Rep: OEB Doc: 13892 Rev: 0 ONTARIO ENERGY BOARD Volume: 3 11 AUGUST 2004 BEFORE: R. BETTS PRESIDING MEMBER P. NOWINA MEMBER P. SOMMERVILLE MEMBER 1 RP-2003-0253 2 IN THE MATTER OF a hearing held on Wednesday, 11 August 2004, in Toronto, Ontario; IN THE MATTER OF the Ontario Energy Board Act, 1998; AND IN THE MATTER OF an application by Tribute Resources Inc. and Tipperary Gas Corp. for an order designating a gas storage area; AND IN THE MATTER OF an application by Tribute Resources Inc. and Tipperary Gas Corp. for an order authorizing the injection of gas into, storage of gas in, and removal of gas from a gas storage area; AND IN THE MATTER OF an application by Tribute Resources Inc. and Tipperary Gas Corp. for an order granting leave to drill two wells in the proposed designated storage area; AND IN THE MATTER OF an application by Tribute Resources Inc. and Tipperary Gas Corp. for an order approving or fixing just and reasonable rates for the storage of gas. 3 RP-2003-0253 4 11 AUGUST 2004 5 HEARING HELD AT TORONTO, ONTARIO 6 APPEARANCES 7 GEORGE VEGH Board Counsel ZORA CRNOJACKI Board Staff KATHI LITT Board Staff CHRIS LEWIS Tribute Resources and Tipperary gas Corp. JOHN CHINNECK Tipperary Storage Landowners' Association JONI PAULUS Northern Cross Energy FRANK THIBAULT Market Hub Partners Ltd. MARILYN BROADFOOT Huron County Federation of Agriculture and Landowner GLENN LESLIE Union Gas 8 TABLE OF CONTENTS 9 PRELIMINARY MATTERS: [20] TRIBUTE/TIPPERARY PANEL 1 - WALSH, McCONNELL, GORMAN, FISHER, LOWRIE, JORDAN, FRANCIS; CONTINUED: [57] CONTINUED CROSS-EXAMINATION BY MR. VEGH: [65] CROSS-EXAMINATION BY MR. LESLIE: [330] CROSS-EXAMINATION BY MR. CHINNECK: [415] PRELIMINARY MATTERS: [805] TRIBUTE/TIPPERARY PANEL 1 - WALSH, McCONNELL, GORMAN, FISHER, LOWRIE, JORDAN, FRANCIS; CONTINUED: [809] CONTINUED CROSS-EXAMINATION BY MR. CHINNECK: [817] CROSS-EXAMINATION BY MS. PAULUS: [1588] 10 EXHIBITS 11 EXHIBIT NO. E.3.1: EXCERPTS FROM CSA Z341.1-02 [33] EXHIBIT NO. E.3.2: BOARD DECISION IN THE CANENERCO APPLICATION [494] EXHIBIT NO. E.3.3: COVER LETTER ACCOMPANYING MAY 11, 2004 AMENDING AGREEMENT [1141] EXHIBIT NO. E.3.4: EXTRACT FROM THE OGSRA OPERATING STANDARDS VERSION 2 [1355] 12 UNDERTAKINGS 13 ORAL ANSWER TO UNDERTAKING F.2.1: TO ADVISE WHETHER OR NOT THE APPLICANT IS PREPARED TO AGREE TO BRING THE CURRENT ABANDONED WELL PLUGS UP TO THE CSA STANDARDS IN SECTION 13.3.1, AS A CONDITION OF APPROVAL [35] UNDERTAKING NO. F.3.1: TO COMPLETE AND FILE WITH THE BOARD OPERATING AND MAINTENANCE GUIDELINES AND EMERGENCY RESPONSE PLAN BEFORE THE COMMENCEMENT OF INJECTION [86] UNDERTAKING NO. F.3.2: TO PROVIDE AN INDEPENDENT REVIEW OF THE TYPE AND VALUE OF INSURANCE REQUIRED TO RUN THE PROJECT [292] UNDERTAKING NO. F.3.3: TO REVIEW THE OIL AND GAS LEASE, UNIT AGREEMENT AND GAS STORAGE AGREEMENT ON THE GUINDON LANDS [321] UNDERTAKING NO. F.3.4: TO REVIEW PARAGRAPH 5.4.19 OF THE BOARD'S DECISION EBO201/EBLO263, AND TO ADVISE WHETHER THE APPLICANTS WILL ADHERE TO A SIMILAR CONDITION OF APPROVAL [525] UNDERTAKING NO. F.3.5: TO PROVIDE THE RESULTS OF THE CAPROCK ANALYSIS TO THE BOARD AND ALL PARTIES FORTHWITH UPON RECEIPT [705] UNDERTAKING NO. F.3.6: TO PRODUCE A RISK ASSESSMENT PLAN AS A CONDITION OF THE BOARD GRANTING APPROVAL [783] UNDERTAKING NO. F.3.7: TO CONSIDER WHETHER TIPPERARY IS WILLING TO PROVIDE A RISK ASSESSMENT PLAN [851] 14 --- Upon commencing at 9:37 a.m. 15 MR. BETTS: Thank you, everybody. Please be seated. 16 Good morning, everybody. Today's day 3 of the hearing of application RP-2003-0253, that is, an application submitted by Tipperary Gas Corporation and Tribute Resources Inc. with respect to a project surrounding the Tipperary storage pool project. 17 Before we begin the morning's activities, are there any preliminary matters for the consideration of the Panel? 18 MR. LEWIS: Yes, Mr. Chairman. 19 MR. BETTS: Mr. Lewis. 20 PRELIMINARY MATTERS: 21 MR. LEWIS: In regards to the issue of the section 38(3) amendment to our application, which was decided yesterday, I've spoken to Mr. Chinneck and advised him of the direction which I intend to take on this. But on further reflection last night, I would like to reserve my right to make further submissions in regards to that issue until after we've heard more evidence today, and possibly tomorrow, if that would be acceptable. 22 MR. BETTS: That would be acceptable. 23 MR. LEWIS: And I have one other preliminary matter, and that is in regards to an undertaking that was given yesterday. That was the undertaking that was F.2.1. 24 And just before we supply the answer to that undertaking, Mr. Vegh, I read the transcript last night and I believe the undertaking that was given at line 825, which reads: 25 "Okay. So, given that there's a general adherence to the CSA, are the applicants prepared to bring the -- or to agree as a condition of approval specifically to bring the current plugs up to current CSA standards?" 26 And on my reading of the transcript that preceded that - correct me if I am wrong - I understand that you were asking for an undertaking in respect of the two older wells that were previously discussed... 27 MR. VEGH: Imperial 368 and Imperial 397? 28 MR. LEWIS: Correct. Is that what it was in relation to? Not the other wells that were plugged, that were also discussed. You're talking about those two in relation to that undertaking. 29 MR. VEGH: Well, my understanding was that those two were the only wells that were plugged using lead plugs. 30 MR. LEWIS: I believe that's right, yes. Just so we're clear. 31 Just before that, the answers to be given by Mr. Gorman, I would like to submit as an exhibit some additional sections out of the Z341.1-02 CSA standard. So perhaps we could put those in and mark those as an exhibit. We've put some back on the table back there for anyone in the stands, as it were, to get, and we have extra copies here for the Board and the Board Counsel. 32 MS. LITT: Exhibit E.3.1, excerpts from CSA Z341.1-02. 33 EXHIBIT NO. E.3.1: EXCERPTS FROM CSA Z341.1-02 34 MR. LEWIS: Mr. Gorman, would you like to respond to the undertaking? 35 ORAL ANSWER TO UNDERTAKING F.2.1: TO ADVISE WHETHER OR NOT THE APPLICANT IS PREPARED TO AGREE TO BRING THE CURRENT ABANDONED WELL PLUGS UP TO THE CSA STANDARDS IN SECTION 13.3.1, AS A CONDITION OF APPROVAL 36 MR. GORMAN: In formulating the response to the undertaking, I believe it's necessary to look at the context and the intent of the abandonment section that was referred to yesterday. And if I can take you to our exhibit. 