storage rights? Was it divided up in the 16 purchase? 17 MR. LOWE: Yes, it was and each component of 18 the purchase is negotiated on a stand-alone basis to add 19 up to the cumulated total. 20 MS LEA: Thank you. 21 This is something I asked the panel yesterday 22 and I think they referred it to you: Does Union have a 23 policy of purchasing the assets of existing producing 24 pools if it appears from the geological data that is 25 available that the pools might eventually become 26 candidates of gas storage areas? 27 MR. LOWE: We are not always in control of 28 that, but certainly if that were the case we would have 347 UNION GAS PANEL 3, ex (Lea) 1 an interest in making an offer and sitting down and 2 discussing with the owners of the storage rights what 3 the sale price might be. 4 MS LEA: Okay. Thank you. 5 You gave us some evidence earlier this morning 6 about the prices for 10(3)m(3) of the storage rights in 7 each of these pools and you indicated that the Mandaumin 8 and Bluewater Pool price was quite heavily discounted, 9 but also that the Oil City Pool price was somewhat 10 discounted from what you described as the expected 11 market price of $28. 12 I had understood your earlier evidence to be 13 that you had seen pool prices that went up to a maximum 14 of $28 but that that was not the average market price. 15 Can you expand a little bit on what you would expect in 16 the market? 17 MR. LOWE: Yes. From the review of storage 18 rates purchases that I have had the opportunity to look 19 at, the prices would range from in the order of $4.90 20 for the Mandaumin Pool, which I believe would be at the 21 low end of the scale -- and I'm having a little 22 difficulty converting that to 10(3)m(3) from numbers 23 that I am more familiar with. 24 --- Pause 25 MR. LOWE: To a high of, I believe, $44 a 26 10(3)m(3) is the highest amount that has been paid. 27 MS LEA: Where was that? 28 MR. LOWE: That would be the Oil Springs East 348 UNION GAS PANEL 3, ex (Lea) 1 Pool and the Dowe A Pools. 2 MS LEA: Can you tell me what the -- I'm not 3 asking you for the average price over the whole history, 4 but if you were to go into the market today what would 5 you expect to be the average market price? 6 MR. LOWE: I would say the average market 7 price would be in the $28 to $30 10(3)m(3). 8 MS LEA: Okay. Now, I earlier mentioned the 9 Undertaking 28 which describes the percentage DSA acres 10 to the Oil City Pool for which you held the gas storage 11 rights. Is it still -- is that undertaking still 12 current? Do you still own just over 80 per cent of the 13 gas storage rights there? 14 MR. LOWE: Yes. I believe when I prepared 15 that undertaking the Archibald Hardy lease and the Hoven 16 lease were taken into account. So that would still be 17 current. 18 MS LEA: That would still be current. 19 How much do you expect to pay to acquire the 20 remaining gas storage rights? 21 MR. LOWE: We would not be purchasing gas 22 storage rights, we would be acquiring gas storage leases 23 from landowners. That way we would pay our standard 24 storage compensation package that is identified in 25 section 9, pages 9-1 and 9-2. 26 MS LEA: All right. I think I understand 27 this. I think I understand that now. 28 MR. LOWE: I tried to point out the 349 UNION GAS PANEL 3, ex (Lea) 1 distinction between gas storage leased purchases and gas 2 storage rights purchases with the panel this morning -- 3 MS LEA: Yes. I got a bit confused. Go 4 ahead, I'm sorry. 5 MR. LOWE: -- when I addressed the panel this 6 morning in cross by Mr. Leslie. 7 MS LEA: Mr. Haley, you talked about the 8 leases for transmission lines and many of the questions 9 that I had for you have been answered by the evidence 10 that you provided this morning. 11 The last three leases that you don't yet have 12 options for, are you confident that these last three 13 leases will be made available? 14 MR. HALEY: We have Mr. Vogel's word that his 15 clients have agreed to provide those easements. 16 MS LEA: Okay. Is there anything outstanding 17 with respect to the Township of Dawn-Euphemia? You 18 haven't seen the agreements, obviously, but there was an 19 objection by the Township of Dawn-Euphemia originally to 20 using the Dawn Valley -- D-A-W-N Valley -- road 21 allowance being used for construction of the MPS 16 22 transmission line. 23 That was originally a problem. Has that been 24 settled? 25 MR. HALEY: I have not been involved in those 26 negotiations at all. I believe Mr. Leslie has addressed 27 that in preliminary matters prior to this session. 28 MS LEA: Okay. Can you assist me then: Are 350 UNION GAS PANEL 3, ex (Lea) 1 there any issues outstanding with regard to the Township 2 of Dawn-Euphemia regarding leases or any other 3 difficulties with respect to the transmission lines? 4 MR. LESLIE: No, there are not. 5 MS LEA: Thank you very much. 6 Can we turn now to the question of gathering 7 lines. I'm not sure whether I understood that your 8 remarks this morning covered easement agreements for the 9 gathering lines. 10 I gather that there are several landowners who 11 will have gathering lines constructed on their 12 properties. Again, I'm not even sure if my original 13 information about where these were supposed to go is 14 still correct given the changes. 15 Can you assist me with this? 16 MR. HALEY: That would be a question better 17 answered by Mr. Lowe. 18 MS LEA: Whoever can answer it, please 19 help me. 20 MR. LOWE: Yes, I can try. 21 --- Pause 22 MS LEA: Yes. Can you then tell me where -- 23 tell me who and where gathering lines are going to be 24 constructed, that is, who are the landowners and where 25 are the gathering lines? 26 I'm looking at the Schedule 5 in section 4, 27 which is the big map of the Mandaumin Bluewater Pool. 28 MR. LOWE: Could you repeat that reference, 351 UNION GAS PANEL 3, ex (Lea) 1 please? 2 MS LEA: I didn't hear you, Mr. Lowe. 3 We have section 4, Schedule 5, large map. 4 --- Pause 5 MR. LOWE: Yes. Starting at the top of the 6 map in the Mandaumin Pool within Lot 1 -- 7 MS LEA: Yes. 8 MR. LOWE: -- at UMD No. 3 a gathering line 9 would be extended from the well to the road allowance. 10 MS LEA: So does the black dashed line, then, 11 represent gathering lines on this map? 12 MR. LOWE: Where they exist on landowners 13 property and not on road allowance, yes. 14 MS LEA: Thank you. Okay. So the Rawlings 15 property also has gathering lines for UMB 1, 6 and 2. 16 MR. LOWE: That's correct, and the dash line 17 on that map adjacent to the pink roadway area are also 18 considered gathering lines. 19 MS LEA: And what about the Kember Farms 20 property? 21 MR. LOWE: Yes. On the Kember farm from UMB 4 22 to UMB 5 and out to the road allowance, it's also a 23 gathering line. 24 MS LEA: Anything else in the Mandaumin? 25 MR. LOWE: No, there is not. 26 MS LEA: So in Bluewater, I seem to see those 27 on the Hardy property. Are they on the Hardy property 28 or the Josh property? 352 UNION GAS PANEL 3, ex (Lea) 1 MR. LOWE: All the gathering lines are on the 2 Hardy property. 3 MS LEA: Okay. 4 MR. LOWE: You see can that dash line 5 extending from UBW 1. 6 MS LEA: Yes. 7 MR. LOWE: Heading south to pick up UBW 2 and 8 then heading easterly along the bush line and 9 interconnecting with a point of intersection of a line 10 that heads south from BTS 5-3-2 would be considered 11 gathering lines. AT the point of interconnection of the 12 two, I guess, "U" shaped gathering line, I believe we 13 cross over on to -- sorry. 14 MS LEA: I'm sorry? 15 MR. LOWE: At that point of interconnection we 16 transfer over to transmission unit. 17 MS LEA: So it becomes a transmission line as 18 it proceeds further south. 19 MR. LOWE: That's correct. 20 MS LEA: Okay. So with respect to those 21 gathering lines, have you negotiated even agreements or 22 options for agreements of these property owners? 23 MR. LOWE: Yes, we have. 24 MS LEA: And what sort of agreement do you 25 offer for gathering lines? Is it the same as for 26 transmission lines? 27 MR. LOWE: No, it is not. The primary reason 28 is we offer the equivalent easement payment and we pay 353 UNION GAS PANEL 3, ex (Lea) 1 crop losses on an annual basis as opposed to a one time 2 lump sum because the storage pool operates annually for 3 extended periods of time. 4 We pay the disturbance component that's 5 normally contained in the transmission easement. We 6 include that in the calculation of the roadway payment 7 where the roads are -- gathering lines are normally laid 8 adjacent to the road lines. 9 MS LEA: Okay. 10 MR. LOWE: Now, to the extent that on Mr. 11 Hardy's property as an example, to the extent that the 12 gathering lines are not adjacent to roadways, they will 13 be paid out at the easement rates. 14 MS LEA: Are there any other differences 15 between the easement agreement that you offer for 16 gathering lines and that offered for transmission lines? 17 MR. LOWE: Speaking in terms of compensation 18 or documentation? 19 MS LEA: Well, I guess I'm more concerned with 20 compensation and also rehabilitation, soil protection, 21 those sorts of issues. I'm not exactly sure what's 22 offered here. 23 MR. LOWE: Yes. On the rehabilitation basis, 24 that's where I addressed the crop damages, it's paid out 25 annually until there is a full return to productivity of 26 that land. On the easement payment, they do it as a one 27 time crop loss based on a formula -- crop loss payment 28 based on a formula. 354 UNION GAS PANEL 3, ex (Lea) 1 MS LEA: Do you know the reason for the 2 difference? 3 MR. LOWE: Yes, I do. 4 MS LEA: Do you want to share it? 5 MR. LOWE: Well, I guess the primary reason is 6 we have no rights, I guess, to be on the property with 7 respect to an easement. We have to negotiate the right 8 to be there as well as the other damage settlement. 9 The other reason is that we don't have an 10 ongoing staff available to monitor the crop losses and 11 pay the damages out annually whereas with respect to 12 storage pools, we have an ongoing land administration 13 staff that can be available to monitor crop loss and pay 14 any damage claim. 15 MS LEA: I'm sorry, I don't understand. With 16 respect to crop loss, you say you can't monitor what's 17 happening on the gathering lines. 18 MR. LOWE: No. We can monitor on the 19 gathering lines. We have the staff available to do 20 that. 21 MS LEA: Okay. So the crop loss is paid 22 annually. 23 MR. LOWE: Yes. 24 MS LEA: I understand. 25 MR. LOWE: To the extent it exists, yes. 26 MS LEA: Yes. And with transmission lines 27 then, it is not paid annually. 28 MR. LOWE: That's correct. It's a one time 355 UNION GAS PANEL 3, ex (Lea) 1 settlement. 2 MS LEA: Okay. I think I understand now. Do 3 you have the form of easement agreement that we could 4 look at for the Board? 5 MR. LOWE: I beg your pardon? 6 MS LEA: Is the form of easement agreement 7 used also for gathering lines? 8 MR. LOWE: We don't have a form of agreement. 9 The right to install the line is included in the lease 10 documents. 11 MS LEA: But I thought you said you did reach 12 an agreement with the landowners. 13 MR. LESLIE: Ms Lea, if I can interject. It's 14 a matter of nomenclature of the document that allows you 15 to construct again on storage lease and the compensation 16 arrangements are dealt with under that document, so it 17 has broader purposes. It would be a substitute to the 18 easement when you are talking about gathering lines. 19 MS LEA: Is there any additional form of 20 agreement that people who have gathering lines on their 21 property sign or have with Union other than this gas 22 storage lease? 23 MR. LOWE: We enter into the acknowledgement 24 form for one document and in this proceeding we have 25 committed to the letter of commitment for our 26 construction practices, but that's not something that's 27 signed back to us. 28 MS LEA: Okay. The letter of commitment, you 356 UNION GAS PANEL 3, ex (Lea) 1 mean the letter of understanding and the construction 2 commitment. 3 MR. LOWE: No. The work commitment document 4 for storage pools. 5 MR. LESLIE: Ms Lea, again, if I could just 6 keep the nomenclature straight. 7 MS LEA: Yes. 8 MR. LESLIE: The letter, I think it was called 9 the construction commitment letter -- 10 MS LEA: Right. 11 MR. LESLIE: That is the same thing for 12 gathering lines that the letter of understanding has for 13 transmission lines. 14 MS LEA: I'm with you now. All right. The 15 letter of understanding deals with transmission lines 16 and the construction commitment deals with all of the 17 storage facilities, which include gathering lines. 18 MR. LOWE: That's correct. 19 MS LEA: I think I understand. So the 20 protection offered to landowners, I mean -- I'm 21 concerned not so much about what document -- the 22 protection offered to landowners who have gathering 23 lines on the property. Mr. Lowe, you have described the 24 differences between what's offered to a landowner with a 25 transmission line and a gathering line. Am I right? 26 MR. LOWE: That's correct. 27 MS LEA: Okay. The reason I ask -- how large 28 are these gathering lines? I think their MPS 12 is the 357 UNION GAS PANEL 3, ex (Lea) 1 largest. 2 MR. LOWE: It varies for the various wells. 3 This particular drawing I am looking at here doesn't 4 have it in. This is probably a question better 5 addressed to the facilities panel previously. I can try 6 and assist. 7 MS LEA: I guess my point is that the 8 construction disturbance that may occur with an 9 easement, with a gathering line, may be equivalent to 10 the construction of service that would be caused by the 11 construction of the transmission line. Would you agree 12 with that? 13 MR. LOWE: It can be. Where there are 14 gathering lines or laid off of road allowances there is 15 a significant reduction in the level of impact. 16 MS LEA: Yes. 17 MR. LOWE: Most of the truck traffic is on the 18 road which is a much stronger surface, say, than the 19 adjacent land. We are generally dealing with smaller 20 pipe sizes than we are in an easement. 21 On a storage project of this sort, the 22 pipeline sizes are much smaller than normal. We really 23 expected very little impact. Our experience with 24 gathering lines, we have very little second year impact 25 on the crops. 26 MS LEA: One moment, please. I just need a 27 moment. 28 --- Pause 358 UNION GAS PANEL 3, ex (Lea) 1 MS LEA: Mr. Lowe, I was trying to recall. I 2 know that I have debated the issue of whether Union has 3 to file or has to have easement agreements for gathering 4 lines with you before. I know that Union's position is 5 that the gas storage lease gives them the right to enter 6 the land for that purpose. 7 Leaving aside that argument for the moment, 8 have you filed in previous proceedings easements for 9 gathering lines? My recollection is that you did it for 10 phase I of this application. 11 MR. LOWE: Yes. No, Ms Lea, as far as I know 12 we have not done so. 13 MS LEA: You have not done so. 14 MR. LOWE: The storage lease is the comparable 15 document. 16 MS LEA: I understand your position. I was 17 just trying to recollect how that matter had been 18 resolved in the past. 19 MR. LOWE: What we do, Ms Lea, is get a survey 20 done of the easement area and we file that at the 21 Registry Office, put the public on notice that there is 22 a pipeline there. As far as the compensation is 23 concerned, you have our assurance that the compensation 24 is equitable. 25 MS LEA: Yes. I'm just trying to determine 26 whether the Board has to approve the form of the 27 agreement. I understand your position that that 28 agreement exists in the gas storage lease. Is that 359 UNION GAS PANEL 3, ex (Lea) 1 correct? 2 MR. LOWE: Yes. That is correct. 3 MS LEA: Okay. That is your position. Thank 4 you. 5 Turning to the question of the gas storage 6 leases and again, thank you for the evidence that you 7 filed today. In the Oil City Pool there are several 8 landowners and in the Bluewater and Mandaumin Pool there 9 are landowners Harris and MacRae for whom you do not 10 have gas storage and/or PNG -- P&NG leases. Am I 11 correct? 12 MR. LOWE: That is correct. 13 MS LEA: Okay. You have indicated earlier 14 today that you have made all of these landowners the 15 standard offer you have made to other landowners? 16 MR. LOWE: With respect to those lease 17 documents, yes. We haven't made the official Union Gas 18 storage compensation offer yet because we only -- except 19 in the case of Mandaumin where it has already been 20 accepted, we don't make that offer until after we have a 21 court order and prior to injection. That is what is 22 stated in the storage lease. 23 MS LEA: With respect to the leases then, do 24 you anticipate having further discussions or 25 negotiations with the landowners for whom these leases 26 are outstanding? 27 MR. LOWE: I think that will be dependent on 28 Mr. Vogel as their representation. 360 UNION GAS PANEL 3, ex (Lea) 1 MS LEA: Are all of the landowners who have 2 not yet signed leases part of the Lambton County Storage 3 Association? I did not think all the -- 4 MR. LOWE: With the exception of the 5 management board, the road allowances and I would have 6 to check on the house lots in Oil City, but the answer 7 is yes on the balance. 8 MS LEA: Okay. I didn't think the house lot 9 owners were, but that is fine. I accept that the 10 government is not. Do you think then that if either an 11 agreement on compensation or a ruling as to compensation 12 is made that you -- that that would offer you new hope 13 to negotiate leases with these people whose property is 14 as yet not under lease? 15 MR. LOWE: That would be my expectation, yes. 16 MS LEA: You told us about the management 17 board situation. You said that the government 18 department was undergoing reorganization. Have you made 19 any progress at all since the technical conference in 20 terms of the status of that leasing agreement? 21 MR. LOWE: I have recently contacted Elliott's 22 Land Services and I think the response to that is that 23 it is still in the works. 24 MS LEA: And the municipalities with respect 25 to the roadways, they will receive the same compensation 26 of $65.53 per acre per annum for the roadways in the 27 DSA. Is that right? 28 MR. LOWE: Did I hear you say 65? 361 UNION GAS PANEL 3, ex (Lea) 1 MS LEA: I think that is -- yes, that is what 2 I said. Am I wrong? 3 MR. LOWE: Yes. There was an interrogatory 4 response where we had corrected that number. 5 MS LEA: Oh, okay. 6 MR. LOWE: It was in evidence at $63.53. I 7 think there was a transcription error. The new offer as 8 stated in section 9, page 9-1 is $64.68. 