37 MR. LEWIS: That's 3.1? 38 MR. GORMAN: 3.1. Now, Z341.1, which is the front page for this exhibit, refers to "reservoir storage." If we turn to the second page of the exhibit, clause 5.8.7, "abandonment." Now, this is the clause that further directs us to the abandonment requirements that were talked about yesterday. And I'll quote from this clause: 39 "Where a well drilled into or through the storage zone represents a risk to the integrity of the storage zone and it is determined that remedial cementing or casing repair is not feasible or practical, or where remedial efforts have failed to upgrade the well for storage operations, the well shall be properly plugged and abandoned in accordance with clause 13 prior to commencing storage operations." 40 So that refers to a well that's drilled into a reservoir, for example, an injection/withdrawal well drilled into the gas zone for purposes of storage operations. And it anticipates problems - it's possible to have problems during drilling - and a situation where it's necessary to abandon the well. So you've drilled into the reservoir, into the container. You've got to abandon the well. You need to put a plug there. It's my opinion that it's not intended to apply to wells outside the reservoir. 41 Now, if we go further to the next page in the exhibit, where 5.8.7 directs us to section 13, which are the requirements for abandonment plugs for wells drilled into the reservoir, it states: 42 "The following requirements for abandonment plugs shall apply." 43 Now, if we go to the second requirement, (b): 44 "The initial plug shall isolate the reservoir from the wellbore." 45 That further amplifies the intent of the standard, in my interpretation, in that it was for a well that had been drilled into the reservoir. 46 In the case of the two wells in question, it is my opinion that they weren't drilled into the reservoir. A reservoir is a container that contains oil, gas, or water. I believe Mr. Walsh, yesterday, described this, these wells and their location, as not being in the gas-bearing zone. In essence, they are not drilled into the reservoir. 47 So I believe that this standard is not meant to apply to the wells outside the reservoir, and replugging is not required and it's not warranted. And I believe Mr. Walsh may have further comment on this issue. 48 DR. WALSH: I guess the only thing that I can add to that is that, in my experience in the last 20 years, I can't recall this kind of condition being applied to any designation application or applications to inject, store and withdraw, so I just don't believe it's appropriate for the client -- for the applicant at this stage to agree to such undertaking. 49 MR. LEWIS: So the answer to the undertaking? 50 MR. GORMAN: No, it's not required. 51 MR. BETTS: Thank you. 52 Mr. Vegh, are you prepared to continue with your cross-examination? 53 MR. VEGH: Yes, sir. Thank you. 54 Maybe just as a preliminary matter, other parties will commence their cross-examinations today, we expect, so they should feel free to review the transcripts of the cross-examination and speak to the court reporter directly if there are any corrections to be made to the transcripts. 55 MR. BETTS: Mr. Vegh, actually, it would be preferred, at least by me - I haven't conferred with my fellow Panel Members - if there are to be changes to the transcripts, that they be -- at least while the hearing is underway, that they advise all parties of those changes, and that way there will be an opportunity to change copies that exist out there, rather than having some floating around that are different. 56 So, if anybody is aware of changes to the transcripts, I'd like them brought up as preliminary matters. 57 TRIBUTE/TIPPERARY PANEL 1 - WALSH, McCONNELL, GORMAN, FISHER, LOWRIE, JORDAN, FRANCIS; CONTINUED: 58 P.WALSH; Previously Sworn. 59 K.McCONNELL; Previously Sworn. 60 J.GORMAN; Previously Sworn. 61 J.FISHER; Previously Sworn. 62 J.LOWRIE; Previously Sworn. 63 H.JORDAN; Previously Sworn. 64 D.FRANCIS; Previously Sworn. 65 CONTINUED CROSS-EXAMINATION BY MR. VEGH: 66 MR. VEGH: Thank you. Just following up on the response to the undertaking, and you have argued your case, I'm not going to ask you to reargue it. Just a clarification of the factual assumptions that went into your statement. Your point, Mr. Gorman, that the wells are not located inside the boundary of the reservoir, as I understand, well 397 did have a gas show, did it not? 67 MR. GORMAN: A gas show was reported. 68 MR. VEGH: Yes. And it is inside the reef, just does not penetrate the reservoir? 69 MR. GORMAN: That's correct. 70 MR. VEGH: Okay, but your response to the undertaking is clear. So thank you for that. 71 I do have some questions, first, following up from the evidence yesterday. And first, Mr. Jordan, these are for you. This has to do with the status of the lease and the agreements with respect to the Guindon property. We had some questions about that. And in reading the transcripts, it wasn't entirely clear to me what the answers were. So I just would like to get an answer on the subject. 72 Does the applicant have a valid gas storage lease agreement on the property owned by E. Guindon in the northeast corner of lot 36, concession 9, of Goderich Township? 73 MR. JORDAN: Yes, they do. 74 MR. VEGH: Does the applicant have a valid petroleum and natural gas lease on the property owned by E. Guindon in the northeast corner of lot 36, concession 9 of Goderich Township. 75 MR. JORDAN: Yes, they do. 76 MR. VEGH: Is the property owned by E. Guindon in the northeast corner of lot 36, concession 9, of Goderich Township subject to the unit operation agreement for the Tipperary pool? 77 MR. JORDAN: No, it's not. 78 MR. VEGH: Mr. Fisher, turning to you, you gave evidence -- I forget if it was yesterday or the day before -- that you will be preparing an operating and maintenance guidelines? 79 MR. FISHER: That's correct. 80 MR. VEGH: You also said that you will be preparing an emergency response plan? 81 MR. FISHER: Yes, we will. 82 MR. VEGH: Are you prepared to agree that both of those documents will be finalized and filed with the Board before the commencement of operations? 83 MR. FISHER: Yes, we will. 84 MR. VEGH: Is that an undertaking? Do we have an undertaking number for that, please? 85 MS. LITT: F.3.1. 86 UNDERTAKING NO. F.3.1: TO COMPLETE AND FILE WITH THE BOARD OPERATING AND MAINTENANCE GUIDELINES AND EMERGENCY RESPONSE PLAN BEFORE THE COMMENCEMENT OF INJECTION 87 MR. BETTS: Mr. Vegh, would you just describe that for me, please, the undertaking as you understand it? 88 MR. VEGH: The applicant undertakes to complete and file with the Board an operating and maintenance guideline and an emergency response plan prior to commencing operations. 89 MR. BETTS: Thank you. 90 MS. LOWRIE: Sorry. Commencing operations or injection? 91 MR. VEGH: Sorry, commencing injection. 92 Mr. Fisher and Mr. Francis, I wanted to ask some questions arising out of our discussion yesterday in terms of the business operations of the applicants. I'd like some clarification both around the storage sales that are being offered and the commodity sales, if any, that will be offered. 93 And first with respect to the storage. We call that storage at Dawn. I take it that what we're really talking about when we're talking about selling storage, we're talking about selling the right to inject and withdraw gas. 94 MR. FRANCIS: That's correct. 95 MR. VEGH: And by that, let me tell you what I understand that to mean, and you can tell me if my understanding is correct or consistent with your understanding. 96 My understanding is that what you were selling is really the right of a customer to deliver a certain amount of gas to you on a daily or seasonal or whatever the term is, of the basis, and then the right to receive from you a certain amount of gas on a daily or seasonal basis, or whatever other time? 97 MR. FRANCIS: That's correct. 98 MR. VEGH: So, in a sense, what you operate is sort of like a bank account for that gas? 99 MR. FRANCIS: Yes. That's correct. 100 MR. VEGH: And so do you plan to store your own gas as well or just customers' gas? 101 MR. FRANCIS: The business model at this point is to storing customers' gas. 102 MR. VEGH: And in the evidence yesterday you said that if you have extra commodity, you may sell it as -- you may sell it outside the province? 103 MR. FRANCIS: That's correct. 104 MR. VEGH: And so, when you say extra commodity, since you won't be storing your own gas, whose gas will you be selling? 105 MR. FRANCIS: Yeah. As the business model initially starts out, there wouldn't be any extra commodity to sell at the exfranchise points. 106 If, through rounding there may be very small volumes that needs to be balanced and taken off system as we get into operating the pool. So I wouldn't expect those volumes to be -- to be large, in any case. 107 MR. VEGH: So the only commodity sales that you would be carrying out is with respect to excess commodity after leveling out the injections and withdrawals? 108 MR. FRANCIS: Rounding due to heat value, adjustments, things like that. 109 MR. VEGH: There's no plan to sort of trade around? 110 MR. FRANCIS: Not at this point. 111 MR. VEGH: That's -- okay. And we have gone at this issue a couple of different ways. But you do agree, and you do confirm, that if you do seek to sell gas in Ontario, you would have to come to the Board for a specific exemption allowing you to do that? 112 MR. FRANCIS: That's correct. We understand that. 113 MR. VEGH: Okay. So I'd like to go on to what's in the category of "other" in issue 5. And I'd like to turn to the question of Tipperary's financial capacity and expertise. 114 Sorry for the delay. I was just trying to put my hands on some exhibits filed yesterday. But maybe I'll just describe them to you. There we go. 115 Looking at the letter from the CIBC dated August 9, I believe that's at that addressed to you, Ms. Lowrie, and I think you spoke to this evidence yesterday. It's with respect to the, the financial strength, I guess, of Donald Crich and Crich Holdings & Buildings Limited. 116 MS. LOWRIE: Yes. 117 MR. BETTS: I believe that's Exhibit 2.7? 118 MR. VEGH: E.2.7. Thank you. And this letter, in summary, this letter indicates that Mr. Crich and Crich Holdings & Buildings do have some financial wherewithal. 119 MS. LOWRIE: Yes. 120 MR. VEGH: And Mr. Crich, I take it, judging from this, he's a successful businessman. 121 MS. LOWRIE: Yes. 122 MR. VEGH: And I guess the point you're trying to make from this letter is that he has the funds to support this venture? 123 MS. LOWRIE: Yes. 124 MR. VEGH: And I suppose what we can take from this is that, as long as a venture appears to be profitable, Mr. Crich will continue to support it? 125 MS. LOWRIE: He has supported it in the past. He's put approximately $1.2 million into it, at a higher stage of risk than after designation. 126 MR. VEGH: But when you get right down to it, if the project for whatever reason turns out not to be financially viable as a successful businessman, he'll stop investing in it? 127 MS. LOWRIE: The storage pool, when it's developed, is a valuable asset. 128 MR. VEGH: But there are no guarantees in this world. And this letter doesn't purport to offer a guarantee for financial backing. 129 MS. LOWRIE: No. That's correct. 130 MR. VEGH: So there will be backing provided that it's economic to continue to back it. 131 MS. LOWRIE: Yes. 132 MR. VEGH: Now, the operator of the pool, we've discussed this, is the Tipperary -- is Tipperary Gas Corp., or will be Tipperary Gas Corp.. 133 MS. LOWRIE: Yes. 134 MR. VEGH: And -- I'm sorry, just one second. And this is described or addressed in the letter from Mr. Walsh to the Energy Board dated June 29. I'd like to ask you to turn to that. It's at Exhibit E.1.4, the last sheet in Exhibit E.1.4. Do you have that? I'd like you to keep that letter available, and also turn up response to Board Staff Interrogatory No. 1. Do you have that? 135 MS. LOWRIE: Yes. 136 MR. VEGH: And Board Staff Interrogatory No. 1 contains a number of -- or the response to Board Staff Interrogatory No. 1 contains a number of financial statements, and the financial statement I'd like you to -- I'd like to take you to is a financial statement of Tipperary Gas Corp. as of December 31, 2003, which I believe is the third document -- the second document from the back of that interrogatory. 137 So, according to the Tipperary Gas Corp. financial statements of December 31, 2003, it has assets as at that time of $10? 