9 MS LEA: $64.68. 10 MR. LOWE: And yes, they will be made that 11 offer. 12 MS LEA: But you don't need lease agreements 13 for the roadways, do you? 14 MR. LOWE: Yes, we take out lease agreements. 15 MS LEA: You take out lease agreements. Okay. 16 Do you have those lease agreements yet with them? 17 MR. LOWE: No. As you can imagine, as stated 18 at the technical conference, the roadway descriptions 19 and survey fabrics for the roads is quite complicated 20 and it has taken some time to get those documents put 21 together with a proper lease description. My 22 understanding is they have those documents and they are 23 under review. 24 MS LEA: Okay. You mean the municipality has 25 them? 26 MR. LOWE: I think it is the Lambton County 27 that has the roadways. 28 MS LEA: Okay. But do you expect to get those 362 UNION GAS PANEL 3, ex (Lea) 1 leases or is there a problem between you and the 2 municipality in regards to getting those leases? 3 MR. LOWE: No, we expect to get the leases. 4 MS LEA: Okay. So it is just a question of 5 getting the wording in the description correct? 6 MR. LOWE: I think the paperwork is done now. 7 It is a matter of having them present it before counsel. 8 I am not sure of the exact status of that. 9 MS LEA: So I guess then that the situation is 10 that Union is -- wishes the Board to approve this 11 application with some private landowners still not 12 having signed gas storage and P&NG leases. Is that 13 correct? 14 MR. LOWE: That would be our wish, yes. 15 MS LEA: You are asking the Board then to 16 expropriate the gas storage rights from the landowners 17 in favour of Union, take the gas storage rights in 18 favour of Union? 19 MR. LOWE: I prefer to use the word 20 appropriation, but to grant -- I guess we would 21 appreciate them if they would grant us the rights to use 22 the land in the same way knowing that the landowners are 23 going to be compensated in the main -- in the same 24 manner as adjacently. 25 MS LEA: Well, why should the Board 26 expropriate to take away those rights from these people 27 to satisfy Union's storage desires? 28 MR. LESLIE: Ms Lea, under the act the Board 363 UNION GAS PANEL 3, ex (Lea) 1 and only the Board can give you the right to inject, 2 store and remove gas from land that is within a 3 designated storage area. The act also contemplates all 4 its designations by regulation. The Board makes that 5 recommendation. Once those approvals are in place, the 6 company is so authorized, is authorized to inject, store 7 and remove gas. If there is no agreement as to 8 compensation for those rights, the act provides in 9 section 38(1) that the Board will be the arbiter of what 10 that compensation should be. 11 The custom of having storage leases is 12 longstanding, but I think in principle, at least, you 13 wouldn't have to have a storage lease with anyone. I 14 mean the Board controls these matters and they 15 ultimately control the compensation as well. So the 16 fact that you don't have a storage lease with individual 17 landowners is probably not in the end determinative of 18 anything. It is a matter for the Board to decide 19 whether you should have the right to inject, store and 20 remove gas and that is what we are here for. 21 MS LEA: Mr. Leslie, thank you. I understand 22 that matters of compensation, of course, are dealt with 23 subsequently. But I guess what I am getting at is Union 24 is asking the Board to approve this application without 25 the consent of those landowners whose gas storage rights 26 are affected. 27 MR. LESLIE: That is correct. 28 MS LEA: Now, why would that be in the public 364 UNION GAS PANEL 3, ex (Lea) 1 interest. That is my question. 2 MR. LESLIE: Well, because it is in the public 3 interest to have storage facilities in Ontario. That 4 was the whole point of the evidence on lead and the 5 economics. If you require landowner consent in each and 6 every instance, you wouldn't have any gas pool or at 7 least you would have them with substantially different 8 conditions. 9 MS LEA: I understand your position, Mr. 10 Leslie, I just need to understand Union's position on 11 the record and the reason why they believe it is in the 12 public interest for this taking place? 13 MR. LESLIE: I can address this in my 14 submissions but that is basically it. 15 MR. LOWE: If it gives the Board panel any 16 comfort, there are a number of landowners in other 17 storage pools that have operated close to 30 years now 18 that have no leases. 19 MS LEA: Now, that doesn't mean they are 20 happy. I am not quarrelling that this Board has in the 21 past made orders over the consent of landowners. 22 MR. LOWE: Some of those landowners have been 23 before this Board in previous occasions on a 24 compensation application and they have had compensation 25 awarded and they have accepted it. 26 MS LEA: And some of the landowners have other 27 concerns besides merely compensation about these gas 28 storage leases. In any event, I understand your 365 UNION GAS PANEL 3, ex (Lea) 1 position. I don't think I need further evidence on it. 2 Now, if you are granted authorization to 3 inject, store and withdraw gas from the Oil City Pool, 4 will you keep making attempts to get these leases from 5 owners in these pools? 6 MR. LOWE: It's our intention to make an offer 7 prior to injection as required under -- under leases 8 agreements even though we don't have leases. So we 9 would undertake to do that one more time. There is only 10 so many times that you can approach a landowner. 11 MS LEA: Okay. Let's go back then and have a 12 look then at what has happened to those landowners who 13 did not choose to sign leases in the Phase I 14 application. I think we indicated to you that we might 15 be interested in these matters. 16 There were two landowners as I recall them. 17 There was the McMurphy property and the Higgs property. 18 And at the time of that hearing, Union did not hold gas 19 storage leases for either property and I gather that is 20 still the case. Can you update us on that? 21 MR. LESLIE: Ms Lea, and I had mentioned this 22 to Mr. Mackie earlier, this came up at the technical 23 conference and as a result Mr. Bev Wilton who was the 24 lands -- the person from Union's Lands Department 25 involved prepared a letter to me actually detailing his 26 contact with both the Higgs and Mr. McMurphy following 27 the Phase I hearings. And if it would be helpful I can 28 file that letter now. It does give information about 366 UNION GAS PANEL 3, ex (Lea) 1 the context that is ongoing. 2 MS LEA: Certainly. Thank you very much. 3 MR. LESLIE: Mr. McMurphy was here himself. 4 He may still be here. I don't know. 5 MS LEA: Yes. 6 MR. LESLIE: But he spoke to this briefly. 7 MS LEA: Thank you very much. 8 I think that will be 9.11. And that will be 9 letter from Bev Wilton. 10 EXHIBIT NO. 9.11: Letter from Bev Wilton 11 MS LEA: Now, just reading this letter, it 12 looks as if there was no contact with the Higgs family, 13 subsequent to the Phase I hearing, until after the 14 technical conference. 15 Do I understand that to be true, as far as 16 anyone's knowledge goes? 17 MR. LESLIE: I don't think that's accurate. I 18 think he just starts by saying that he spoke to him on 19 the 20th of January, but I believe he had contact with 20 him prior to that, as well. 21 MS LEA: Can anyone advise me as to the 22 attempts that Union made, since the hearing, to get gas 23 storage leases? 24 MR. LESLIE: I think the situation with the 25 Higgs is that, on a relatively amicable basis, Mr. 26 Wilton and Mr. Higgs have agreed to disagree. Mr. Higgs 27 is accepting payments from Union on the basis that those 28 payments are currently made for storage rights -- that 367 UNION GAS PANEL 3, ex (Lea) 1 is to say, he's getting what everybody else is 2 getting -- but he's doing so without prejudice to his 3 right to get more, and the compensation hearing, 4 presumably, will affect that, but he has been unwilling 5 to sign any kind of documentation, but he is getting 6 paid what all the other owners are being paid and he and 7 Mister -- as the letter indicates, he and Mr. Wilton 8 don't have any misunderstanding about the status. 9 MS LEA: And is Mr. Higgs a member of the 10 Lambton County Storage Association? I'm sorry. I 11 haven't completely read this letter yet. 12 MR. LESLIE: I believe he is, but I'm not -- 13 I'm not certain of that. 14 MR. LOWE: There's nothing in this 15 application, Miss Lea, that would tell us one way or the 16 other on that. 17 MS LEA: You are hopeful, however, that if -- 18 I gathered, from what you said, that if compensation 19 matters are resolved with that organization that may 20 assist in determining what compensation Mr. Higgs may 21 eventually receive? 22 I don't want to put words in your mouth; I 23 don't know whether that's what you were implying or not. 24 MR. LESLIE: Well, I think Mr. Higgs will 25 probably get the benefit of any benefit that arises out 26 of those. That's my understanding. And that's his 27 understanding, as well. That's what this letter speaks 28 to. 368 UNION GAS PANEL 3, ex (Lea) 1 MS LEA: What about contacts with the owners 2 of the McMurphy property -- with Mr. McMurphy? Were 3 there attempts made, after the Phase I hearing, to 4 contact the McMurphys? 5 MR. LESLIE: As Mr. McMurphy said the other 6 day, they made an offer; it's the standard offer; he 7 understands it's the standard offer; he doesn't think 8 it's adequate. There's not much point in further 9 discussion. 10 Again, it's a matter of whether the Board 11 feels that the amount that's being paid for storage 12 should be changed. And Mr. McMurphy, again, will get 13 the benefit of any increase in compensation. 14 So I don't think there's any misunderstanding, 15 as between the parties, as to where they stand. 16 MS LEA: Just a moment, please. 17 --- Pause 18 MS LEA: Was there also -- 19 MR. LESLIE: Both of these landowners, I 20 should probably say -- and I have said it, with respect 21 to Higgs -- are being paid the standard compensation 22 now. It's not that they are not getting any money. 23 MS LEA: Thank you. 24 Was there also a question of a transmission 25 easement that was required on the Higgs property? 26 MR. LESLIE: Not in this case, no. 27 MS LEA: I'm sorry. In Phase I, I believe 28 there was a transmission -- 369 UNION GAS PANEL 3, ex (Lea) 1 MR. HALEY: In Phase I -- I'm aware of that 2 from being in the Lands Department -- there was a 3 transmission easement and that has -- that was acquired 4 and is registered, and all matters related to the 5 transmission easement have been concluded. 6 MS LEA: Okay. Thank you. 7 One moment, please. 8 --- Pause 9 MS LEA: I don't have any further questions 10 for this panel. Thank you, gentlemen, very much. 11 The only thing I would say, though, is that we 12 haven't had a chance to look at all of these documents. 13 If there's something that arises later in the day, 14 perhaps we can ask you, either on or off the record, for 15 clarification. There was quite a bit received, so we 16 need maybe more time to review. 17 But thank you very much for your answers, and 18 those are my questions for this panel. 19 THE PRESIDING MEMBER: Thank you, Ms Lea. 20 I just have a couple of questions. 21 The first relates -- and you may have answered 22 this, and if you have, I do apologize -- the first 23 relates to the issue of gas storage leases and the 24 gathering lines and whether specific easements are 25 needed for gathering lines. 26 Do you think that within the Union Gas' gas 27 storage leases that you just expand the documents to 28 include descriptions of the easements for the gathering 370 UNION GAS PANEL 3, ex (Lea) 1 lines? Or is it that -- as I understood it before, it 2 was your position that the standard gas storage leases, 3 in and of themselves, grant Union the right to go onto 4 the property and construct whatever gathering lines they 5 want? 6 MR. LESLIE: Can I intervene -- 7 THE PRESIDING MEMBER: Certainly. 8 MR. LESLIE: -- because I think -- and Mr. 9 Lowe is not a lawyer but -- 10 THE PRESIDING MEMBER: Okay. 11 MR. LESLIE: -- he can tell me if I have got 12 this wrong. The lease agreements allows them to go in 13 and put in the gathering line. The easement that Mr. 14 Lowe is referring to, I think, is a real estate document 15 that records on title where that gathering line is, but 16 it isn't an easement in the sense that was filed this 17 morning that has a number of terms and conditions 18 dealing with the construction and compensation and 19 things of that kind; it's more of a plan of survey type 20 easement that's been put on title so people know where 21 it is. 22 THE PRESIDING MEMBER: I guess, Mr. Leslie, as 23 I understood, the Board staff's concern about the 24 easements for the gathering lines is that, as you know, 25 gas storage leases may have been signed many years ago 26 and there's concern that Union would, without informing 27 the landowner, without the landowner's consent, use a 28 gas storage lease standard agreement to go on and start 371 UNION GAS PANEL 3, ex (Lea) 1 construction, as opposed to an easement agreement where 2 the landowner would specifically agree to the 3 description of where the gathering lines were going to 4 be on the property, and I'm just wondering if we can 5 clarify the -- 6 MR. LOWE: The gas storage lease gives us the 7 specific right to lay pipelines. 8 THE PRESIDING MEMBER: But not for a specific 9 location. Is that correct? 10 MR. LOWE: That's correct. We use the 11 acknowledgement form to identify the location and we get 12 the landowner's permission to a specific site. 13 THE PRESIDING MEMBER: Okay. So the 14 landowner, then, using the rights under the gas storage 15 leases, would sign an acknowledgement, basically, saying 16 they acknowledge that this is where the wells are going 17 to be constructed and where the gathering lines would 18 be -- 19 MR. LOWE: As well as the roadways, yes. 20 THE PRESIDING MEMBER: As well as the 21 roadways. 22 MR. LOWE: Correct. 23 THE PRESIDING MEMBER: Okay. And they would 24 get additional compensation for that? 25 MR. LOWE: That's correct, yes. 26 THE PRESIDING MEMBER: So there is -- even 27 though there's not an easement agreement, per se, there 28 is an acknowledgement by the landowner as to where the 372 UNION GAS PANEL 3, ex (Lea) 1 location -- and the agreement of the landowners as to 2 the location of those gathering lines and where the 3 wells are going to be located and the roads? 4 MR. LOWE: Yes, there is. 5 THE PRESIDING MEMBER: Okay. And then you use 6 the survey as the document -- rather than registering 7 specific separate easement agreements on title, you 8 registered the survey that indicates where the gathering 9 lines are, and that's registered against title? 10 MR. LOWE: That's correct. 11 MS LEA: I also need to interject, very 12 briefly, too, if it please the Board. 13 THE PRESIDING MEMBER: Certainly. 14 MS LEA: Part of my difficulty with this -- 15 and help me, Madam Chair and Mr. Leslie, if I'm wrong 16 about this -- but the applicant has applied under 17 Section 90 of the Act for an order granting leave to 18 construct gathering pipelines. Paragraph 7 of the 19 application. And if you look at Section 96 of the 20 Ontario Energy Board Act -- 21 MR. LESLIE: Yes, but I think that deals with 22 transmission lines. 23 MS LEA: If you look at Section 96 of the 24 Ontario Energy Board Act, it says: If, after 25 considering an application under Section 90, 91 or 92, 26 the Board is of the opinion that construction, expansion 27 and reinforcement -- and so on. So it doesn't -- 28 although Section 90 does apply to transmission lines, 96 373 UNION GAS PANEL 3, ex (Lea) 1 seems to say, when you make any application under those 2 sections -- 3 MR. LESLIE: Miss Lea, transmission lines are 4 dealt with in Sections 90 to 99. And if you want -- if 5 you can't get an owner to agree to a transmission line, 6 you would have to expropriate. That's why you get an 7 easement. 8 Gathering lines are dealt with in the earlier 9 sections of the Act, Sections 37 through 43, I 10 believe -- no, 42, I believe it is, which deal with 11 storage facilities. And they are also dealt with in the 12 gas storage leases. But the gathering lines aren't 13 subject to Section 90 of the Act or the sections that 14 follow that. 15 MS LEA: So the fact that you have made an 16 application under section 90 doesn't mean that 17 section -- 18 MR. LESLIE: That pertains to the transmission 19 lines. That is why we differentiate between the two. 20 MS LEA: Mr. Leslie, the fact that you have 21 made an application under section 90 for your gathering 22 lines doesn't mean that section 96 applies to you? 23 MR. LESLIE: The application under section 90, 24 as I understand it, relates to transmission lines. 25 MS LEA: If you could have a look at 26 paragraph 7 of the application, you may want to just 27 think about this and get back to me, but this is my 28 query. I'm not sure that I'm understanding the 374 UNION GAS PANEL 3, ex (Lea) 1 submission. 2 MR. LESLIE: Well, I think the word 3 "gathering" is misplaced there, because these are all 4 transmission lines. Or the application may be 5 misconceived. I will have to look at it. I hadn't, 6 frankly, noticed that before. 7 But my understanding is that sections 90 and 8 following deal with the transmission facilities and that 9 the gathering lines are dealt with within the designated 10 storage unit. 11 MS LEA: I think that part of the confusion 12 arises from the fact that in a past decision the Board 13 has found that gathering lines are transmission lines. 14 Now, I guess from my point of view, our main concern is 15 twofold. 16 First, if the Board has to approve the form of 17 agreement under the legislation, then it has to do that 18 and so we need to see the form. 19 Secondly, we want to understand, and I think I 20 do understand this, that the people who have easements 21 for -- pardon me -- people who have gathering lines on 22 their property are getting the same sort of protection 23 as you get with the transmission lines. I don't think 24 we have a quarrel about that really. I'm just trying to 25 figure out whether the legislation is satisfied and 26 whether the people are being treated reasonably 27 equitably that have gathered lines and transmission 28 lines. That is what I need to know. 375 UNION GAS PANEL 3, ex (Lea) 1 So perhaps you could get back to me on it. 2 MR. LESLIE: Now, wait a minute. I'm sorry. 3 What is your concern? 4 MS LEA: Twofold. 5 --- Laughter 6 MS LEA: Twofold. 