138 MS. LOWRIE: Yes. The general partner has assets of $10. 139 MR. VEGH: Well, Tipperary Gas Corp. has assets of $10. 140 MS. LOWRIE: Yes. 141 MR. VEGH: And Tipperary Gas Corp. will be the operator of the storage facility. 142 MS. LOWRIE: Yes. 143 MR. VEGH: And so you could understand why some people may be concerned or -- concerned about Tipperary's financial capability to operate this undertaking given that it has assets of $10? 144 MS. LOWRIE: Yes. 145 MR. VEGH: And you mentioned that, in terms of the compensation to the landowners, both Tribute and Tipperary will be responsible for that compensation. 146 MS. LOWRIE: That is correct. 147 MR. VEGH: And I noticed in the most recent version of the amending agreement to the landlords -- or, sorry, to the landowners, I don't have to take you to it, but the document includes both Tribute and Tipperary as counterparties to the compensation agreement with the landlords -- sorry, with the landowners. 148 MS. LOWRIE: Mm-hm. Yes. 149 MR. VEGH: Yes. And the earlier version of the amending agreement had, I believe, Tribute Resource as the counterparty to the landowners. 150 MS. LOWRIE: Yes. 151 MR. VEGH: Can you explain what are the consequences, in your view or in your company's view, of making that change in terms of the contractual responsibility from Tribute, in the original amending agreement, to both Tribute and Tipperary in the subsequent amending agreement. 152 MS. LOWRIE: I don't -- there aren't really any consequences. I believe it was put on because petroleum and natural gas leases are held in the name of Tribute -- 153 MR. VEGH: Yes. 154 MS. LOWRIE: -- at the moment. The natural gas storage leases are being held in trust in Tribute because shares are units of -- have already been issued in the limited partnership for the -- for the -- 1,700 units have been issued in the limited partnership for the transfer of those assets, and there have been funds put into the limited partnership. 155 The confusion with the statements is that that is the statement of the general partner, not the limited partnership statements. 156 MR. VEGH: I'm sorry, what confusion? 157 MS. LOWRIE: Well, the $10 doesn't represent the funds put into the limited partnership. 158 MR. VEGH: Well, if we -- okay, I -- but Tipperary -- but it's Tipperary Gas Corp. that's seeking the approval here. 159 MS. LOWRIE: Tipperary Gas Corp. as general partner for the limited partnership. The limited partnership is Huron Tipperary L.P. 1, and the funds are being raised in the limited partnership. Tipperary Gas is the general partner. Tribute is receiving units for the contribution of storage rights and petroleum and natural gas rights. Other parties, Donald Crich, is putting in cash and has invested cash in the limited partnership. 160 MR. VEGH: And so if we look at the balance sheet for the limited partnership, which is also at Exhibit 1 -- 161 MS. LOWRIE: Mm-hm. 162 MR. VEGH: -- can you turn to that? Again, as at December 1, 2003. 163 MS. LOWRIE: Yes. 164 MR. VEGH: And when we look at the assets as at December 1, 2003 for the limited partnership, there is a -- well, a current cash asset value of zero? 165 MS. LOWRIE: Yes. 166 MR. VEGH: And then there are the assets described -- the fixed assets described as "storage development," "storage rights," "seismic." 167 Now, what is the basis for the evaluation of those assets at those amounts? 168 MS. LOWRIE: As of that date, 2,500 units had been issued in the limited partnership; 1,700 of the units were for the transfer of storage rights to -- so Tribute owns 1,700 units. And then Donald Crich put in 800,000 in cash. 169 MR. VEGH: So what the partnership has in terms of value is $800,000 in cash -- 170 MS. LOWRIE: Which it spent on 3-D seismic, reworking wells, and development of the project. 171 MR. VEGH: But what it now -- so what is now set out in the balance sheet as assets is an estimate of the value of rights? 172 MS. LOWRIE: Yes. 173 MR. VEGH: But apart from that, no hard assets are marketable assets? 174 MS. LOWRIE: No hard assets? 175 MR. VEGH: Well, it has -- it has rights. 176 MS. LOWRIE: It has natural gas storage rights. 177 MR. VEGH: Yeah. 178 MS. LOWRIE: That's correct. 179 MR. VEGH: And this estimate of the value of those rights, where does that estimate come from? 180 MS. LOWRIE: That was a negotiated right estimate in 1999. 181 MR. VEGH: Negotiated between whom? 182 MS. LOWRIE: Between Donald Crich and Tribute. Mr. Crich did not -- he may have owned 1 percent of Tribute in 1999, but he wasn't a controlling shareholder. And that was by the prior president of Tribute, so it was the third party -- 183 MR. VEGH: But you wouldn't say that this is an independent evaluation of the value? 184 MS. LOWRIE: At the time it was, because he was not -- he was a third party at the time, because he was not a 10 percent owner of Tribute. He is not now an officer or director of Tribute. He currently owns 25 percent of the shares of Tribute because, when we, we reorganized Tribute, I became President, we purchased the shares from the prior President. So he owns -- no, I guess he owns 22 percent; I own 25 percent of Tribute. 185 MR. VEGH: And when did you take over Tribute? Sorry? 186 MS. LOWRIE: November of 2002. 187 MR. VEGH: And how long have you known Mr. Crich? 188 MS. LOWRIE: Since 1989. 189 MR. VEGH: So the two of you weren't strangers. 190 MS. LOWRIE: No, the two of us were not strangers. 191 MR. VEGH: And this was effectively an amount that the two of you agreed to would represent the value of these rights? 192 MS. LOWRIE: No. That was an investment that was presented to him by Tribute. 193 MR. VEGH: When you say "by Tribute," do you mean by you? 194 MS. LOWRIE: By Doug Brett, former President. 195 MR. VEGH: And did you have any association with Tribute at that time? 196 MS. LOWRIE: I was the treasurer. 197 MR. VEGH: Okay, so -- 198 MS. LOWRIE: But he agreed to the value, or he wouldn't have contributed 600 -- or 800,000 in cash at that time, if he had not agreed to a value of $1.7 million for the storage, because he received 800 units out of a total of 2500 units for putting the 800,000 cash into the limited partnership. 199 MR. VEGH: So my only point is this. 200 MS. LOWRIE: Mm-hm. 201 MR. VEGH: That the value of the proposed operator, Tipperary Gas Corp. 202 MS. LOWRIE: Mm-hm. 203 MR. VEGH: Is $10. 