7 Section 96 requires the Board -- just a 8 second. Sorry. Where is it? 9 --- Pause 10 MS LEA: Now I have lost the section again. 11 Right. Okay. Section 97. 12 Section 97, requires the Board -- in an 13 application under section 90, 91 or 92, the Board cannot 14 grant leave to construct unless it knows that the 15 applicant is going to offer to each owner of land 16 affected by the approved route or location or locations 17 an agreement in a form approved by the Board. 18 I'm not saying that the form you are using 19 would not be approved by the Board. What I'm trying to 20 understand is, given that you have made an application 21 under section 90 for gathering lines, does this Board, 22 then, have to approve the form of the agreement before 23 it can grant the order? Just reading that section, it 24 looks like they do. 25 So that is the first concern. 26 MR. LESLIE: I now understand your point. 27 MS LEA: Okay. 28 The second thing is, and I think this has been 376 UNION GAS PANEL 3, ex (Lea) 1 probably addressed by your witnesses, since there may be 2 construction impacts related to gathering lines which 3 may or may not be equivalent to construction impacts on 4 transmission lines -- let's say that the line is the 5 same size at both ends -- yes, 12 -- what you call them 6 doesn't matter? 7 Are people who have gathering lines on their 8 property adequately protected that the land is restored 9 properly? 10 I think your witnesses have said that that is 11 the case, because they have the commitment, the 12 construction commitments here. So I don't think we have 13 a quarrel with that. But I don't want the Board to 14 suddenly find that it has to approve a form and it 15 doesn't have the form. 16 THE PRESIDING MEMBER: So I guess that is the 17 question, Mr. Leslie: Do we have the form? Do we have 18 the form of -- 19 MR. LESLIE: I would like to think about this. 20 This is the first time I have heard this issue being 21 discussed. 22 THE PRESIDING MEMBER: Certainly, Mr. Leslie. 23 --- Pause 24 THE PRESIDING MEMBER: Mr. Leslie, my next 25 question, and I guess this is the one I wanted to ask 26 Mr. Egden about, but unfortunately -- as you mentioned 27 before, various issues of the case overlap and one of 28 the problems with panels is questions may arise in one 377 UNION GAS PANEL 3, ex (Lea) 1 panel that have an impact on the other. 2 This deals with the Oil City Pool and, in 3 particular, with the lots of MacKenzie, Charlton and 4 Cunningham, which are on the northwest corner of the 5 Management Board Secretariat property. 6 Obviously, there are a couple of options that 7 are open to the Board and I just want to -- I'm not 8 saying we are going to go one way or the other, but I 9 want to keep all the options opened. 10 You have asked that these lots be included in 11 the designated storage area when there haven't been 12 licences and leases granted by these people, so I want 13 to explore the possibility of -- even though I know it 14 is contrary to MNR policy to not go along drilling 15 lots -- of excluding, if the Board wanted to, these lots 16 from the designated storage area to avoid the problem of 17 misappropriation or appropriation or expropriation or 18 one of those "ation" words of their property. 19 My question for Mr. Egden, and perhaps he can 20 get back to the Board in written form, is whether 21 non-excluding those three lots from the designated 22 storage area would cause problems as to preserving the 23 integrity of the gas storage pool. 24 In other words, as I understand his evidence 25 before, was one of the reasons for excluding what I 26 would call the residential area to the northwest and 27 being able to exclude the residential area to the 28 northwest with the fact that it was residential and 378 UNION GAS PANEL 3, ex (Lea) 1 there were buildings on it and, therefore, while it may 2 come within the boundaries that they might want to 3 require in the designated gas storage pool, that he had 4 comfort that the integrity of the pool would still be 5 maintained, from a geographical point of view, because 6 of what was on the -- 7 MR. LESLIE: No, I understand. 8 THE PRESIDING MEMBER: Okay. 9 So those are my questions. I'm not saying 10 that that is the way we are going to go, but I would 11 like that option to be open for us if the Board decides 12 to go that way. 13 MR. LESLIE: We are told that we wouldn't have 14 a problem with it. I think probably that the current 15 boundary is drawn in the way that it was because of 16 discussions with others, but I'm told that, for this 17 reason you have given, it wouldn't be a problem to 18 exclude those lots from the designated storage area. 19 THE PRESIDING MEMBER: If we could just have 20 Mr. Egden confirm that so that will be on the record, I 21 would appreciate that. 22 MR. LESLIE: Yes. 23 MR. LOWE: Excuse me, Madam Chair, would that 24 also include the Mac Brown property, for completeness? 25 THE PRESIDING MEMBER: I suppose you can deal 26 with Mac Brown, but the Board -- 27 MS LEA: Where is the Mac Brown property? 28 THE PRESIDING MEMBER: It is at the southerly 379 UNION GAS PANEL 3, ex (Lea) 1 end of the Secretariat property. 2 MS LEA: I'm not sure that that would be as 3 easy to answer. That gets a little closer in. 4 THE PRESIDING MEMBER: I suppose you could 5 keep the Mac Brown property separate. 6 --- Pause 7 THE PRESIDING MEMBER: I'm not sure, Ms Lea, 8 if we need an undertaking. 9 MS LEA: Yes. I think we had better have an 10 undertaking number for that. So 16.8 would be the 11 answer from Mr. Egden as to whether the storage 12 reservoir will compromised by the exclusion of the 13 properties mentioned. 14 UNDERTAKING NO. 16.8: Mr. Egden to 15 advise whether the storage reservoir will 16 be compromised by the exclusion of the 17 properties mentioned 18 THE PRESIDING MEMBER: Yes, the MacKenzie, the 19 Charlton, the Cunningham. 20 And then, because the Mac Brown property is 21 further south at the corner of Courtright and Oil 22 Heritage Road, perhaps a separate description for that. 23 MR. LESLIE: But the same question would apply 24 to the Mac Brown property. 25 THE PRESIDING MEMBER: The same question. 26 Exactly. Exactly the same question. 27 MR. LESLIE: I will confirm with what I am 28 being told through Mr. Egden. 380 UNION GAS PANEL 3, ex (Lea) 1 THE PRESIDING MEMBER: Thank you. I would 2 appreciate that. 3 Hopefully this is my final question, and that 4 deals with the description of the Bluewater proposed 5 designated storage area. That is found in Schedule B, 6 page 1 of 2. That would be the application. 7 --- Pause 8 LESLIE: I'm sorry, could I have the reference 9 again? 10 THE PRESIDING MEMBER: Sure. It is Schedule B 11 of the application, page 1 of 2. 12 MR. LESLIE: So it is "B" as in Bob? 13 THE PRESIDING MEMBER: "B" as in Bob. It is 14 the meets and bounds description of the proposed 15 boundary of the Bluewater proposed designated storage 16 area. 17 MR. LOWE: It is also shown as section 9, 18 Schedule 9, if that is easier. 19 THE PRESIDING MEMBER: That is okay, as long 20 as the description is the same. 21 This is the description that Union is asking 22 the Board to recommend to Cabinet being included within 23 the designated storage area. 24 First of all, I preface this by saying I 25 dislike meets and bound descriptions and I haven't done 26 meets and bounds descriptions since I was an articling 27 student, so bear that in mind. 28 As I go down and trying to take the meets and 381 UNION GAS PANEL 3, ex (Lea) 1 bounds description with the diagram that is in 2 Schedule D, page 3 of 4, I'm fine as I go through the 3 first paragraph, then the second one, thence northerly, 4 and thence northerly, thence easterly, thence northerly, 5 thence easterly, thence easterly, and I'm fine up to 6 that point in time. So I'm fine with the first 7 description all in singular. 8 Then seven paragraphs down, as I'm reading 9 through this description, we are in -- it is a question 10 of we are in Concession 2, Lot 3 at the time, and the 11 next paragraph it goes "THENCE Easterly through Lot 1, 12 Concession 3." 13 The next paragraph continues through said 14 Lot 1 and thence northerly and along the half lot line 15 of said Lot 3. 16 I guess I am confused as to how -- especially 17 those two paragraphs dealing with easterly through 18 Lot 1, Concession 3 and the second paragraph through 19 Lot 1 apply to this description. 20 MR. LESLIE: Good for you. 21 --- Laughter 22 MR. LESLIE: I'm sorry, I mean that sincerely. 23 I never would have thought of checking this myself, but 24 I share your dilemma. 25 MS LEA: I think there might be an extra line 26 in there or something. 27 THE PRESIDING MEMBER: I think there is an 28 extra couple of paragraphs in. 382 UNION GAS PANEL 3, ex (Lea) 1 I did try to do it for all the other -- for 2 the other pools as well. On the proposed Oil City Pool 3 I couldn't do it because there is an R Plan that is 4 referred to and we didn't have copies of the R Plan. 5 Since this is the document that forms the 6 basis of the regulation -- 7 MR. LESLIE: No, I understand the significance 8 as well. 9 THE PRESIDING MEMBER: Thank you. I would 10 appreciate it if the meets and bounds descriptions could 11 be thoroughly checked against the descriptions in the 12 material that we have been provided to make sure that 13 they are accurate. 14 Perhaps we should have an undertaking for that 15 as well. 16 MS LEA: Undertaking 16.9. Thank you. We 17 will call that revised meets and bounds. 18 UNDERTAKING NO. 16.9: Union Gas Panel to 19 provide revised meets and bounds 20 THE PRESIDING MEMBER: Anything on redirect, 21 Mr. Leslie? 22 MR. LESLIE: No. 23 --- Laughter 24 THE PRESIDING MEMBER: Thank you. 25 Then this panel is excused with our thanks. 26 I think before the next panel, now might be an 27 appropriate time for a quick break, so we will reconvene 28 at 3:30. Thank you. 383 1 --- Upon recessing at 0315 2 --- Upon resuming at 0335 3 THE PRESIDING MEMBER: Mr. Leslie, Ms Lea, as 4 we approach the last panel our thoughts start turning to 5 the argument phase. I guess I was wonder if there 6 are -- 7 First of all, Ms Lea, do you have any idea of 8 how long you think you will be in cross-examining this 9 panel? 10 MS LEA: No, unfortunately I can't give a very 11 good estimate at this point. I'm hoping to finish this 12 panel by the end of the day certainly. It might be less 13 than an hour and-a-half, it might not be. 14 Unfortunately, I don't know. 15 THE PRESIDING MEMBER: Mr. Leslie, first of 16 all, will you have long in direct with this panel? 17 MR. LESLIE: No, very short. 18 THE PRESIDING MEMBER: Okay. Do you have any 19 suggestions as far as argument is concerned? Would you 20 be looking for an oral argument, written argument? 21 MR. LESLIE: I would prefer oral and we could 22 do it tomorrow as far as I'm concerned. 23 THE PRESIDING MEMBER: You would be prepared 24 to do it tomorrow morning, first thing? 25 MS LEA: I would go first, certainly, so that 26 Union could hear what I had to say, if anything. 27 But subject to that, Mr. Leslie? 28 MR. LESLIE: Subject to that, yes. 384 1 THE PRESIDING MEMBER: Subject to 2 availability, the Board is willing to sit later tonight 3 to hear argument, if that would be convenient for the 4 parties. If it's not then that's fine, we will stay 5 over until tomorrow. I'm just trying to accommodate as 6 many people as possible. 7 MR. LESLIE: I think I would prefer to do it 8 in the morning, just so I give some thought to it. 9 THE PRESIDING MEMBER: That's fine, 10 Mr. Leslie. All right, then. 11 I know Ms Lea wants to make some submissions. 12 Why don't we see how long it goes this afternoon as far 13 as the cross-examination of this panel is concerned. 14 PRELIMINARY MATTERS 15 MS LEA: Thank you. 16 I have one preliminary matter actually that 17 has been brought to my attention. 18 THE PRESIDING MEMBER: Yes, Ms Lea. 19 MS LEA: Thank you. 20 Mr. David Vokes, who spoke to the Board 21 yesterday, was back today and left with me a document 22 which I understand he wishes to be filed with the Board. 23 It would be the same as a letter of comment. It follows 24 up on his presentations yesterday. 25 That would be Exhibit 17. I think we are at 26 Exhibit 17.2. 27 Of course Union has copies of this. 28 EXHIBIT NO. 17.2: Document from 385 Preliminary Matters 1 Mr. Vokes following up on his 2 presentation 3 THE PRESIDING MEMBER: Thank you, Ms Lea. 4 MS LEA: The other preliminary matter, or 5 perhaps question of clarification, I think it was raised 6 in the break by Mr. Mackie to Union. 7 We didn't understand that what Mr. Lowe said 8 about the options for crop loss payments were the same 9 as in the agreement. We are a little confused about 10 that. 11 MR. LESLIE: I can deal with that. I think 12 Mr. Lowe is still here. Actually, this is more 13 Mr. Haley's responsibility. 14 But Mr. Lowe I believe talked about the 15 one-time payment for crop loss. This is dealt with in 16 the letter of understanding. There is an option, there 17 is a comparative crop loss program and it is described 18 in some detail in that document. 19 The reality I think is that most people take 20 the one-time payment and Mr. Lowe is probably relating 21 to that, but there is the option of the comparative crop 22 loss program and it is set out in the agreement. 23 MS LEA: So a landowner can choose either 24 option? 25 MR. LESLIE: Yes, indeed. 26 MS LEA: Thank you very much. 27 That completes my preliminary matters. 28 Thank you. 386 Preliminary Matters 1 THE PRESIDING MEMBER: Thank you, Ms Lea. 2 Any preliminary matters for you, Mr. Leslie? 3 MR. LESLIE: Just one. 4 With respect to the point that Ms Lea was 5 raising about the application for gathering lines being 6 made under section 90 of the Act, it is my understanding 7 that there is prior jurisprudence indicating that 8 gathering lines are to be considered as transmission 9 lines and that the application therefore treats 10 gathering lines as transmission lines. 11 The practice, I am told, has been to -- that 12 in connection with the gathering lines the agreement 13 that is referred to in section 97 of the Act is the 14 storage lease, and in this case it would be the storage 15 lease as supplemented by the construction commitment 16 letter which pertains to the storage lease and the 17 construction of gathering lines on lands within the DSA. 18 I am further advised that there are no 19 gathering lines on properties which are not subject to a 20 storage lease so that all the gathering lines are on 21 properties where there are storage leases. 22 That is consistent with what was done in 23 Phase I, although this point wasn't raised in Phase I, 24 as far as I can recall, but that is how it was dealt 25 with in Phase I. 26 MS LEA: Mr. Leslie, the only question I have 27 arising arose out of something Mr. Lowe said I think, 28 that there was another -- maybe a single piece of paper 387 Preliminary Matters 1 that people sign and that this joins the letter of 2 commitment to the -- 3 MR. LESLIE: Yes, you are quite right and 4 thank you. 5 There are also the acknowledgements and they 6 would form part of the package. 7 The acknowledgements as to the location of 8 facilities by the landowners would presumably also form 9 part of the package that would be the -- that would meet 10 the requirements of section 97. 11 MS LEA: So can we see a copy of those 12 acknowledgements, then, to have -- 13 MR. LESLIE: Well, that's what I filed earlier 14 today, the acknowledgement letters from two landowners, 15 and the rest of them are in the record I believe. 16 MS LEA: Okay. Just so that I am completely 17 clear, that is the letter entitled "Letter of 18 Acknowledgement" 9.9 and 9.10? 19 MR. LESLIE: I believe that is correct, yes. 20 Yes. 21 MS LEA: So if we look at the gas storage 22 lease, the letter of acknowledgement and the letter of 23 commitment, that is the complete package with respect to 24 gathering lines? 25 MR. LESLIE: Yes. 26 MS LEA: Thank you. 27 THE PRESIDING MEMBER: Mr. Leslie, I 28 personally would appreciate just if in your argument you 388 Preliminary Matters 1 could summarize that for me in one place what you have 2 just said. 3 I will take it the issue did come up, I know 4 in Ladysmith with Enbridge Consumers Gas, and I did sit 5 on that case and we did tell them that they had to have 6 easement agreements for the gathering lines. They tried 7 to rely on Century Pools I and we told them that at that 8 time we had thought that you did have easement 9 agreements. 10 So that being the case, I would appreciate 11 your argument so that we can clarify it, because I know 12 that the utilities all want to be treated exactly the 13 same as to their commitments about whether they do or do 14 not need specific easement agreements for gathering 15 lines. 16 Okay. 17 --- Pause 18 MR. LESLIE: The next panel consists of 19 Mr. Bill Wachsmuth, Mr. Greg Payne, Mr. Chris Shrive, 20 Mr. David Wesenger and Mr. Gerry Mallette. 21 I wonder if they could be sworn, please. 22 SWORN: DAVID WESENGER 23 SWORN: CHRIS SHRIVE 24 SWORN: GREG PAYNE 25 SWORN: WILLIAM WACHSMUTH 26 PREVIOUSLY SWORN: GERARD MALLETTE 27 EXAMINATION-IN-CHIEF 28 MR. LESLIE: Mr. Wesenger, you are sitting 389 UNION GAS PANEL 4, in-ch (Leslie) 1 closest to the Board, so I will start with you. I 2 gather you are an environmental consultant and you were 3 the author of one of the environmental consulting 4 reports in connection with this project. 5 MR. WESENGER: That's correct, yes. 6 MR. LESLIE: Can you identify that report for 7 the Board? 8 MR. WESENGER: Yes, I am responsible for the 9 Oil Spring East proposed natural gas transmission 10 pipeline, environment and socioeconomic assessments. 11 MR. LESLIE: Thank you. Do you adopt that 12 report, sir? 13 MR. WESENGER: Yes, I do. 14 MR. LESLIE: And, Mr. Shrive, you are also an 15 environmental consultant and I gather you were 16 responsible for the environmental report, for the 17 environmental assessment as it relates the Mandaumin and 18 Bluewater Pools. 19 MR. SHRIVE: That is correct. 20 MR. LESLIE: And do you adopt that report, 21 sir? 22 MR. SHRIVE: I do. 23 MR. LESLIE: Mr. Payne, I'm sorry, I don't 24 have your title, sir. Could you identify yourself, 25 please. 26 MR. PAYNE: Senior Environmental Planner. 27 MR. LESLIE: Senior Environmental Planner with 28 Union Gas. 390 UNION GAS PANEL 4, in-ch (Leslie) 1 MR. PAYNE: With Union Gas. 2 MR. LESLIE: And your evidence for purposes of 3 these proceedings is found in section 7 of the evidence. 4 MR. PAYNE: That is correct. 5 MR. LESLIE: And that deals with environmental 6 matters and with the environmental assessment. 7 MR. PAYNE: That is correct. 8 MR. LESLIE: And do you adopt that evidence? 9 MR. PAYNE: Yes, I do. 10 MR. LESLIE: Mr. Wachsmuth, you are Union Gas' 11 Coordinator, Project, Assets and Development. 12 MR. WACHSMUTH: Yes, I am. 13 MR. LESLIE: And your evidence for purposes of 14 these proceedings is in section 7, again it's 15 environmental matters and environmental assessment. 16 MR. WACHSMUTH: That is correct. 17 MR. LESLIE: And do you adopt that evidence? 18 MR. WACHSMUTH: Yes, I do. 19 MR. LESLIE: And Mr. Mallette, you have been 20 previously introduced to the Board. Your evidence for 21 purposes of this proceeding is found in section 4 of the 22 evidence. 23 MR. MALLETTE: Yes, that's correct. 24 MR. LESLIE: And do you adopt that evidence, 25 sir? 26 MR. MALLETTE: Yes, I do. 27 MR. LESLIE: Thank you. Mr. Mallette, there 28 was an undertaking given earlier, I think it's 16.3, and 391 UNION GAS PANEL 4, in-ch (Leslie) 1 that was to explain the land costs in connection with 2 the Oil City Pool and in particular the increase in 3 those land costs. I believe it's about a $70,00 4 increase. Could you do that now, sir? 5 MR. MALLETTE: The Oil City geoproject 6 consists of about eight kilometres of ten inch diameter 7 transmission pipeline. The original application 8 included one kilometre of easement and very minimal 9 amounts of temporary land use. The rest of the 10 construction was on road allowance. 11 Now, reflected in the updated evidence and 12 based on the detailed design, the estimate still 13 includes the one kilometre of easement, but the cost for 14 that easement on a per acre basis is higher. That 15 contributes to part of the $70,000 increase. 16 More significantly, the estimate now includes 17 an additional 3.5 kilometre long strip of temporary land 18 along Black Ash Road. The temporary land would be used 19 to store topsoil in areas where the road allowance is 20 being farmed. 21 Also, additional to the new easement or to the 22 new estimate, is more temporary work room at stream and 23 road crossings that have been identified to facilitate 24 the detailed design. 25 In summary, the higher cost is related to the 26 higher cost of the easement per acre, plus additional 27 temporary land along Black Ash Road and at crossings 28 such as roads and streams. 392 UNION GAS PANEL 4, in-ch (Leslie) 1 MR. LESLIE: All right. Thank you. Mr. 2 Mallette, in addition, there was some discussion 3 yesterday of the impact of the agreement with the 4 Lambton County Storage Association on the costs 5 associated with these proposals and whether the impact 6 would be such that there needed to be some reassessment 7 of the economics of the project. 8 I had asked you to look at that question and I 9 understand you have done so. Could you tell the Board 10 whether or not those costs will in any way affect the 11 economics of the project. 12 MR. MALLETTE: Yes. I'm testifying today on 13 this panel primarily dealing with the pipelines from the 14 wellhead out. However, I have also spoken with Mr. 15 Marusic who testified earlier and also received his 16 comments that I will provide right now. 17 For the facilities, the wellhead facilities 18 and access roads that Mr. Marusic had testified to as 19 well as all of the pipeline facilities from the wellhead 20 out, I can provide that there is no additional cost 21 impact to the estimates that have been provided with the 22 updated information. 23 Many of the considerations that went into the 24 LCSA arrangements were anticipated in the updated 25 information, the updated estimates, and any additional 26 items that have been added since that time are of such a 27 nature that they will be easily handled within the 28 contingency allowance. 393 UNION GAS PANEL 4, in-ch (Leslie) 1 Overall, there is no effect of the LCSA 2 agreements. 3 MR. LESLIE: Thank you. Mr. Wachsmuth, 4 earlier today I described to the Board changes in 5 pipeline routing along Mandaumin Road and also a change 6 in the location of the metering station such that it 7 would be on property owned by the Elliotts as opposed to 8 Mr. Vokes. Were you here when I did that? 9 MR. WACHSMUTH: Yes, I was. 10 MR. LESLIE: Could you briefly, so that it's 11 on the record from a witness, explain to the Board why 12 those changes were made. 13 MR. WACHSMUTH: I guess what I can do is I can 14 talk to the planning process and our thought process 15 that was followed during this change. Mr. Mallette and 16 Mr. Payne may wish to add additional material relative 17 to the engineering and some specific environmental 18 features on it. 19 A part of our group is that we always try to 20 be proactive whenever there are other changes take 21 place. We always have a feedback mechanism in place to 22 go back and review the decisions which were made 23 previously to that to see if those decisions are still 24 accurate and appropriate and current and the best thing 25 to be there. 26 What happened, and as you heard yesterday and 27 I guess this morning from Mr. Egden, it was necessary to 28 change the well locations in the Mandaumin Pool. 394 UNION GAS PANEL 4, in-ch (Leslie) 1 Previously there had been wells on both sides of 2 Mandaumin Road. There were some wells on the east, some 3 on the east, the wellheads anyway, the above ground 4 facilities. 5 With the new well locations which Mr. Egden 6 and Mr. Pardy determined to be the appropriate 7 locations, all of the wellheads moved to the west side 8 of Mandaumin Road, so I guess at that point in time we 9 looked at the issue. We had a pipeline going up the 10 east side. We looked at it to determine whether or not 11 should we still be on the east, could we move over to 12 the west, what would be the impacts of that, moving from 13 one side to the other. 14 There was also -- I realize we put out a lot 15 of paper today and yesterday, but in the LCSA agreement 16 there was also a request by one of the LCSA landowners 17 that maybe the west side of the road would be better 18 than the east side of the road, so we looked at that as 19 well as the material which was provided when Mr. Egden 20 moved the well. We realized it was possible to move 21 over to the west side of the road. It would result in 22 less road crossings, address the concern brought up by 23 one of the LCSA members. 24 Therefore, we looked at possibly going to the 25 west side of the road. By going to the west side of the 26 road, then we moved down and looked at the 27 appropriateness of the station location. The station 28 location was on the east side of the road. Would it 395 UNION GAS PANEL 4, in-ch (Leslie) 1 make sense to leave it on the east side and do another 2 road crossing? Would it be better to move back and look 3 to see whether it was possible to move it to the west 4 side? 5 There was a woodlot north of the Sun Canadian 6 lines on the west side, so we basically said no, he's 7 not going there, but there are other options, so we 8 looked at the Elliotts. At that point in time the 9 Elliotts were approached to determine whether or not 10 they would be willing to have a station on their 11 property. 12 They were not one of the original ones because 13 before we had wells on the east side of the road and it 14 didn't make a lot of sense. So we were able to look, 15 based on Mr. Egden's changing the well location, it gave 16 us opportunity to go back and look at what we were 17 proposing to see whether it was still there or the best 18 opportunity and the best places to put pipelines and 19 stations. 20 And what we determined was is that we would be 21 able to move over to the west side of the road. As well 22 we were able to move the station across. 23 And as well, once we were on the Elliott 24 property, when we there, we asked them about the 25 possibility of moving the transmission easement to the 26 Bluewater Pool, moving it from, I believe, the McCrie 27 property south to the Elliott. They weren't landowners 28 before but now that they were a landowner as part of the 396 UNION GAS PANEL 4, in-ch (Leslie) 1 station, we looked at that option. So we also looked at 2 the option to determine the transmission line going into 3 the Bluewater Pool. The best location for that. And 4 based on the new circumstances, we determined that the 5 Elliott property had potential and we talked to them 6 about moving the line there, to which they agreed. 7 So I guess it was really -- it was sort of a 8 chain reaction of events which started with Mr. Egden 9 having to move the well and that moved in us looking at 10 our routes and pipeline to determine that yes, we could 11 move the pipeline to the other side of Mandaumin. We 12 could move the station over to the Elliott's and as well 13 we could move the pipeline down on to the Elliott's 14 property as opposed to the McCrie's. 15 So those are the changes which we are 16 proposing. And I guess it really follows what we think 17 are good principles, is that once we get a line there we 18 really -- well, we don't like to say anything is set in 19 stone, but when new things happen and when things 20 change, we try to go back and look at them to determine 21 what is the appropriate and most environmentally 22 acceptable location for the pipeline and other 23 facilities. 24 MR. LESLIE: Sorry. Thank you, Mr. Wachsmuth. 25 I have nothing further. Thank you very much. 26 I'm sorry. I have nothing further, Ms Lea. 27 EXAMINATION 28 MS LEA: I beg your pardon. I'm not very 397 UNION GAS PANEL 4, ex (Lea) 1 quick on the uptake. 2 Anyway, thank you, gentlemen, for your 3 evidence in-chief. I have a few issues to discuss with 4 you and the first is not strictly environmental but 5 almost more construction related and I would like to 6 start with that. And that is the question of access to 7 natural gas by those people whose land is being affected 8 by this project but who don't yet have gas service. And 9 as you know, staff was interested in this issue. 10 Now, if we look at the facilities map, we see 11 that some of the wells, gathering lines and transmission 12 lines get quite close to farm buildings and residences 13 in the areas of these pools. Now, I understand that 14 none of the property owners in this area do have access 15 to natural gas service at this time. Am I correct? 16 MR. MALLETTE: Yes, that is correct. 17 MS LEA: And can you tell me have you been 18 asked to provide gas service by anyone in this area? 19 MR. MALLETTE: Well, I don't have the exact 20 names of who was asked but I know that inquiries have 21 been made. 22 MS LEA: And what response did you give to 23 those inquiries? 24 MR. MALLETTE: If I could direct you to 25 Undertaking No. 24 -- 26 MS LEA: Yes. 27 MR. MALLETTE: -- that resulted from the 28 technical conference, we have provided an answer 398 UNION GAS PANEL 4, ex (Lea) 1 regarding what work had been done to assess the ability 2 to deliver gas to landowners. I can read that. 3 MS LEA: Well, we can look at it too. You 4 have indicated here that there is -- that the provision 5 of gas service in these circumstances would be 6 uneconomical and would require an aid to construct in 7 excess of $10,000 per service connection. 8 Can you tell me why it is that it would be so 9 uneconomic in this situation? 10 MR. MALLETTE: Well, probably the biggest 11 drawback to delivering gas to these homes, as you have 12 identified the pool facilities that we have applied for 13 here are in close proximity to some homes, and you would 14 think that it would be an easy task to get the gas from 15 the pool lines to the homes. However, there is a couple 16 of problems with these particular lines. 17 One of the problems is that the gas is at a 18 pressure that is very high when trying to deliver gas to 19 a home that is at a very low pressure. So extensive 20 facilities would be required for each tap off of the 21 line to reduce the pressure. 22 Secondly, the gas in these lines is -- is not 23 sales type of gas. It is not odourized. And so 24 therefore what is really needed is a separate 25 distribution system where the pressure could be 26 regulated at a regulating station and then put into 27 smaller diameter lines and the gas would also be 28 odourized at that regulating station and turn it into 399 UNION GAS PANEL 4, ex (Lea) 1 gas that would be normally distributed to homes and 2 consumed in homes. 3 MS LEA: And is it practical or economic to 4 build a small -- local distribution system to serve a 5 group of these landowners? 6 MR. MALLETTE: Well, again referring to 7 Undertaking 24, the work that we have done to date 8 indicates that it is probably not of -- the aid to 9 construct would be so high that landowners would be 10 unlikely to be interested in that. 11 MS LEA: I understand that you do serve 12 residents off transmission lines that have as high or 13 higher pressures. For example, the Parry Sound line. 14 Have you had to build depressurization 15 facilities there to effect that service? I mean if you 16 can do it in one place, why can't you do it here? 17 MR. MALLETTE: I'm trying to recall all the 18 details of Parry Sound. However, I believe that 19 consideration there was if there was a number of people 20 in a small town such as Sprucedale, I think it was, you 21 could -- you could put in a station and distribute to 22 enough people to make it economic. Additionally 23 individual taps could -- could be taken off. Again, 24 however, in that case, the gas is odourized in the Parry 25 Sound lateral. 26 MS LEA: It is already odourized. 27 MR. MALLETTE: If it is already odourized at 28 the point where it leaves the TransCanada pipeline. 400 UNION GAS PANEL 4, ex (Lea) 1 MS LEA: Now, is there any problem, presuming 2 that one could overcome the economic difficulties and 3 the odourization, is there any problem because these are 4 storage pools as opposed to a transmission line that 5 flows all year. Is there a problem with providing gas 6 on a regular basis all year or not? 7 MR. MALLETTE: We are beginning to leave my 8 area of expertise here. 9 MS LEA: Okay. 10 MR. MALLETTE: However, I do understand that 11 that is a potential problem, yes. 12 MS LEA: Now, do you know whether Union holds 13 a certificate of public convenience a necessity or -- 14 and a franchise agreement to serve in the township where 15 this is taking place? 16 MR. LESLIE: I don't know. 17 MR. WACHSMUTH: Yes, we do. 18 MS LEA: You do. All right. Mr. Wachsmuth, 19 you always know. You are always one of my favourite 20 witnesses. If nobody else knows, you always know. 21 All right. Well, seriously though, thank you 22 very much. I gathered from what you said then that 23 although it might -- it might be physically possible, it 24 would be extremely expensive. Does that about summarize 25 it? 26 MR. MALLETTE: Yes, I think that is a good 27 summary. 28 MS LEA: And how did you reach the idea -- the 401 UNION GAS PANEL 4, ex (Lea) 1 amount of $10,000 per service connection? Because I was 2 thinking, of course, of one tap off the line to a small 3 area and several landowners could then tap off that -- 4 that system. In other words, you have one 5 depressurization place and it is like a mini, mini 6 distribution system. 7 MR. MALLETTE: Yes, that is basically what 8 would have to be done and again to quote from the 9 undertaking, the potential services are mapped, 10 facilities and costs are estimated and an economic 11 analysis performed using an OEB-approved economic model. 12 That is what is done and the types of facilities that 13 you described would be a typical type of facility that 14 would be -- would be designed or estimated in this case. 15 But as I say, it would be expensive because of all the 16 facilities that would be required to depressurize the 17 gas and to odourize it. 18 MS LEA: I guess what I am trying to get at is 19 the undertaking suggests that that would be $10,000 per 20 service connection, which I read as "per house". 21 If we were only having one connection to the 22 transmission line, which was going to odourize, 23 depressurize and everything, would that one connection 24 cost $10,000 -- which might make it feasible to pay 25 $1,000 a head -- or would that be in excess of $10,000? 26 MR. MALLETTE: I really don't have that 27 information. I suspect that it would be more than 28 $10,000 to do all of the things that you just described. 402 UNION GAS PANEL 4, ex (Lea) 1 I think that's all I can offer right now, though. 2 MS LEA: Could it be possible -- I mean is it 3 feasible, if someone did want to have a connection off 4 the transmission line and was willing to pay a $10,000 5 fee, for example, if they had an operation that would 6 use a lot of gas, is it feasible to do that, apart from 7 the economics? Or would the other considerations that 8 we have talked about? Can you help me there? 9 MR. MALLETTE: Well, yes, if the aid to 10 construct is being provided by the consumer, then it 11 would be economic and anything can be done. 12 I think the point has been made before, in 13 other hearings, that we are in the business of selling 14 gas and we are more than willing to accommodate any 15 opportunity to sell gas. 16 So, again, if the interest is shown and the 17 aid is available, or the economics make sense, then it 18 will be done -- and has been done, all over the 19 province. 20 MS LEA: Thank you very much. 21 Turning, then, to more strictly environmental 22 issues, as you know, we were interested in the fact that 23 Union chose to choose another route for the Mandaumin 24 transmission lines than that recommended by its 25 environmental consultants. 26 We heard from Mr. Marusic about the 27 engineering factors, earlier today. 28 I wonder if someone could comment on the 403 UNION GAS PANEL 4, ex (Lea) 1 environmental and socioeconomic factors that were taken 2 into account in making the decision to change from the 3 environmentally-preferred route to a less preferred 4 route, if I can put it that way. 5 MR. PAYNE: If I could turn you to the section 6 in the Gore & Storrie report -- 7 MS LEA: Yes? 8 MR. PAYNE: -- page 4-9, Section 4, that 9 section of the Gore & Storrie report, as it indicates, 10 was written by Union Gas for insertion into that report 11 and, basically, what we are trying to say there is that 12 before a route -- I will just let everybody get there, I 13 guess. 14 --- Pause 15 MR. PAYNE: Before a route is proposed, Union 16 reviews that route, for a number of factors; and they 17 are: engineering and operations; land cost; and 18 environmental considerations. 