204 MS. LOWRIE: Mm-hm. 205 MR. VEGH: The value in the unaudited financial statements of the limited partnership is $2.5 million. 206 MS. LOWRIE: Mm-hm. 207 MR. VEGH: And that value represents the value of rights as opposed to cash or other resources available? 208 MS. LOWRIE: Mm-hm. 209 MR. VEGH: I don't know if the record can hear you say mm-hm. 210 MS. LOWRIE: Yes. Funds -- that's funds spent on the project. 211 MR. VEGH: And that value -- that amount was something that was determined between Mr. Crich and the company -- and Tipperary Gas Corp.? 212 MS. LOWRIE: And Tribute Resources. 213 MR. VEGH: Okay. Which is the parent company of Tipperary Gas Corp.? 214 MS. LOWRIE: Yes. The funding is through the limited partnership, so, as we go forward, we issue units in the limited partnership. At any given point in time it has a value, and units are issued right at the moment they're being issued at $1,000 per unit. 215 MR. VEGH: And do you have any independent valuation of the partnership? 216 MR. LEWIS: If I could just possibly interject. I believe, and I don't know whether we have them in front of us, but as an answer to one of the undertakings, I believe the audited financial statements for Tribute were submitted as a further answer to an undertaking. And I believe there's some information in those that comments on the value. And I -- I just don't know where I can put my finger on them right now, but perhaps those might help Ms. Lowrie answer this question. 217 MR. VEGH: Would you like to take that away for now, and then, if you do want to refer to that document to supplement your evidence in this area, you can -- you can do that later. And if I have any questions on what you're proposing we can discuss it at that time? Or would you like to address that now? 218 MS. NOWINA: Excuse me, Mr. Vegh. I think I found the reference. If you would like to look at it in the Tribute Resources Inc. statement, financial statements? Are you talking about note 4 to those financial statements? 219 MR. LEWIS: I believe the statements that are in the pre-filed evidence are unaudited statements. 220 MS. LOWRIE: No. They're audited, Tribute -- 221 MS. NOWINA: Tribute Resources are audited by Ernst & Young. So it's in Undertaking 1 or rather, it's the same -- it's the same interrogatory response, number 1. 222 MS. LOWRIE: There were subsequent statements filed on a consolidated basis. 223 MS. NOWINA: Okay. 224 MS. LOWRIE: I don't know where they are. 225 MR. LEWIS: Thank you very much for pointing that out. I'm just wondering if we could get to the tab, because I'm having difficulty with the book that's entitled: "Response --" 226 MS. NOWINA: IRS book? 227 MR. LEWIS: Response to interrogatories? 228 MS. NOWINA: Yes. Tab -- white tab 1. Buff tab 1. 229 MR. VEGH: So I have the audited financial statements of Tribute Resources for December 31, 2003. Was there something you wanted Ms. Lowrie to point to in there? 230 MR. LEWIS: For some reason we are having a difficulty finding this. 231 MR. BETTS: I don't mind us sorting this out till we find the right document. So everybody, let's just work at sorting this thing out if we can. 232 MR. LEWIS: Mr. Vegh... 233 MR. BETTS: Do you need any assistance with yours to find out where it is or a comparison to somebody else's? 234 MS. LOWRIE: No, I don't. I don't know if it really matters. Was there a question about the financial statements? 235 MR. VEGH: I have no question -- 236 MS. LOWRIE: There are consolidated financial statements that have been filed for Tipperary and Tribute, audited. 237 MR. VEGH: Well, you have audited financial statements for Tribute 238 MS. LOWRIE: Prepared on a consolidated basis. 239 MR. VEGH: That's right. 240 MS. LOWRIE: Right. 241 MR. VEGH: And my question to you is, has there been an independent valuation of the assets of Tipperary Gas Corp.? 242 MS. LOWRIE: No. 243 MR. LEWIS: Mr. Chairman, I'm wondering if we could take a small break. Mr. Gorman needs a break. 244 MR. BETTS: You needn't point Mr. Gorman out. You could have asked for the break and that would have been fine with me. I understand that. Well, let's take a short 10-minute break. We'll return by that clock at 10:30. 245 MR. LEWIS: Thank you. 246 MR. BETTS: Actually, why don't we, instead of just taking a short break, because it is close to 11, why don't we make it a 20-minute break, which will allow everybody to get a refreshment. So that will bring us back at 20 minutes to 11:00. 247 --- Recess taken at 10:17 a.m. 248 --- On resuming at 10:51 a.m. 249 MR. BETTS: Thank you, everybody. Please be seated. 250 Did any preliminary matters arise during the break? 251 Mr. Vegh, please continue. 252 MR. VEGH: Thank you. 253 Ms. Lowrie, just to finish on this line of questioning. When we got into the discussion around the financial statements, the context was the amending agreement which, for the first time, added Tipperary Gas Corp. as a counterparty to the landowners. And my final question is to seek just your confirmation on the record that there is nothing in this amending agreement that in any way takes away from any of the obligations of Tribute with respect to the compensation to landowners? 254 MS. LOWRIE: That is correct. 255 MR. VEGH: Do you have a ballpark figure of what is the aggregate annual compensation that will be owing to the landowners? 256 MR. JORDAN: Ballpark? 257 MR. VEGH: Yes. 258 MR. JORDAN: 120,000. 259 MR. VEGH: Thank you. 260 Going back to the June 29 letter, the middle of the letter states that: 261 "The well licences will be transferred to Tipperary Gas Corp., who will have posted the appropriate well bond." 262 Now, who will that bond be posted with? 263 MS. LOWRIE: Currently, wells are bonded with MNR legislation, under MNR legislation. So the funds are actually posted with Chris Lewis, or Giffen & Partners in trust. 264 MR. LEWIS: Yeah. There's a regulation under the Oil, Gas and Salt Resources Act requiring an operator of a facility to post security as a condition of holding any well licence. And that security, by legislation, is to stand as security for future plugging obligations and the like. 265 Under the Oil, Gas and Salt Resources Act and applicable regulations, our firm acts as trustee for the applicant, as well as 15, 20 other oil and gas companies, in holding that security. And this arrangement's done with the full knowledge and consent of the Ministry of Natural Resources. We are simply trustee of the security funds which are held for the MNR, effectively, to secure any obligations of the applicant in this case. And that's all, again, driven by the Oil, Gas and Salt Resources Act and regulations. 