19 In this case, Union has decided to reject the 20 northern portion of the environmentally-preferred route 21 of the pipeline and go with an 22 environmentally-acceptable route, for the above-noted 23 reasons. 24 Union has made this decision after consulting 25 with the environmental consultants, who have determined 26 that the alternative route is an acceptable alternative, 27 and we would have told -- had the route not been an 28 acceptable alternative, we would not have proposed this 404 UNION GAS PANEL 4, ex (Lea) 1 option. 2 MS LEA: How did you weight the various 3 factors? 4 Obviously, the environmental factors suggested 5 the first -- the preferred -- environmentally-preferred 6 route. But other factors suggested that you use the 7 route that you have eventually selected. 8 How did you weight those factors in arriving 9 at your decision? 10 MR. WACHSMUTH: I don't think there was any 11 specific weighting; like it wasn't 25 for each of the 12 four, or it wasn't one there. 13 I guess, really, what it was is we looked at 14 it from the team approach. We looked at it and heard, I 15 guess, from Mr. Marusic, this morning, that if we stayed 16 with the environmentally-preferred route, you either 17 couldn't get the deliverability or you couldn't -- or 18 you would have to make part of the pipeline bigger than 19 the 16-inch. Then there was the costs -- which Mr. 20 Mallette can talk about -- and I believe it's over a 21 million-dollar range. Then they looked at sort of the 22 land, and there were no significant differences with the 23 land requirements on each one. And then we went and we 24 looked at what the environmental concerns were -- and in 25 doing that, we talked to Mr. Shrive and found out: are 26 the routes close, are the routes -- this is marginally 27 acceptable, and this one is tremendously good 28 environmentally, or are they both about the same and 405 UNION GAS PANEL 4, ex (Lea) 1 what the differences were. 2 So it was really looking at a combination of 3 all of the factors, what -- and there wasn't a specific 4 weighting. Like the million dollars wasn't, "We have 5 got to save that at the expense of the environment out 6 there", or it was that, "Oh, now you have got to put two 7 different sizes of pipe in, in order to meet" -- I'm not 8 sure the words Mr. Marusic would use -- "to meet the 9 technical requirements of the pool". It was really you 10 looked at all of -- all of the factors were looked at 11 and it was determined that the route that we would be 12 moving forward with is the route that we have put 13 forward. 14 MS LEA: What about socioeconomic impacts? 15 That was one thing that you didn't mention in your 16 explanation, sir. Were those taken into account? And 17 are they very different for these two routes? 18 MR. WACHSMUTH: I will start with the first 19 part. I mean we were expecting Mr. Shrive to look at 20 socioeconomic features and constraints in his 21 determination of the preferred route. 22 MS LEA: I understand -- 23 MR. WACHSMUTH: Specifically to what they 24 were, I will leave that to Mr. Shrive. 25 MS LEA: Mr. Payne, you seem to want to -- 26 MR. PAYNE: Yes. I was going to indicate that 27 socioeconomic features are part of what's considered in 28 the environmental package, and Mr. Shrive has indicated, 406 UNION GAS PANEL 4, ex (Lea) 1 in his report -- and he can certainly speak for his 2 report -- that the preferred route was such for the 3 potential of less social and cultural impact. 4 MS LEA: Thank you. 5 Has anybody quantified the difference in what 6 it will cost to mitigate any damages that may be 7 caused -- environmental mitigation, in general, 8 rehabilitation -- between the environmentally-preferred 9 route and the route that you have now proposed to the 10 Board? 11 MR. PAYNE: I have attempted to do that in the 12 undertaking from the Technical Conference No. 35. 13 MS LEA: Thirty-five, yes. 14 Yes, I have that before me. 15 --- Pause 16 MS LEA: I read this undertaking but I didn't 17 know how to figure out how much it would cost; what the 18 dollar values would be. 19 MR. PAYNE: I guess, overall -- what it said 20 at the bottom here is, overall, the environmental 21 mitigation costs for this project would be marginally 22 higher on the Fairweather route -- 23 MS LEA: Which is the one you are -- 24 MR. PAYNE: That's the 25 environmentally-preferred route. 26 MS LEA: Oh. Yes? 27 MR. PAYNE: -- when compared to the Mandaumin 28 route -- the proposed route, in this case -- in the area 407 UNION GAS PANEL 4, ex (Lea) 1 of agricultural lands, and that's impacts of topsoil 2 stripping and dealing with environmental lands, tile 3 drainage, archaeology, water course crossings and route 4 length, and it's just -- I can turn you to the chart 5 that's in that answer. 6 MS LEA: Yes, I -- 7 MR. PAYNE: This chart is taken out of the 8 Gore & Storrie report, Table 4.3. And as you can see, 9 it's really the section of cross-country pipelines which 10 gives the environmental and tile drainage impacts. That 11 would be route segment B2. 12 MS LEA: And is that -- when we look at the 13 chart -- the features labelled, "Agricultural Lands and 14 Tile Drainage"? 15 MR. PAYNE: Yes. 16 MS LEA: And because there is -- these are 17 hectares, listed in hectares, the 5.5 on the Fairweather 18 route, as opposed to 1.6 of agricultural lands on the 19 Mandaumin route? 20 MR. PAYNE: That is correct. 21 Now, that being said, the environmental 22 mitigation costs, as I have indicated, are marginally 23 higher -- and perhaps Mr. Mallette could speak to a 24 level of costs here -- but the environmental mitigation 25 costs are not something that would have teetered the 26 scale in any way. I'm trying to get that point across 27 here that, although there is slightly higher costs on 28 the Fairweather route, it's not something that would 408 UNION GAS PANEL 4, ex (Lea) 1 have tipped the scale one way or another, from a pure 2 environmental perspective. 3 MS LEA: Okay. One moment. 4 --- Pause 5 MS LEA: Although it seems somewhat 6 counter-intuitive to hear that it will cost more for 7 environmental mitigation on the 8 environmentally-preferred route, I gather that the 9 reason for that, from your evidence, is the amount of 10 agricultural land that would be affected and the fact 11 that agricultural land and tile drainage is perhaps more 12 expensive to mitigate somewhat than some of the other 13 features here -- 14 MR. PAYNE: And to a lesser extent, you have 15 marginally higher costs for archaeological work, which 16 would be dependent upon distance; you have got an 17 increased pipe length on the environmentally preferred 18 route. 19 So if you base -- much like survey work, if 20 you base it on distance, you will get a marginally 21 higher cost for that work. There also is a couple of 22 smaller agricultural drains that would have to be 23 crossed on the environmentally preferred route, not of 24 significant cost impact but they are there. And again, 25 I have tried to lined that out in this undertaking. 26 MR. WACHSMUTH: Ms Lea, if I might add. What 27 one of the differences is between the preferred route 28 and the proposed route is that there is an east-west 409 UNION GAS PANEL 4, ex (Lea) 1 connection between Fairweather and Mandaumin Road. On 2 the proposed route that connection takes place within a 3 road allowance and on the environmentally preferred 4 route it takes place across the country. 5 So by the fact that we are going to have one 6 east-west connection between Mandaumin and Fairweather 7 Road going across country, that is why you have the 8 differences in the agricultural field and in the tile 9 drainage, where you wouldn't have that if you were 10 within a road allowance. 11 MS LEA: Okay. Thank you. I wonder if we 12 could now have a look at the proposed route then. Now, 13 I am looking at Interrogatory No. 108 attachment, 14 page 1, which is an environmental features map, also 15 socioeconomic features. 16 Now, I want to talk about one environmental 17 feature before we get on to the socioeconomic. And I 18 understand from reading the transcript of the technical 19 conference that this map seems to indicate that it is 20 more of a problem than it actually is. And that is the 21 Bear Creek woodlot which is towards the south end of the 22 proposed route. 23 If we look at Interrogatory 108, the 24 attachment, page 1, it looks like you are taking the 25 pipeline through a woodlot. Can you describe to me what 26 is happening for the crossing of the Bear Creek woodlot? 27 MR. PAYNE: If I could address that. I'm 28 trying to recall just exactly which map I used in 410 UNION GAS PANEL 4, ex (Lea) 1 addressing this in the technical conference. 2 I believe it is best addressed through the map 3 in Interrogatory 107 where you don't have the woodlot 4 blob, if you will, located on the map. 5 MS LEA: Let us just turn that up. 6 MR. PAYNE: It is -- Mr. Wachsmuth has pointed 7 out to me as well that for demonstration purposes the 8 aerial photographs are photomosaic -- 9 MS LEA: Have you got photomosaic? 10 MR. PAYNE: -- in the Gore & Storrie report 11 are a good -- are indicative of this as well. 12 MS LEA: Okay. Sometimes I find photomosaics 13 more useful. I don't know what you think there. 14 MR. PAYNE: It is on sheet 8 of 9. 15 MS LEA: Okay. Well, we have got sheet 8 of 9 16 and Interrogatory No. 107 attachment before us. 17 MR. PAYNE: Okay. As you come down 18 Fairweather Road, there is two items that need to 19 address this question. First of all, the blob that sits 20 there indicating the area of concern, if you look at the 21 topographical map at 107, the area that is recognized as 22 forest cover is cut back along Fairweather Road. 23 MS LEA: Okay. I think you are going to have 24 to locate it a little more precisely. 25 If we move north from the Dawn 156 station, we 26 cross the Aberfeldy, that is A-B-E-R-F-E-L-D-Y, Line. 27 MR. PAYNE: That is correct. And just as we 28 move north of Aberfeldy Line -- 411 UNION GAS PANEL 4, ex (Lea) 1 MS LEA: On the Fairweather Road. 2 MR. PAYNE: -- on the Fairweather Road -- 3 MS LEA: Yes. 4 MR. PAYNE: -- you can see a green area there. 5 MS LEA: Yes. 6 MR. PAYNE: That green area represents forest 7 cover and as you can see it is cut back away from the 8 road and there is actually agricultural field there. 9 MS LEA: So how much woodlot or trees, if any, 10 will you have to cut in order to take that route across 11 what is labelled as the Bear Creek woodlot? 12 MR. PAYNE: The short answer to that is none. 13 And the second part of my explanation is that because 14 Fairweather is not a road that is travelled much, it is 15 sort of a clay-based road, the road authority has given 16 us a favourable locate to put the pipeline right up in 17 the -- directly adjacent to the travel portion of the 18 road, if you will, on the built-up area of the road. So 19 we won't require any tree clearing through there. 20 MS LEA: Just looking at the topographic map, 21 it looks as if there is a fair amount of riparian 22 vegetation just as you cross over what appear to be 23 streams in that area. Is that a concern? 24 MR. PAYNE: Right at the creek itself, there 25 is no vegetation directly adjacent to the road. 26 MS LEA: Okay. In that same crossing, how is 27 that to be accomplished? 28 MR. PAYNE: At the present time we are 412 UNION GAS PANEL 4, ex (Lea) 1 reviewing or we are looking at directional drilling for 2 that crossing. There is some in-service questions as 3 we -- as we get closer to construction here. 4 The top part from the Enniskillen station to 5 the Mandaumin storage pool has to be constructed at an 6 earlier date, and then at a later date this portion. It 7 is my understanding that this portion from the 8 Enniskillen station back towards the Dawn 156 plant can 9 be constructed. And that may coincide with the opening 10 of the fisheries windows in this area, in which case we 11 could discuss it with the Ministry of Natural Resources 12 to see if they had any further concerns with us using a 13 dam and pump style dry crossing there. But right now we 14 are looking at a directional drill. 15 MS LEA: So if you decided to move away from 16 directional drilling, you would discuss it with the 17 ministry before attempting a dam -- 18 MR. PAYNE: Most definitely. Permits for both 19 are required. 20 MS LEA: Thank you. 21 MR. PAYNE: And any alterations to those 22 permits must be discussed with the ministry. 23 MS LEA: Do you have all the permits you need 24 from the ministry to attempt your stream crossings or do 25 you believe that you will get those permits? 26 MR. PAYNE: We do not have the permits at this 27 time. The permit applications have been made. As you 28 can understand from a logistical point of view, the 413 UNION GAS PANEL 4, ex (Lea) 1 ministry does like to issue a permit for a calendar year 2 and they do not like to address permits too far in 3 advance of a calendar year. So they have somewhat 4 informally asked us to make our applications in that 5 same calendar year. The permits will expire if they are 6 not used in that year. 7 The applications have been made right now. I 8 have talked to the authorities, both the conservation 9 authority and the Ministry of Natural Resources, and 10 neither body anticipates any issue with us getting 11 permits. 12 MS LEA: When you talk about the conservation 13 authority, that is the St. Clair Region? 14 MR. PAYNE: That is correct. 15 MS LEA: Do you know what construction window 16 the Ministry now uses for stream crossing? 17 MR. PAYNE: It is dependent upon the type of 18 crossing and the habitat there. It can be July 1st is 19 our assumption of what is available there and we have 20 discussed it with them and they are going to look into 21 that matter. 22 MS LEA: And that would be the earliest date? 23 MR. PAYNE: Yes. 24 MS LEA: Okay. Now, another feature of the 25 proposed route I would like to discuss with you briefly 26 is the accommodation which I understand from the 27 technical conference you have made regarding the social 28 feature of the church and cemetery that occurs about 414 UNION GAS PANEL 4, ex (Lea) 1 halfway down this route. It is marked, I believe, on 2 the topographic map with a black "C" for cemetery. 3 Is the jog in the pipeline immediately below 4 that black "C" related to accommodating this social 5 feature? 6 MR. PAYNE: Yes, it is. 7 MS LEA: And why did you have to cross the 8 road and come back again? 9 MR. PAYNE: As I explained in the technical 10 conference, the church has been there for some time, 11 probably constructed when Mandaumin Road was gravel all 12 the way along its length. And now with the widening of 13 Mandaumin Road, the church is significantly closer to 14 the travelled portion of the road. Also directly 15 adjacent to the church is a cemetery. So in lieu of 16 going behind the cemetery or the concerns of putting the 17 pipeline that close to a cemetery of some age, we have 18 elected to move to the other side of the road. 19 MS LEA: I gather also that you are willing to 20 suspend construction activities if there are going to be 21 any services in the cemetery and also on Sundays? 22 MR. PAYNE: Most definitely. 23 MS LEA: Thank you. 24 Turning to questions, then, about your 25 mitigation or construction practices for both 26 transmission lines, in the Technical Conference you 27 documented these things for the Mandaumin transmission 28 line. I just want to confirm them for the Oil City. 415 UNION GAS PANEL 4, ex (Lea) 1 You gave us a fairly full description in the 2 Technical Conference of your program to mitigate traffic 3 disruption during construction along the Mandaumin 4 Road -- this is at pages 211 to 212 of the Technical 5 Conference. Will you do the same thing for the Oil City 6 pipeline? Is there a traffic concern for that 7 transmission line? 8 MR. PAYNE: As I explained during the 9 Technical Conference, I was getting a little bit out of 10 my bailiwick at that time, outside my environmental box. 11 That is probably best handled by Mr. Mallette 12 MS LEA: Certainly. Whoever can help us. 13 I just need -- I understand what is going to 14 be done for Mandaumin. I don't know if there is a 15 similar concern for Oil City. 16 MR. MALLETTE: Our practices for Oil City 17 would not be any different than for Mandaumin. 18 I might point out, however, that Fairweather 19 Line, because of the nature of the road -- again being 20 really a fair weather road and you can't get down it if 21 it isn't fair weather -- we can close that road or a 22 good portion of it during our construction. The Town 23 has allowed us to do that. So there really won't be any 24 traffic concerns in that stretch. We also have that for 25 Black Ash Road. 26 So with the exception of those two areas where 27 we actually have an ability to close the road, we will 28 be instituting the MTO Guidelines for traffic control 416 UNION GAS PANEL 4, ex (Lea) 1 and signage. 2 MS LEA: Thank you. 3 Also in the Technical Conference at pages 219 4 to 220 you describe your commitment to apply mitigation 5 programs to minimize and avoid archaeological heritage 6 losses and damages. 7 Again, I understood in the Technical 8 Conference that this was being discussed for the 9 Mandaumin pipeline. I want to confirm that this will be 10 applied for both transmission lines. 11 MR. PAYNE: Most definitely. 12 MS LEA: Okay. 13 There has also been a concern raised here and 14 also at the Technical Conference about noise abatement 15 and noise disturbance during construction and also 16 during operation of the facilities. 17 We understand from what we have heard that the 18 direction drill runs all day and all night and that 19 it -- I think the rotary drill -- I should say rotary 20 drill, not directional drill -- the rotary drill is also 21 the noisier one because it has a diesel engine and Union 22 has elected to use two of these machines during 23 construction. 24 Can anyone describe to me noise abatement that 25 might be considered for the nighttime use of rotary 26 drills? 27 MR. WACHSMUTH: I really hate to do this, but 28 Mr. Pardy probably would have been the best person to 417 UNION GAS PANEL 4, ex (Lea) 1 ask that question to. 2 MS LEA: We did discuss it to some degree. 3 MR. WACHSMUTH: I have nothing to add to the 4 information that Mr. Pardy brought forward. We can 5 probably -- Mr. Mallette probably can talk to pipeline 6 construction equipment, but the actual well drilling, 7 there is nothing we have to add to what Mr. Pardy 8 brought forward. 