266 MR. VEGH: And what is the amount that's going to be posted? 267 MS. LOWRIE: That depends on how many wells will be drilled. 268 MS. McCONNELL: If I may add, they are Silurian wells, so I believe it's $6,000 per Silurian well, up to a maximum of $70,000. 269 MR. VEGH: So $6,000 per Silurian well -- 270 MS. McCONNELL: Up to a maximum of $70,000. 271 MR. VEGH: And how many well licences are we talking about here, then, for the purposes of the bond? 272 MS. McCONNELL: There would be the two observation wells and the injection well. 273 MR. VEGH: So three. 274 MS. McCONNELL: Three, yes. 275 MR. VEGH: The letter goes on to state that: 276 "At that time" - that is, the time of the transfer - "Tipperary Gas Corp., as general partner of Huron Tipperary L.P. 1 will be responsible for operating the entire gas storage operation and related assets." 277 It says: 278 "Tipperary Gas Corp. apparently arranging for the appropriate amounts of insurance, including comprehensive and liability with its insurer AON Reed Stenhouse." 279 What is, in Tipperary's view, the appropriate amount of insurance? 280 DR. WALSH: The insurance matter is being looked after by Mr. Fisher, and perhaps he could comment on that. He has the most up-to-date information. 281 MR. FISHER: Currently, it's our view that we would carry a general liability policy in the amount of approximately 5 million Canadian. In addition to that, we would have an asset facility in place that would be to the amount of 10 to 12 million Canadian, depending on ultimate capital costs for the project. We would have nothing beyond that. 282 MR. VEGH: When you identify these amounts, and you say that's your view, I take it that these, both the type and the quantum of insurance, have not been verified by a third party as being correct amounts? 283 MR. FISHER: We've been in conversations with our current insurance provider, AON, and they've given us a number of different options. They leave a lot of discretion to us as the insurer -- insured party. And when I state an opinion, I'm qualifying, I guess, the fact that we've been asked to provide environmental insurance beyond what we believe is necessary. 284 MR. VEGH: Beyond what you believe is necessary? 285 MR. FISHER: For the project, yes. 286 MR. VEGH: Is Tipperary prepared to undertake to have an independent third party valuation of both the type and quantum of insurance that is reasonable to run this operation? 287 MR. LEWIS: Perhaps that might be a matter that we want to discuss before we provide you with an answer to that undertaking. 288 MR. VEGH: Okay. So I'll request the undertaking and you can -- you can consider it. 289 MS. LITT: F.3.2. 290 MR. VEGH: And while you're considering it, you can consider it as a condition of approval. 291 MS. LITT: Undertaking to provide an independent review of the type and value of insurance required. 292 UNDERTAKING NO. F.3.2: TO PROVIDE AN INDEPENDENT REVIEW OF THE TYPE AND VALUE OF INSURANCE REQUIRED TO RUN THE PROJECT 293 MR. VEGH: I have some questions now on the rate M16 issue. That's the rate with -- sorry, that's the contract with Union Gas. 294 Could you turn to that contract, please. That's at orange tab 2, white tab 3, in volume 1. 295 Mr. Francis, these questions may be directed to you. Article 2 of that contract identifies the general terms and conditions, and it specifies that: 296 "The general terms and conditions for the services provided under this contract are specified in schedule A of Union's M16 rate schedule." 297 And then just above that article is subsection 1(k), which has a definition of Union's M16 rate schedule. And I just want to read that definition, put it on the record. The M16 rate schedule is defined as: 298 "Union's M16 rate schedule, including schedules attached thereto or such other replacement rate schedule which may be applicable to the services provided hereunder as approved by the Ontario Energy Board from time to time." 299 So, in other words, the definition of the M16 rate in your agreement is the current M16 rate or any other replacement M16 rate that the Board approves. Do you understand that? 300 MR. FRANCIS: Yes, I do. 301 MR. VEGH: And you also understand that the Board is currently contemplating a review of the M16 rate schedule. 302 MR. FRANCIS: Yes, we understand. 303 MR. VEGH: And there may be changes to the M16 rate as a result of that review. 304 MR. FRANCIS: We understand. 305 MR. VEGH: And if there are changes to the M16 rate, then effectively the terms and conditions of your transportation contract with Union will also change. 306 MR. FRANCIS: That's correct. 307 MR. VEGH: And you're prepared to live with those changes. 308 MR. FRANCIS: Yes. 309 MR. VEGH: And you may have been asked this before, so I apologize if you have, but do you have any concerns about Union's ability to meet its obligations under the M16 contract? 310 MR. FRANCIS: No concerns. 311 MR. VEGH: And the M16 contract, we've talked about this before, is for firm service. Have you -- have you requested interruptible service from Union? 312 MR. FRANCIS: Yes, we have. And the negotiations and the language is Union would serve the interruptible request on a reasonable efforts basis so if we request, Union will look to see if the interruptible capacity is available, and if it is available. It's at Union's discretion. 313 MR. VEGH: Thank you, panel. Those are my questions. 314 MS. McCONNELL: Mr. Vegh, can I make a correction to the well bonding? We have applied for one horizontal and two lateral wells out of one wellbore. The lateral wells would be bonded as well. So there would be the two observation wells, the one horizontal well, and the two lateral wells. So a total of five wells. And any subsequent wells that would be drilled in there would also be bonded. Anything, I guess, with a separate well licence has a bond. 315 MR. VEGH: Thank you. 316 MR. LEWIS: If I could just, before we're finished, I think there was another undertaking that we were going to give. Maybe Mr. Jordan could speak to that. 317 MR. JORDAN: In discussion with Mr. Cochrane in regards to the Guindon lands, we would like to take an undertaking to review all the oil and gas lease, the unit agreement, and the gas storage lease. The exact breakdown on the Guindon lands. It's outside of our application, and we just want to verify that we do have the leases over the totality of her property, and that we are making payments to her, or if we are missing any pieces of that, it would have an impact if the northern boundary was to be moved north on to her property. 