9 MS LEA: Okay. So you are not aware of any 10 noise abatement scheme that can be applied in addition 11 to just letting it run and hoping it doesn't disturb 12 people? 13 MR. WACHSMUTH: I guess the one thing that I 14 maybe can say, and I guess noise is in the eye of the 15 beholder as well, but when one -- if we were to look 16 back at the maps and the drawings which were here for 17 the Century Phase I Pool, and there were wells that 18 were, I believe, closer in the Century Phase I 19 application to houses than what they are in the Century 20 Phase II, and we did not have any noise complaints that 21 were entered into complaint tracking system relative to 22 noise from well drilling. 23 MS LEA: Well, there may have been various 24 reasons for that, or perhaps it is experience with 25 previously drilling operations that have led people to 26 come forward today, but certainly we heard from 27 Mr. Vokes that there was some disturbance from noise 28 with the drilling he has already experienced. 418 UNION GAS PANEL 4, ex (Lea) 1 What lighting -- again this may be a Mr. Pardy 2 question and I didn't ask him this. 3 Do you know if those drills are lit up all 4 night also? I would expect they are. 5 MR. WACHSMUTH: Yes, they are. There are 6 lights on them. 7 MS LEA: Is there any mitigation you can do by 8 angling the lights, anything to mitigate the disturbance 9 that light may cause in the rural environment? 10 MR. WACHSMUTH: I haven't been on a drilling 11 well rig at night, but driving by one and seeing one lit 12 up the lights appear to be directed down where all the 13 equipment is on the rig. The lights are aiming where 14 the men are working and they are not trying to light up 15 the whole well pad. Based on driving by them at night, 16 the light does seem to be isolated on the rig. 17 MS LEA: Okay. 18 Mr. Wachsmuth, I'm going to ask you to look at 19 something, and you may need to take some time to do that 20 before you consider the answer to those questions, and 21 it is some suggestions for noise abatement that were put 22 forward by one of the witnesses for the Lambton County 23 Storage Association. 24 So this is evidence that is a response to an 25 interrogatory asked by us of the Lambton County Storage 26 Association witnesses. It's Interrogatory No. 4 from 27 Board Staff to Lambton County Storage Association. 28 Again, this may be a Mr. Pardy question and 419 UNION GAS PANEL 4, ex (Lea) 1 what we can do perhaps, if you can't answer it, is just 2 get an undertaking to determine whether these are 3 practical noise abatement strategies. 4 Have you been able to locate Interrogatory 5 No. 4? 6 MR. WACHSMUTH: Yes, I have. 7 MS LEA: Okay. On the second page of that 8 there is a list "Noise Abatement", and it states: 9 "A number of mitigation methods have been 10 used that seem applicable to the project 11 under discussion." 12 And they suggest three things there. 13 This is probably the first time you have had 14 to consider this and I don't want to rush you, and I 15 don't know if you can comment on this, but if you can be 16 helpful I would appreciate it. 17 MR. WACHSMUTH: I would like to undertake to 18 have Mr. Pardy look at this and get back to you. 19 MS LEA: That's absolutely fine. Let's give 20 that an undertaking number then. 21 What I was hoping for a comment on is, are 22 these suggestions practical, are they doable, are they 23 advisable, that kind of thing? 24 So let's call it Undertaking 16.10, the 25 practicality of the noise abatement strategies suggested 26 in Interrogatory No. 4 answered by the Lambton County 27 Storage Association. 28 UNDERTAKING NO. 16.10: Mr. Wachsmuth 420 UNION GAS PANEL 4, ex (Lea) 1 undertakes to respond to the practicality 2 of the noise abatement strategies 3 suggested in Interrogatory No. 4 answered 4 by the Lambton County Storage Association 5 MS LEA: Another matter which has been brought 6 to -- pardon me? 7 MR. WACHSMUTH: Just let me confirm, is this 8 in respect to well drilling? 9 MS LEA: Well, that is what I'm asking you 10 for. Just a moment. 11 The question said: 12 "Does Dr. Napier..." 13 That's N-A-P-I-E-R: 14 "...have any specific recommendations 15 concerning the abatement of noise 16 associated with drilling operations or 17 pipeline construction." 18 So I can't tell you whether he was only 19 talking about pipelines or well drilling here. 20 --- Pause 21 MR. WACHSMUTH: I guess I'm not sure whether 22 these three things relate to well drilling, but we will 23 have Mr. Pardy review to see whether they are 24 appropriate mitigation measures for well drilling. 25 MS LEA: Thank you. 26 Another matter brought to our attention just 27 recently by a landowner who is attending this hearing is 28 the question of dust control, not merely the Vokes 421 UNION GAS PANEL 4, ex (Lea) 1 concern but another landowner raised the concern about 2 dust control and how his experience was that it was a 3 difficult matter and he hadn't seen much success in dust 4 control in the past. 5 It has been mentioned on the record here that 6 calcium chloride is an option for that, but I would like 7 you to tell me if it has environmental disadvantages. 8 What about water? What about an oil-based biodegradable 9 product? Can you comment on dust control options? 10 Whoever. Go ahead. 11 MR. WACHSMUTH: I think Mr. Payne will. 12 MS LEA: Please. 13 MR. PAYNE: Certainly I would indicate that 14 water is obviously an option and is used to a great 15 extent during the construction programs I have been 16 involved with. 17 The use of calcium chloride is often employed 18 on public roads. It is a matter of course for road 19 construction and we have used it in the past to control 20 dust on public roads for pipeline construction. 21 The use of this chemical on gathering or on 22 pool line roads on adjacent agricultural fields I would 23 think would be not as advisable as water. The oil based 24 chemical substances that are dumped on roads such as 25 brand name Tembine or some sort of lignin based product 26 like that we have not used. I think we would not look 27 forward to using such a thing. Water is definitely the 28 best option from an environmental standpoint. 422 UNION GAS PANEL 4, ex (Lea) 1 MS LEA: Are there biodegradable oil based 2 products, that is based on vegetable oils rather than 3 other chemicals available for dust control now, do you 4 know? 5 MR. PAYNE: Well, there is the product 6 marketed as Tembine. I believe it's still available. 7 That's a biodegradable product. However, it is a brown 8 substance sprayed on roads. Some municipalities do 9 spray it on their roads. I would certainly want our 10 crews to consult with the landowner of a property before 11 we got something like that in close contact with their 12 fields. 13 MS LEA: In saying that you think that water 14 is probably the preferred alternative, how many times a 15 day would you have to apply water to achieve effective 16 dust control? 17 MR. PAYNE: They have a water truck out there 18 every day. 19 MS LEA: So it would be spraying on an ongoing 20 basis. 21 MR. PAYNE: Depending on the weather, yes. 22 Once you put down one of these roads, there's a fair bit 23 of dust, rock dust, in the rock. Initially, when you 24 put the road down, it will generate a fair amount of 25 dust. As the road is washed down or watered down and 26 travelled, that amount of dust is dramatically reduced 27 over time. 28 There certainly will be some dust issues 423 UNION GAS PANEL 4, ex (Lea) 1 during construction and we have said we will address 2 those and we will address them promptly. 3 MS LEA: You will respond to dust control 4 complaints. 5 MR. PAYNE: Most definitely, but as these 6 wells go into production and there is less traffic, 7 there usually isn't a major issue with us. Certainly 8 the truck traffic is greatly reduced and the roads are 9 subject to rain. It gets rid of a lot of the dust out 10 there. They are not travelled like a County Road all 11 the time when you see dust problems. 12 MS LEA: I'm talking about the access roads 13 also. 14 MR. PAYNE: Yes. 15 MS LEA: Now, I would like to ask you whether 16 certain things are covered in the agreement that you 17 have with the landowners so that we understand that 18 these things are being taken care of. That is that 19 there will be a communication with the affected 20 landowners and, for that matter, with municipalities 21 about the construction schedule and practices. 22 --- Pause 23 MS LEA: You may be able to answer these, Mr. 24 Wachsmuth, without referring to any documents. 25 MR. WACHSMUTH: I don't think you need to turn 26 the documents up, but as Mr. Haley filed this morning, 27 or this afternoon, he filed a new or a revised version 28 of the letter of understanding, the transmission lines. 424 UNION GAS PANEL 4, ex (Lea) 1 He also filed a new document to us which is the 2 construction commitment letters for operations within 3 the storage pool. 4 MS LEA: Yes. 5 MR. WACHSMUTH: Within those documents, I 6 believe it's 1CL in the commitment letter and in the 7 transmission LOU it's 1W. There's the commitment for us 8 to use our complaint tracking system. 9 While Mr. Haley is probably the best person to 10 talk to that, to give you some of the general things 11 that are in our complaint tracking system, it involves 12 our lands relation agent program where we have a person 13 assigned to the project who is in daily contact or 14 contact on a continuous basis with the landowners to 15 inform them of what is going to be going on in the pool. 16 It was filed as part of an interrogatory a 17 copy of a card which is given to all of the landowners 18 which provides a list of contact people at Union Gas 19 that the landowners can contact in the event that they 20 do have problems. 21 The complaint tracking system also goes and 22 records complaints which are received during 23 construction. The complaints come in in a form that is 24 entered into a computer based program that reminds 25 people how long they have been in the program as well 26 as -- at least based or whether resolved. 27 Also, the proposed conditions of approval will 28 require to list all of the -- or the proposed conditions 425 UNION GAS PANEL 4, ex (Lea) 1 of approval will have a clause in there which talks to 2 preparing a log of all the landowner complaints and it's 3 from that complaints tracking system that that log is 4 prepared. 5 As well, in this project there has been 6 provision for a joint committee made up of landowners 7 and Union Gas personnel and that committee would be 8 available if landowners have concerns and issues that 9 they wish to have addressed. 10 I do believe that we have got a very 11 comprehensive program. We have done a number of 12 post-construction studies on other projects and the 13 landowners have been very happy with the results of our 14 lands relation program. 15 MS LEA: Okay. There are a couple of other 16 things I wanted to check to find out if they are covered 17 in these new documents that we have. I don't need 18 details about them so much as an understanding that they 19 are covered in the agreement. 20 I gather that you are going to strictly adhere 21 to your wet soil construction shutdown policy and that 22 that is reflected in the agreements. 23 MR. WACHSMUTH: Yes, we will be following our 24 wet soil practice. 25 MS LEA: The agricultural ministry I believe 26 has a guide to weed control in Ontario 2000. I gather 27 adherence to that policy is also something that Union 28 commits to do. I'm sorry, it's not -- 426 UNION GAS PANEL 4, ex (Lea) 1 MR. WACHSMUTH: We are certainly committed to 2 weed control whether that volume of the OMAFRA document 3 is specifically identified or not. 4 MS LEA: It is not. 5 MR. WACHSMUTH: It is not? 6 MS LEA: It is not, but do you comply with the 7 Ministry of Agriculture's requirements with regard to 8 weed control? 9 MR. PAYNE: I think in terms of spraying, the 10 Ministry of the Environment regulates that and you have 11 to be a licensed user of products for handling spraying. 12 We certainly follow those guidelines. 13 We have a copy of the OMAFRA document 2000 14 weed control guidelines and we will be having a look at 15 it, but we are certainly in compliance with the Ministry 16 of the Environment regulations on spraying, where the 17 pesticides or herbicides can be sprayed. Definitely the 18 landowner is involved in that process as well. 19 MS LEA: Now, with respect to tile drainage, 20 damage to tiles, locating, restoration and 21 post-construction work to be done on tile drainage. Is 22 that covered in the documents, Mr. Wachsmuth, that you 23 made reference to? 24 MR. WACHSMUTH: Yes, it is. 25 MS LEA: What about soil remediation, that 26 there's protection of the soil remediation of it? There 27 was quite a bit of evidence about that in the original 28 filing from the landowners. Is that covered in the 427 UNION GAS PANEL 4, ex (Lea) 1 document that you have referred to? 2 MR. WACHSMUTH: I believe that it is. 3 MS LEA: Now, with respect to soil protection 4 and remediation, you will recall in E.B.L.O. 267, which 5 was the Dawn-Euphemia case, there was some increased 6 protection offered as a result of that case. Can you 7 tell me whether those measures -- yes, Dawn to 8 Enniskillen, pardon me. I think so. Dawn to 9 Enniskillen leads to construct as opposed to 10 Dawn-Euphemia. I think I'm getting my -- 11 MR. WACHSMUTH: Yes. That's right. 267 was 12 Dawn to Enniskillen. 13 MS LEA: Dawn to Enniskillen, thank you. 14 Okay. Yes. That leads to construct. There was an 15 increased policy for soil protection and remediation. 16 Is that level of soil protection going to be applied 17 with respect to this project, do you know? 18 MR. WACHSMUTH: I'm sorry, I'm not exactly 19 sure specifically what you are asking. 20 MS LEA: No, I'm not specifically sure either. 21 Just a moment and I will see if I can find out. 22 You remember that we had quite a bit of 23 evidence about topsoil protection and stripping and 24 piling the soil in different piles and the different 25 layers of the subsoil and so on. I don't know. 26 I haven't had time to review in detail what 27 the soil protection remediation practices are in the new 28 letter of understanding and commitment, construction 428 UNION GAS PANEL 4, ex (Lea) 1 commitment. I don't know whether they have reached the 2 level that they did in the Dawn to Enniskillen case. 3 Can you assist us there? 4 MR. PAYNE: The Dawn to Enniskillen case, as I 5 understand it, was somewhat unique in that there were 6 some issues with the directly adjacent pipeline and the 7 topsoil surrounding that. In this case there isn't that 8 issue. We don't have a directly adjacent pipeline that 9 has caused significant issues with crop production. 10 There is no predisturbed section of topsoil 11 versus new topsoil that will be disturbed. There was a 12 definition line talked about during 267 of areas that 13 were impacted during the construction of the MPS 42 14 pipeline and we don't have that issue here. That would 15 not be included. 16 MS LEA: Thank you. Now, I wonder if we could 17 turn to, just to get some things confirmed on the 18 record, Interrogatory No. 118. 19 In Interrogatory No. 118 you filed various 20 letters from various agencies and there are a couple of 21 outstanding issues. I just want an update on those. 22 One of the letters was from the Ministry of Natural 23 Resources, which indicated that this request for 24 environmental review be forwarded to the Aylmer District 25 Office. Was there anything that arose out of that 26 review that MNR objected to in terms of this pipeline 27 construction? 28 MR. PAYNE: No. The Aylmer office is sort of 429 UNION GAS PANEL 4, ex (Lea) 1 the local office. Mr. Renton is an overall planner for 2 the Ministry of Natural Resources and he would have 3 deflected that document just as a courtesy to the local 4 office. However, the project is being looked after at 5 the Chatham office and we have had discussions with the 6 Chatham office and the Ministry of Natural Resources and 7 they have no issue with the project. 8 MS LEA: All right. What about Lambton County 9 and the tree cutting by-law. I notice that the letter 10 filed as an attachment to Interrogatory 118 talks about 11 a request that Lambton County was making and there has 12 been a couple of people with correspondence. I notice, 13 Mr. Payne, you wrote back and said it is not necessary 14 to make the amendment requested by Lambton County. But 15 there is nothing in here to indicate whether Lambton 16 County agreed with you or not. 17 What is the status with respect to your 18 discussions with Lambton County and tree cutting? 19 MR. WACHSMUTH: I guess there is really two 20 issues here, and the one issue relates to a meeting 21 which was held between officials at Lambton County, 22 Mr. Boyd, Mr. Van Horne, the solicitor, and Mr. 23 Katybato, the engineer, from the Lambton County side, 24 myself, Mr. McNally and Christine Jackson, one of the 25 lawyers for Union Gas. 26 We met with the Lambton County after the 27 Century I project to try to resolve some of the issues 28 that Mr. Boyd brought forward at that time. We 430 UNION GAS PANEL 4, ex (Lea) 1 documented the discussions of that meeting and sent that 2 letter back to the county and asked the county to -- if 3 that was a clear -- if that was their understanding as 4 well, if they would sign and return that letter to us. 5 Ms Jackson has had additional discussion with 6 the county and while, based on my discussions with 7 Ms Jackson, they don't have any objections to it, they 8 are not sure whether Mr. Van Horne is the right person 9 to sign the letter. I guess in the bureaucracy of the 10 county whether or not they -- he would need to go to 11 council to get it approved in order to send it back or 12 whether we should be forming a letter of understanding 13 with the county. So that is why we do not have a letter 14 signed back from the county confirming those 15 discussions. 16 Specifically to the letter that Mr. Payne 17 wrote, we sent that back. We have not heard back from 18 the county and I guess our position is that if somebody 19 is upset with something that we are proposing, we either 20 hear from them or we received a letter back or they come 21 to -- attend at the hearing and present their views. 22 So we are based that we didn't hear back and 23 that we didn't -- that nobody came that we believe that 24 they have accepted the positions that we have got and 25 that they are -- Ms Jackson is still working with 26 Mr. Van Horne to determine what the appropriate method 27 is to get the confirmation from Lambton County in the 28 Lambton County letter. 431 UNION GAS PANEL 4, ex (Lea) 1 MS LEA: Okay. Well, the letter that is the 2 attachment to Interrogatory 117 which is, I think the 3 one -- the letter of agreement that you were referring 4 to, it mentions in number 3 that the parties, that is 5 Union and the county: 6 "The parties will deal directly with one 7 another to try and resolve the issue in 8 advance of OEB hearings." (As read) 9 And I guess this is a general thing. Since the 10 technical conference, have you contacted the county to 11 deal with this issue or are you simply relying on the 12 fact that you haven't heard from them? 13 MR. WACHSMUTH: Ms Jackson has contacted the 14 county since the technical hearing. And they did not 15 address any specific concerns with this project to her. 16 MS LEA: How much tree cutting are you doing 17 in Lambton County on this project? 18 MR. PAYNE: Just bear with me for a minute 19 here. 20 MS LEA: Please. 21 MR. PAYNE: We estimate that there will be 22 approximately about a half of or 0.5 of a hectare to be 23 cut and that is primarily in the area along the NPS 10 24 Bluewater line parallel to the Sun Canadian easement as 25 discussed in my environmental report for the pools. 26 MS LEA: And is that the type of area where 27 you replant two for one? 28 MR. PAYNE: Yes, that is. 432 UNION GAS PANEL 4, ex (Lea) 1 MS LEA: And do you know where you are going 2 to plant those trees? 3 MR. PAYNE: We have not had that discussion 4 yet with the Kembers and the adjacent property owner 5 there that has the woodlot. They are apprised of the 6 policy and we haven't had the -- we haven't had the 7 chance to sit down with them and discuss exactly where 8 they would be going back. 9 However, we will and I have put forward in the 10 meetings that I have with the landowners in the area in 11 the public meetings that the policy is in place from 12 Lambton County, that we do encourage the replanting and 13 we will abide by what was discussed with Mr. Wachsmuth 14 and Ms Jackson in Lambton County. 15 MS LEA: Do you not have some hedgerow trees 16 to cut for this project? 17 MR. PAYNE: There is some brush to be cut 18 along the edge of the woodlot on the Hardy property to 19 ensure that the pipeline is tucked in closer and doesn't 20 interfere with its tile drains and we have had that 21 discussion with Mr. Hardy. But beyond that there is a 22 slight piece of old field area, as you go down Mandaumin 23 Road and we make the jog to get around the church, there 24 is an area there that has some scrub in it that we would 25 have to cut in the easement portion along there. 26 MS LEA: Okay, thanks. Have you contacted the 27 Ministry of Environment with respect to a permit to 28 discharge water after hydrostatic testing? 433 UNION GAS PANEL 4, ex (Lea) 1 MR. PAYNE: At the present time we are 2 awaiting -- we are awaiting the contractor to get on 3 board to discuss the issue with him as to where he might 4 prefer to discharge water and we would like -- we would 5 like to do that and make one application and encompass 6 any requirements he might have that are acceptable to us 7 and the landowners. And that will leave us with enough 8 lead time to get that permit when required. 9 MS LEA: Thank you. 10 MR. PAYNE: My anticipation is that it would 11 be -- water would not be coming from a natural source 12 because there isn't enough water available in the water 13 crossings on the project and we would be utilizing 14 municipal water for this. 15 MS LEA: Okay. Thank you. 16 Now, you filed in this hearing Union's 17 environmental management manual. It appeared as 18 Appendix E to Tab 1 to the environmental report. Is 19 this a fairly recent production of Union's? When was it 20 developed? 21 MR. PAYNE: We should have put a date on that. 22 MS LEA: Well, that is okay. The exact time 23 isn't important. I just don't recall seeing it before 24 and I figured therefore that it must be recent. 25 MR. PAYNE: It is fairly recent. Although it 26 was part of the Century Pool's Phase I application and 27 it was in the environmental assessment at that point. 28 We really put it together as an information document 434 UNION GAS PANEL 4, ex (Lea) 1 that we can bring to the open houses and have available 2 to anyone that is interested in it. 3 MS LEA: And when you drafted it, I presume 4 you took into consideration the Ontario Energy Board 5 guidelines for the location and construction of 6 pipelines? 7 MR. WACHSMUTH: Yes, we did. 8 MS LEA: Yes, it looks a little bit like that. 9 MR. WACHSMUTH: And I believe it was in late 10 '97 or '98 when it was -- the first version came out. 11 MS LEA: Okay. With respect then to your 12 construction of this project, will you complete your 13 activities in conformance then with the items listed in 14 that manual? 15 MR. PAYNE: Yes, we will. 16 MS LEA: There was also an item that is not 17 the record in this case. I think it is called 18 "Construction Specifications". Am I giving it the right 19 name? Do you know what I'm talking about? 20 MR. WACHSMUTH: I know that Mr. Mallette would 21 like to answer the question. 22 MS LEA: Okay. 23 MR. MALLETTE: I'm sorry. Could you repeat 24 the question? 25 MS LEA: Well, I'm trying to come up with the 26 right name and I don't have the right name. It is 27 something like Construction Specifications. It is not 28 on the record in this case. It is something that the 435 UNION GAS PANEL 4, ex (Lea) 1 Board does have from Union though. 2 I tell you why -- okay. Now, I understand a 3 little bit more the origin of it. I'm sorry. It is 4 late in the day. 5 It's a big manual that we had at the office 6 and it's referred to as a recommended action by your 7 environmental consultants; that is, Union Gas 8 construction specifications is recommended that this be 9 complied with. 10 Do you have any problem with complying with 11 your own construction specifications binder? 12 MR. MALLETTE: No, we do not. 13 MS LEA: Okay. Thank you. 14 So that you will follow your environmental 15 consultants' recommendation, in that regard? 16 MR. MALLETTE: Yes, we will. 17 MS LEA: Apart from the change in the route -- 18 which you have explained to us -- are there any other 19 recommendations made by your environmental consultants 20 that you feel you cannot comply with? 21 MR. PAYNE: No, we do not. We will comply 22 with the recommendations in the environmental reports -- 23 MS LEA: Thank you. 24 MR. PAYNE: -- as far as this application. 25 MS LEA: Have you had an opportunity to review 26 the conditions of approval which Board staff filed in 27 this case as an exhibit and which, also, were provided 28 to you in advance? 436 UNION GAS PANEL 4, ex (Lea) 1 MR. PAYNE: Yes, we have. 2 MS LEA: Are there any conditions in that list 3 of conditions of approval that you believe you cannot 4 comply with? 5 MR. PAYNE: If you could just bear with me, I 6 think I have got it here now. 7 MS LEA: I'm sorry. I didn't hear you. 8 MR. PAYNE: I said, if you could just bear 9 with me, I'm just trying to turn it up. I know I had 10 just one small wording change. 11 MS LEA: Okay. Just a moment. I'm also 12 trying to turn something up. 13 --- Pause 14 MS LEA: Okay. Sorry. You were about to 15 speak to the conditions of approval. Please go ahead. 16 MR. PAYNE: From my perspective, the proposed 17 conditions of approval, drilling licence applications, 18 Mandaumin-Bluewater-Oil City, page 2, Number 5 -- 19 MS LEA: Yes? 20 MR. PAYNE: -- "Union shall, subject to the 21 recommendations by an independent tile contractor", I 22 would suggest that that should say, "independent tile 23 consultant". 24 MS LEA: Thank you. That's not a problem for 25 us. 26 Do you think that wording should be 27 permanently changed? 28 What's a "consultant", as opposed to a 437 UNION GAS PANEL 4, ex (Lea) 1 "contractor"? I guess the contractor does the 2 remediation and the consultant tells you what to do? 3 MR. PAYNE: Yes, the contractor would be the 4 guy with the backhoe and that sort of thing; whereas, 5 the consultant would be organizing what exactly should 6 be done. 7 MS LEA: Anything further, on the conditions 8 of approval? 9 MR. WACHSMUTH: I guess there is one in the 10 pipeline conditions of approval. There's one new 11 condition that has not been traditionally in the 12 conditions of approval. 13 MS LEA: Which one is that, sir? 14 MR. WACHSMUTH: That would be Number O, which 15 relates to: Union shall comply with the intent of the 16 County of Lambton tree-cutting by-law. 17 MS LEA: Yes? 18 MR. WACHSMUTH: And I guess our evidence has 19 been that -- I have been sworn and given evidence 20 relating to that issue that we certainly do try to meet 21 the intent of the by-law, and I guess that's Union's 22 position that we do that, and I guess I'm not sure 23 why -- I realize I'm not supposed to ask questions but I 24 guess I'm not sure that it's necessary for that 25 condition to be in place when we have committed to do 26 our best to try to address the concerns that Lambton has 27 put forward. 28 MS LEA: Okay. So I gather your objection, 438 UNION GAS PANEL 4, ex (Lea) 1 sir, then, is not that you could not comply with this 2 condition but you don't see it as a necessary condition? 3 MR. WACHSMUTH: That is correct. 4 MS LEA: And if we look at Condition A, under 5 the proposed conditions of approval of leave to 6 construct, it does say that Union shall comply with all 7 undertakings made by its counsel and witnesses, 8 according to the evidence of the witnesses at the 9 hearing. 10 Is that the section you would be relying on, 11 in terms of your commitments with respect to Lambton 12 County? 13 MR. WACHSMUTH: Yes, it is. 14 MS LEA: Thank you. 15 We will think about what you have said, sir. 16 I wonder if we could now look at the questions 17 that were -- I think Panel 2 told me that Mr. Mallette 18 would be able to answer these. So, Mr. Mallette, your 19 colleagues have suggested that these go over to you -- 20 and this has to do with the abandonment of facilities. 21 Now, yesterday, we provided Union with the 22 Technical Standards Safety Authority checklist with 23 respect to abandonment -- or was it this morning? I'm 24 sorry. Long day, I guess. 25 Sometime previously, we provided you with 26 this. 27 Have you had an opportunity to look at that 28 document and determine if you recognize it? 439 UNION GAS PANEL 4, ex (Lea) 1 MR. MALLETTE: Yes, I have looked at it and, 2 yes, I do recognize it. 3 MS LEA: Let's give it an exhibit number, 4 then, filed by Board staff, 15.6 -- 15.7, that's right; 5 we have had one already -- 15.7, I believe. 6 EXHIBIT NO. 15.7: Technical Standards 7 Safety Authority checklist with respect 8 to abandonment 9 MS LEA: Now, do you follow that checklist, as 10 part of your abandonment procedure, with respect to 11 pipelines? 12 MR. MALLETTE: Yes, we do. 13 MS LEA: Just one second. 14 --- Pause 15 MS LEA: I'm just trying to separate my 16 pipeline questions from my wells questions. Just one 17 moment. 18 Can you just give me what Union's practice is 19 when it decides that a pipeline is no longer required. 20 What is your abandonment procedure? 21 MR. MALLETTE: Well, each procedure is very 22 site specific. 23 I could perhaps use as an example the 24 application that Union Gas put before the Board, in 25 1999, for abandonment of two sections of 12-line 26 associated with our Panhandle transmission line under 27 the Sydenham River. 28 That was an old-style crossing where there was 440 UNION GAS PANEL 4, ex (Lea) 1 dual lines, 12-inch in diameter, in the middle of a 2 16-inch pipeline, and to facilitate a pegging of the 3 line, we sought to abandon the two sections of the 4 12-inch and instal a 16-inch straight-through instead -- 5 and that was approved and we have done that work. 6 As part of that application, we did utilize 7 the TSSA pipeline abandonment checklist and filed that 8 with our application, complete with answers, or 9 information, regarding each point through that. So 10 that, really, laid out our abandonment process for that 11 particular pipeline -- and I think that would be an 12 example of what we would do for any other sections that 13 would come up for abandonment. 14 MS LEA: Was that a transmission line, sir? 15 MR. MALLETTE: Yes, it is. 16 MS LEA: And would you follow the same 17 practice for gathering and distribution lines, also? 18 MR. MALLETTE: Yes, we would. 19 MS LEA: Now, that particular example that you 20 have given us, then, you did not remove the line from 21 its location? 22 MR. MALLETTE: That's correct. The lines were 23 left in place beneath the Sydenham River. 24 MS LEA: And you capped them off, then, I 25 gather? 26 MR. MALLETTE: Yes, we did. The 12-inch 27 sections were capped. 28 Again, we went through the checklist and made 441 UNION GAS PANEL 4, ex (Lea) 1 a determination on each of the points and provided a 2 rationale for each of our decisions throughout that 3 checklist. 4 Other portions of the 16-inch that connected 5 into the 12-inch were actually taken out and removed 6 from the ground and taken away -- and so, I guess if you 7 considered those smaller portions adjacent to the actual 8 12-inch crossings that needed to be removed to 9 facilitate the new installation as being abandoned, they 10 were actually removed. 11 So we used a couple of techniques at that 12 particular spot. 13 MS LEA: What factors assist you in 14 determining whether a pipeline should be left in situ or 15 removed? 16 MR. MALLETTE: I would say again, going back 17 to that checklist, it gives a very good list of items. 18 To mention a few of them, there is the cleanliness of 19 the pipe, there is the ability to remove it without 20 causing undue disturbance, such as the Sydenham River 21 again as an example. This pipeline was buried beneath 22 the river, and to take it out would have caused quite a 23 bit of disturbance to the river itself and the stream 24 bed. 25 After going through the checklist, it was 26 determined that it would be -- cause no further 27 environmental impact to leave it in place. 28 So all of the items really on the checklist 442 UNION GAS PANEL 4, ex (Lea) 1 are taken into consideration. I wouldn't want to say 2 any one is more important than the other, but there are 3 a number of factors that are considered. 4 MS LEA: What about if the pipeline is on 5 private land? This might be a gathering line, it might 6 be a transmission line or a distribution line, and it is 7 on private property. What do you do in terms of 8 bringing the owner into this process, the owner of the 9 land? 10 MR. MALLETTE: Well, abandonment is addressed, 11 at least, in the easement agreement. 12 MS LEA: The easement agreement for 13 transmission lines, sir? 14 MR. MALLETTE: For transmission lines. It's 15 on the second page, page number 2. 16 MS LEA: Yes, page number 2, which is the 17 first page that I have, yes. Page number 2, yes. That 18 is paragraph numbered 3? 19 MR. MALLETTE: I believe it is paragraph 20 number 1. 21 MS LEA: Okay. 22 MR. MALLETTE: It refers to surrender of the 23 lands and so forth. 24 MS LEA: Yes. It is going to take me a minute 25 to read it, sir. 26 --- Pause 27 MS LEA: I guess my brain isn't working too 28 quickly now. 443 UNION GAS PANEL 4, ex (Lea) 1 You are saying that if you are going to 2 surrender the use of the land which you have acquired by 3 this easement, that you are going to in all respects 4 restore the land to its previous productivity and 5 fertility, as far as is reasonably possible, except for 6 items in respect of which compensation is due under 7 clause 2, which is gates, fences, tile drains, and so 8 on. 9 And it says further that: 10 "The transferor and transferee hereby 11 agree that nothing herein shall oblige 12 the transferee..." (As read) 13 That's Union: 14 "...to remove the pipeline from the lands 15 as part of the transferee's obligation to 16 restore the lands." (As read) 17 Is that the part that you wanted me to look 18 at, sir? 19 MR. MALLETTE: Yes. 20 MS LEA: Okay. So this agreement for a 21 transmission line says, then, that you do not have an 22 obligation to remove the pipeline. 23 MR. MALLETTE: That's correct. 24 MS LEA: Now, apart from your obligations, 25 sir, what would you actually do? 26 MR. MALLETTE: Well, perhaps I should take a 27 bit of a step backward here and talk about the entire 28 menu of what is available when you are no longer going 444 UNION GAS PANEL 4, ex (Lea) 1 to use a pipe. 2 The first thing would be a deactivation of the 3 pipeline and deactivation is covered in part in 4 CSAZ662-96 code in section 10.13. 5 MS LEA: I'm sorry, you are going to have to 6 repeat that number. 7 MR. MALLETTE: Sure. CSAZ662-96, 8 section 10.13. 9 MS LEA: Yes. 10 MR. MALLETTE: That particular clause has been 11 amended in Ontario Regulation 157/97. So it adds a 12 couple of additional things which involves filling the 13 pipe with an inert gas and disconnecting -- sorry -- 14 removing aboveground facilities and this type of thing, 15 and that is a deactivated pipeline. 16 The next phase I guess would be a 17 decommissioning and if it is decommissioned it means 18 that it is not easily put back into service. If it is 19 just deactivated you can go back within 12 months and we 20 attach to it and start using it again. But if it is 21 decommissioned, it then becomes a pipeline that you have 22 to retest and do a number of things to prove its 23 integrity. 24 After that, if you truly want to walk away 25 from it, and that would probably apply to the case that 26 I referred to in the easement agreement where we are 27 talking about abandonment, and that truly is 28 abandonment -- "abandonment" means that you will never 445 UNION GAS PANEL 4, ex (Lea) 1 ever consider using this pipe again -- then you do have 2 a number of things to consider. 3 The TSSA checklist, many elements would apply 4 to the actual abandonment and you would consider again 5 such things as subsidence. If it is a large diameter 6 line, there is potential that over many years, and 7 probably many hundreds of years, we would get 8 perforation because of corrosion and water and soil 9 would leak into it. There would never be a catastrophic 10 failure of the thing where all of a sudden a rift valley 11 appears across the land, but it would eventually fill 12 with material from outside the pipe and fill the line 13 in. 14 Now, item number 1 under "Planning of the 15 Pipeline Abandonment Checklist" indicates that if it has 16 a diameter greater than 12 inches in diameter that 17 subsidence should be considered. There have been 18 studies done to indicate that if it is less than 12 19 inches in diameter, you are probably not going to see 20 any effect on the surface of the line filling with 21 material. Above that, you may, you may not, depending 22 on the circumstance. 