318 So we'd like to have an undertaking to clarify out that acreage? 319 MR. LEWIS: I believe -- maybe to clarify the undertaking, on the record, I believe Mr. Jordan indicated that we have a valid gas storage lease and oil and gas lease on the Guindon lands, and at the break it appeared, on a preliminary review, that because of the confusion of the way these lands were initially leased in larger parcels 38 years ago, and subsequently conveyed and partially discharged and so on and so forth, we would like to be able to check more carefully to be sure that there hasn't been a partial discharge of the lands as they pertain to Guindon house lot, and report back, and possibly correct the previous answer. 320 MS. LITT: Undertaking F.3.3. An undertaking to review the oil and gas lease, unit agreement, gas storage agreement on the Guindon lands. 321 UNDERTAKING NO. F.3.3: TO REVIEW THE OIL AND GAS LEASE, UNIT AGREEMENT AND GAS STORAGE AGREEMENT ON THE GUINDON LANDS 322 MR. BETTS: Thank you. And Mr. Vegh, that concludes your cross-examination? 323 MR. VEGH: Yes. 324 MR. BETTS: Now, can I have an indication again from parties who wish to cross-examine this panel? Mr. Leslie? Mr. Chinneck, and Ms. Paulus. Was there any discussion about order that you would prefer to go in? 325 MR. LESLIE: There was a discussion yesterday evening, sir, and I'm going to go first. I'm not sure who's going second. 326 MR. BETTS: Mr. Chinneck, and Ms. Paulus is last, then. Thank you very much. 327 Mr. Leslie, are you prepared to proceed? 328 MR. LESLIE: Yes. Thank you. 329 MR. BETTS: Please do. 330 CROSS-EXAMINATION BY MR. LESLIE: 331 MR. LESLIE: I think most of these questions are for Mr. Francis or Mr. Fisher, but you'll let me know if someone else is more appropriate. 332 I wanted to talk first just about the operation at the Tipperary storage well. My understanding from the evidence is that the gas that you're planning on putting in storage will be brought in at Union's Dawn site? 333 MR. FRANCIS: That's correct. 334 MR. LESLIE: And then moved from Dawn to Tipperary on Union's transmission system? 335 MR. FRANCIS: That's correct. 336 MR. LESLIE: And then that gas will itself be delivered locally -- 337 MR. FRANCIS: It will be consumed in the local market, yes. 338 MR. LESLIE: Consumed locally, and consumed by Union's customers. 339 MR. FRANCIS: That's correct. 340 MR. LESLIE: And Union will make an equivalent quantity, subject to your balancing arrangements, of gas available at Dawn during the winter, which you will deliver to your customers. 341 MR. FRANCIS: That's correct. 342 MR. LESLIE: So Tribute/Tipperary will not be making -- itself will not be making any local deliveries. 343 MR. FRANCIS: That's correct. 344 MR. LESLIE: In Huron County? 345 MR. FRANCIS: That's correct. 346 MR. LESLIE: And from your pre-filed evidence and interrogatory responses, my understanding is that you had no expectation of serving customers along the gathering line that you propose to build, the six-kilometre line which ties into Union's Goderich-Stratford transmission? 347 MR. FRANCIS: That's correct. 348 MR. LESLIE: And there's no application for a certificate of convenience or necessity for a franchise involved in your plans at this stage? 349 MR. FRANCIS: That's correct. 350 MR. LESLIE: Given the nature of that arrangement, if for any reason gas were not available from the Tipperary storage site during the winter season, my understanding is that Union would then have to redirect flows on its system in order to make up that supply. 351 MR. FRANCIS: That's correct. 352 MR. LESLIE: And looking at the interrogatory responses, some of the reasons that gas might not be available from storage during the winter season that I could identify were compressor failure? 353 MR. FRANCIS: Correct. 354 MR. LESLIE: There's one compressor at this site, as I understand it? 355 MR. FISHER: Yes. 356 MR. LESLIE: There's the possibility of a well freeze-off? 357 MR. FRANCIS: Correct. 358 MR. LESLIE: And then there will also requirements that Union has in its M16 contract, and in the contract they signed with you, on gas quality, such that if the quality of the gas did not meet those standards, Union would have to decide whether it could accept delivery of that gas? 359 MR. FRANCIS: That's our understanding. 360 MR. LESLIE: As I understand it, the gas that is to be injected in the Tipperary well will already be odourized, if that's the correct word? 361 MR. FISHER: Yes, it will be odourized. 362 MR. LESLIE: And it will come out odourized as well. 363 MR. FISHER: There will be new odours too, I'm sure. 364 MR. LESLIE: Well, that was the point of my question. Do any of you have experience with injecting gas that's already been odourized into a well and then withdrawing it? Is there the possibility that the content, the odour, the strength of the odour could change as a result of being stored? 365 MR. FISHER: I have no direct experience with the operation of odourant gas being used for injection and withdrawal purposes. 366 MR. LESLIE: Neither do we, so that was the nature of our concern. And you have not either? 367 MR. FISHER: No. 368 MR. LESLIE: All right. 369 DR. WALSH: If I might add, perhaps, we do have, both Mr. Gorman and myself, have some experience in regards to an odourized gas as it relates to the CanEnerco Chatham D. project, although it wasn't necessarily odourized in the sense that Union provides mercaptans at Dawn, for example, to odourize its gas. But we were receiving gas off the Union system that was naturally odourized, if I might say, from local production, which had --- 370 MR. LESLIE: Sulphur in it. 371 DR. WALSH: Slightly sulphur -- I mean, safer amounts of sulphur for the purposes of transmission and distribution, but enough that it was odourized. And our analysis of the effects of that on injection into our pool, which was a sweet pool at Chatham D, was that there would be some mix of it. So you would have some dilution factor take place. But it's of such minimal extent that it really had no significance in regards to conducting storage operations. 