23 Again, going back to my example of the 24 Sydenham River, you would not notice any subsidence over 25 a line if it does eventually rust out and fill with fill 26 and water and so forth. 27 So, again, you are going to be looking at the 28 cleanliness of it, ensuring that the pipeline is unable 446 UNION GAS PANEL 4, ex (Lea) 1 to become a conduit for groundwater going from point A 2 to point B where you don't want the groundwater to move 3 that way, that type of thing. 4 There are even other things when it comes to 5 abandonment that you might want to consider, such as if 6 it is in a location where it could be used for some 7 completely different purpose, if there is precedence for 8 abandoned pipelines being sold to municipalities to run 9 cables and fibre optics, and that type of thing. So 10 there is another possibility completely that the 11 pipeline would find a new life. 12 Perhaps that gets at some of the issues at 13 hand here that would be taken into consideration when 14 considering an abandonment of a pipeline. 15 MS LEA: Okay. Thanks very much for that 16 explanation. 17 If you had a pipeline on agricultural land, 18 can a general statement be made as to whether it would 19 be more destructive to that land to leave in the 20 pipeline or take it out? Is it possible to make a 21 general statement about that? 22 MR. MALLETTE: I would not feel comfortable 23 making a general statement one way or the other in that 24 case. It would be a site-specific situation. 25 MS LEA: Not just yourself, Mr. Mallette, but 26 the environmental experts, Mr. Wachsmuth, Mr. Payne and 27 the two consultants, whose names escape me for the 28 moment, but Mr. Shrive and -- 447 UNION GAS PANEL 4, ex (Lea) 1 MR. WACHSMUTH: I think it would be very 2 site-specific. The year that it was probably -- that we 3 were trying to take one out, I mean, we would have to 4 follow -- I mean, that would be the year that it would 5 rain all summer. I'm afraid that we would end up in a 6 wet weather situation. I mean, it's very site-specific, 7 and I think that if there are situations you would have 8 the same issues that we have when we put pipelines in. 9 I mean, some of those issues would be there. 10 There would be the potential that the year you chose was 11 a wet one. You certainly wouldn't want to waive your 12 wet weather shutdown to do an abandonment of the 13 pipeline. 14 MS LEA: Okay. I guess what I'm trying to get 15 at, gentlemen, is that I know that the lease that you 16 have signed with respect to transmission lines, and I 17 don't know -- I mean, the easement you signed with 18 respect to transmission lines, and I don't know the 19 situation for gathering lines, does not oblige you to 20 remove that pipeline. 21 If the landowner requested, however, wisely or 22 not, to have you remove the pipeline from his land, 23 would you comply with that request or what would you 24 consider in determining whether to comply? 25 MR. WACHSMUTH: I think we would look at 26 everything. I mean, I guess the -- 27 MS LEA: Can you be a little more specific? 28 MR. WACHSMUTH: I guess the question would be: 448 UNION GAS PANEL 4, ex (Lea) 1 Why would the landowner want the pipeline removed? I 2 can think of an example of a situation south of Chatham 3 where a distribution line was removed and then they came 4 along later and put in a municipal drain, so we had to 5 move the pipeline or else they would have had to put the 6 drain in a different location. 7 If the reason was there, you would look at 8 what the site-specific circumstances were in each of the 9 cases and then make your determination based on that 10 situation. We don't want to create any more damage -- 11 or create damage or do anything there, but in some cases 12 it may be appropriate that the line comes out and in 13 other cases we would prefer that it would be abandoned 14 in place. I guess we would really try to look at that 15 situation, as Mr. Payne talked about at the technical 16 conference, as a team looking at what is best for 17 everything. 18 MS LEA: In the pipeline abandonment 19 checklist, I noticed that there is mention made of a 20 post-abandonment surveillance program. Does Union have 21 such a program in place? 22 MR. MALLETTE: The checklist item reads: 23 "Has consideration been given to 24 conducting a post-abandonment 25 surveillance program?" (As read) 26 I would say that if we were abandoning a pipe 27 and maintaining the easement, that we would keep under 28 surveillance. If the desire, I guess, of both the 449 UNION GAS PANEL 4, ex (Lea) 1 company and the landowner was to release the easement 2 and the easement was released, we wouldn't have the 3 ability to provide the surveillance, but I assume that 4 that would be taken care of by them and the paperwork 5 that went along with the release of the easement. 6 Certainly, when you go to the deactivation 7 stage of pipelines, you must maintain surveillance on it 8 because you are trying to maintain its integrity, so it 9 would certainly apply in the deactivation stage. 10 MS LEA: I guess, if you had decided not to 11 maintain surveillance because the lease itself was being 12 abandoned, if I can use that word, you would still 13 compensate the landowner for damages due to the presence 14 of the pipeline that could be demonstrated and proved as 15 being due to the presence of the pipeline? 16 MR. MALLETTE: If the easement is maintained? 17 MS LEA: No. If the easement is not 18 maintained. 19 MR. MALLETTE: I believe we are into a legal 20 area here, but I think our obligations would end with 21 the release of the easement, but I -- 22 MS LEA: Okay. Thank you. 23 If I want to quarrel with that, I will look up 24 the law. Thank you. 25 Now, in the checklist it does say that 26 landowners and proper authorities should be notified of 27 the abandonment. Would it be Union's practice to notify 28 all landowners of any abandonment on their property? 450 UNION GAS PANEL 4, ex (Lea) 1 MR. MALLETTE: Yes. I can't think of any 2 situation when we would abandon a pipeline and not 3 notify the landowner. 4 MS LEA: Okay. 5 Earlier, with Panel No. 2, I talked about a 6 staff suggestion that Union develop an abandonment 7 policy or procedure with respect to both wells and 8 pipelines. I would like to get your comments on whether 9 you would be willing to do that. 10 I think I explained our understanding of the 11 utility of this earlier, but I will just briefly 12 reiterate. 13 It is not an indication that abandonment 14 procedures are faulty at this time, but merely to have a 15 place where a landowner -- or anyone else can go that 16 wants information about abandonment of a well or a 17 pipeline -- can go and see the policies and procedures 18 that Union has in place. These procedures and policies 19 may refer to a displacement or the checklist, but at 20 least we would have a procedure and policy manual in 21 place with respect to abandonment. Can you comment? 22 MR. MALLETTE: I will comment. 23 I'm unaware of any policy currently in place 24 at Union Gas for abandonment of pipeline facilities 25 other than the standard practice of complying with the 26 TSSA checklist, and it is used when pipelines are 27 abandoned. 28 Abandoning pipelines is not a common thing for 451 UNION GAS PANEL 4, ex (Lea) 1 us to do, and from time to time when we do it the 2 technology can change rather significantly, not just the 3 technology but the thought process behind it, the legal 4 ramifications, the research that has gone into what 5 happens when a pipe cathodic protection is no longer 6 applied to the pipe and gas is no longer inside of it, 7 this type of thing. 8 We identified in Undertaking No. 34 to the 9 technical conference a number of concerns with respect 10 to committing to removing pipe. We did identify the 11 TSSA checklist. We did identify that industry research 12 which I'm directly aware of that is ongoing at the 13 moment. Looking at these kinds of issues can provide 14 new answers in the future. 15 Our approach has been as these projects come 16 forward as abandonment takes place, and in the case of 17 the facilities we are applying for here today, we could 18 be talking many decades before we would be looking at 19 abandoning the line. Whatever legislation, guidelines 20 and so forth that are in place at the time would be 21 complied with. 22 On the document that you handed out, you can 23 see that the members of the technical advisory committee 24 that developed the check list, there's two 25 representatives there from Union Gas. We are actively 26 involved in this area, abandonment area, but we don't 27 feel comfortable, I guess, in applying a broad brush 28 approach at a given moment in time to something that's 452 UNION GAS PANEL 4, ex (Lea) 1 going to take place well into the future. 2 MS LEA: Gentlemen, both Mr. Mackie and I have 3 a nagging feeling that there was something referred to 4 this panel from another panel and we can't remember what 5 it was. Does anybody else recall that your colleagues 6 referred something to you that I may have forgotten? 7 I can't come up with it and I'm not sure it's 8 in your interest to come up with it either. I will say 9 that those are my questions for this panel. If 10 something -- yes. 11 Those are my questions for this panel. If 12 anything vital occurs, I will get in touch with Mr. 13 Leslie or someone else from your team. 14 Thank you very much, gentlemen, for your 15 answers. I'm sorry for two consultants I didn't have 16 any particular questions for you, but your presence is 17 appreciated. 18 The Board may have questions. 19 MR. LESLIE: Ms Lea, I think we may have a 20 question about the difference in the length of the pipe 21 for the environmentally preferred as opposed to the 22 environmentally acceptable and proposed versus -- 23 MS LEA: I thought that was in one of the 24 interrogatories we looked at with this panel, wasn't it? 25 MR. LESLIE: It may have been. We had a note 26 that that question had been left. 27 MS LEA: Thank you. I had it as undertaking 28 35, the segment lengths, which was recorded in a chart. 453 UNION GAS PANEL 4, ex (Lea) 1 Undertaking 35 is where I found that. Thank you, Mr. 2 Leslie, that may have been it. I thought "Ah, that's 3 where it is" so I didn't pursue it further. 4 Thank you very much. 5 THE PRESIDING MEMBER: Thank you, Ms Lea. 6 Ms Simon has a couple of questions. 7 MEMBER SIMON: They are just really 8 clarification questions that arose. One was, 9 Mr. Wachsmuth, you mentioned, and I guess I am confused 10 about this -- I think we heard earlier with regard to 11 the Mandaumin, the change from the Mandaumin route and 12 the Fairweather route, those changes. 13 For the Fairweather route, there would have 14 been a need to change the pipelines. I thought we had 15 heard that there was no need. Is there a need? Was 16 there a need or not? Could you just clarify that for 17 me? 18 MR. WACHSMUTH: I believe what Mr. Marusic 19 said is that he might have to put in, I believe it was 20 2.1 kilometres of 16 or 20 inch pipe as opposed to 16 in 21 order to meet the same capacity. 22 MEMBER SIMON: So he might. He left it at he 23 might. Okay. I understood that he would not. 24 MR. WACHSMUTH: That's correct. He said he 25 would not, but he said that to get the capacity back up, 26 that was what he would have to do. 27 MR. LESLIE: I think he was doing this in 28 conjunction with his garden hose analogy. He was 454 UNION GAS PANEL 4 1 essentially, as I understood it, saying that if you 2 wanted to go from 50 feet to a hundred feet and maintain 3 the same flow of water, you would have to increase the 4 size of the hose. He was giving you an indication of 5 how much you would have to increase the size of the 6 pipe. That was my understanding of what he was saying. 7 MR. WACHSMUTH: That's what I was trying to 8 say. In order to get the same capacity, he would have 9 had to increase approximately two kilometres additional 10 pipe, but that they would have accepted the slower 11 filling/emptying with the 12 inch pipe. 12 MEMBER SIMON: Thank you. That helps. That 13 will clear that up for me. 14 Thank you. 15 MR. PAYNE: Mr. Wachsmuth just said 12 inch. 16 It was actually 16. 17 MEMBER SIMON: Sixteen, right, 16 to 20. 18 Right. 19 MR. PAYNE: Yes. 20 MEMBER SIMON: Thank you. Just one other 21 question. It relates to page 4.10 of the Gore & Storrie 22 environmental report. I'm not sure whether it's a 23 question for you, Mr. Shrive, or not. It has to do 24 with -- this is the last two paragraphs on the page, 25 just above the preferred route and route refinements. 26 Do you have that Mr. Wachsmuth? 27 MR. WACHSMUTH: Yes, I do. 28 MEMBER SIMON: My simple reading of those two 455 UNION GAS PANEL 4 1 paragraphs suggests that there was something related to 2 that CanEnerco project that had a bearing on Union's 3 choice for the Mandaumin Road because I read the last 4 paragraph to say based on these factors, which refer I 5 believe to the paragraph above, where the CanEnerco 6 project was mentioned. It says Union has chosen the 7 Mandaumin route as the preferred pipeline route. 8 Would you please explain what factor is being 9 referred to there or whether it's simply the way it was 10 written. 11 MR. WACHSMUTH: I think it says factors, based 12 on these factors, so I believe that also refers to the 13 paragraph above the one that deals specifically with 14 CanEnerco. It talks about flexibility of the system and 15 the cost premium in the part above. 16 I guess while this report was prepared back in 17 October of last year, CanEnerco had approached us and 18 there were some preliminary things there. I don't think 19 there was a specific thing. I think it was in the back 20 of their minds that this project was potentially out on 21 the future and there was something that they were aware 22 of, but I don't believe there were any specific reasons. 23 It was mainly the reasons of flexibility and costs in 24 the paragraph above that were the deciding factors. 25 MEMBER SIMON: So then I can take it from what 26 you said there -- could I conclude that there is nothing 27 in the decision for the Mandaumin, the choice of the 28 Mandaumin, that had any relationship to the Sarnia 456 UNION GAS PANEL 4 1 Airport pool. That was the earlier evidence. 2 MR. WACHSMUTH: Yes. The evidence on that was 3 very clear. 4 MEMBER SIMON: Thank you very much. Those are 5 my questions. 6 THE PRESIDING MEMBER: Thank you, Ms Simon. 7 Mr. Leslie, any redirect? 8 MR. LESLIE: No, I don't believe so. Thank 9 you. 10 THE PRESIDING MEMBER: Thank you, Mr. Leslie. 11 Thank you very much to the panel. We 12 appreciate your help. You are all excused. 13 Thank you. 14 Mr. Leslie, I understand that you have some 15 submissions. I assume that you want to make them 16 tomorrow morning. 17 MS LEA: I'm content to go with whatever the 18 Board wishes. I will require some time to prepare, 19 however, so it might be more propitious for me to do it 20 tomorrow morning rather than take time this evening. 21 THE PRESIDING MEMBER: That's fine. Thank 22 you. Will you be ready at nine o'clock tomorrow? 23 MS LEA: We can be ready. 24 THE PRESIDING MEMBER: And Mr. Leslie, you 25 will then follow with your oral argument tomorrow 26 morning. 27 MR. LESLIE: Yes, indeed. 28 THE PRESIDING MEMBER: And you will be ready 457 1 to give your oral argument after Ms Lea makes her 2 submissions. 3 MR. LESLIE: Yes. 4 THE PRESIDING MEMBER: Thank you very much. 5 That having been said, we are adjourned until 6 tomorrow morning at nine o'clock. 7 Thank you very much. 8 --- Whereupon the hearing adjourned at 1730, 9 to resume on Thursday, February 10, 2000 10 at 0900 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 458 1 INDEX OF PROCEEDING 2 PAGE 3 Upon resuming at 0901 204 4 Presentation by Mr. Lawson 204 5 Presentation by Mr. McMurphy 212 6 Presentation by Mr. Feenstra 216 7 UNION GAS PANEL 2 (Continued) 8 PREVIOUSLY SWORN: JOSEPH MARUSIC 218 9 PREVIOUSLY SWORN: STEVEN PARDY 219 10 PREVIOUSLY SWORN: JIM EGDEN 219 11 Questions by Board Counsel 220 12 Upon recessing at 1035 264 13 Upon resuming at 1055 264 14 Questions by the Board 290 15 UNION GAS PANEL 3 16 SWORN: DAVID LOWE 297 17 SWORN: BYRON HALEY 297 18 Examination-in-Chief by Mr. Leslie 297 19 Questions by Board Counsel 323 20 Luncheon recess at 1230 329 21 Upon resuming at 1400 329 22 Preliminary Matters 329 23 Questions by Board Counsel 337 24 Upon recessing at 0315 383 25 Upon resuming at 0335 383 26 Preliminary Matters 384 27 28 459 1 INDEX OF PROCEEDING (Cont'd) 2 PAGE 3 UNION GAS PANEL 4 4 SWORN: DAVID WESENGER 388 5 SWORN: CHRIS SHRIVE 388 6 SWORN: GREG PAYNE 388 7 SWORN: WILLIAM WACHSMUTH 388 8 PREVIOUSLY SWORN: GERARD MALLETTE 388 9 Examination-in-chief by Mr. Leslie 388 10 Questions by Board Counsel 396 11 Questions by the Board 453 12 Upon adjourning at 1730 457 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 460 1 EXHIBITS 2 NO. PAGE 3 9.5 Document entitled Measurement 293 4 Station Location 5 9.6 Letter of understanding 299 6 9.7 Construction commitment 301 7 9.8 Bundle of documents of 304 8 previous filings 9 9.9 Rawlings package of documents 316 10 9.10 Kember package of documents 316 11 with application for well 12 licence 13 9.11 Letter from Bev Wilton 366 14 17.2 Document from Mr. Vokes 384 15 following up on his 16 presentation 17 15.7 Technical Standards Safety 439 18 Authority checklist with 19 respect to abandonment 20 21 22 23 24 25 26 27 28 461 1 UNDERTAKINGS 2 NO. PAGE 3 16.4 Mr. Egden to give distance 251 4 between maximum extent of porosity 5 and proposed boundary at southern 6 end for Interrogatory No. 50 7 16.5 Someone from Union Gas to advise 279 8 of Union's operating authority and 9 responsibility for wells in the 10 zone pool 11 16.6 Union Gas to submit a reference 282 12 to the Act and documented procedures 13 to be followed in terms of well 14 abandonment 15 16.7 Mrs. Galbraith undertakes to 336 16 provide storage contracts 17 16.8 Mr. Egden to advise whether 379 18 the storage reservoir will be 19 compromised by the exclusion 20 of the properties mentioned 21 16.9 Union Gas Panel to provide 382 22 revised meets and bounds 23 16.10 Mr. Wachsmuth undertakes to 419 24 respond to the practicality 25 of the noise abatement strategies 26 suggested in Interrogatory No. 4 27 answered by the Lambton County 28 Storage Association