372 MR. LESLIE: Yeah, my understanding is that the odour that's put into the gas in this case is not sulphur, it would be something different. 373 DR. WALSH: That's correct. 374 MR. LESLIE: All right. Well, that will remain to be seen, I guess. 375 I want to talk briefly about the facilities, and in particular the facilities that Union will be having to install, I guess, or you will be having to install in order to tie into Union's system at the Goderich-Stratford transmission line. My understanding is that the tie-in involves about two acres of land. 376 MR. JORDAN: Yes, it does. 377 MR. LESLIE: And Tribute/Tipperary is supplying that land, are they? 378 MR. JORDAN: Yes, they are. 379 MR. LESLIE: Can someone tell me what else is involved in the tie-in, and who's responsible for constructing the equipment or facilities? 380 MR. FISHER: We met with Union in Chatham and discussed the needs for their station. I have a record of it as to what we agreed to, but loosely, there is going to be odorant facilities provided as backup by Union if it's required. They'll also have filter separators on-site to ensure that the gas is clean downstream of our compressor, and they'll also provide metering for custody transfer. 381 MR. LESLIE: I understand they'll also have some pressure control equipment, is that... 382 MR. FISHER: I read a memo regarding earlier correspondence that there was prior agreement between Union and Tribute that Union would provide it. In the current design, I believe we should operate the pressure control valves and ensure that we have that ability to control on-site so we can properly manage the pool withdrawals. 383 MR. LESLIE: All right. Well, my real concern at this stage is really just to get on the record who's paying for this 384 MR. FISHER: We pay for everything. 385 MR. LESLIE: You're paying for everything. 386 My understanding is that Union will itself install some of this equipment and, to the extent they do that, there will be an aid to construction of a payment of some kind? 387 MR. FISHER: Yes. 388 MR. LESLIE: All right. 389 Finally, the Tipperary pool, there's a north and south pool. You're developing the north pool, as I understand it? 390 MR. FISHER: Yes. 391 MR. LESLIE: Do you plan to develop the south pool? 392 MR. FISHER: There is a fair amount of uncertainty as to the actual performance of the north pool, uncertainty regarding Union's ability to take in the winter, uncertainty regarding the ability to pull off of Union's pipeline during the summer. Computers are great, but compressors are very -- they don't understand variance. 393 So it's our opinion, at this point, that we should go through one full cycle of operation, get a feel for how things are indeed operating, and then make a commercial decision as to whether or not to apply for the injection/withdrawal well in south Tip., and then move ahead to drill and develop that pool. 394 MR. LESLIE: You mentioned Union's ability to take the gas and to pull it out of storage. Do you understand that in order to accommodate any future development at Tipperary, there would have to be additional transmission and distribution facilities installed as well? 395 MR. FISHER: I don't understand that, and believe it's possible that Union may not need to add new facilities. If they have a 2.5 Bcf market and we have a 1.8 B pool on the north side and a .7 B pool on the south side, it makes sense to me, without a detailed review, that possibly the same facilities would serve our needs. 396 MR. LESLIE: That's in terms of making deliveries to the local market. 397 MR. FISHER: Oh, yes. Definitely. 398 MR. LESLIE: Right. You've also got to get the gas into storage. 399 MR. FISHER: Well, the current facilities now serve a 2.5 Bcf market, so possibly they might be able to meet the additional storage requirements. But again, we'd want to go through one season of operation to get a better feel for that. 400 MR. LESLIE: All right. I'll leave it at that. 401 You mentioned that you've got firm service and some arrangement on interruptible service. 402 MR. FRANCIS: That's correct. 403 MR. LESLIE: What is the nature of the interruptible service? 404 MR. FRANCIS: As Union's market in the wintertime makes the firm parameter in the M16 contract, we've negotiated, on a reasonable efforts basis, that we have access to that interruptible market. 405 MR. LESLIE: And someone, I think, said yesterday that you could handle any interruptible capacity that was available. 406 MR. FRANCIS: Yes, the injection parameter or capacity and withdrawal capacity could handle the maximum loads that Union has provided. 407 MR. LESLIE: Excuse me just a moment. 408 Thank you very much. Those are my questions. 409 MR. FRANCIS: Thank you. 410 MR. BETTS: Thank you, Mr. Leslie. 411 Mr. Chinneck, are you prepared to proceed with your cross-examination? 412 MR. CHINNECK: I am, sir. 413 MR. BETTS: Please do. 414 MR. CHINNECK: Thank you. 415 CROSS-EXAMINATION BY MR. CHINNECK: 416 MR. CHINNECK: Mr. Walsh, or Dr.Walsh, I see that you now have a Ph.D. 417 DR. WALSH: Yes. 418 MR. CHINNECK: Congratulations. Is it a Ph.D. in geology? 419 DR. WALSH: It's a Ph.D. in strategic management. 420 MR. CHINNECK: But not geology. 421 DR. WALSH: No. 422 MR. CHINNECK: I notice that you have updated your resume since I last cross-examined you in -- last year. 423 DR. WALSH: Yes. 424 MR. CHINNECK: Is that's correct? You had corrected a representation that you were a managing director and strategic planning consultant for Energy Objective since April of 1987; is that correct? 425 DR. WALSH: That's correct. 426 MR. CHINNECK: Right. And your new resume now shows that you had the position since August of 1998, some 11 years later. 427 DR. WALSH: That's correct. 428 MR. CHINNECK: All right. Thank you. 429 Now, your old resume did not show that you were the secretary/treasurer of Lakeville, but you admitted in cross-examination that you had been the secretary/treasurer; is that correct? 430 DR. WALSH: Subject to check, yes. 431 MR. CHINNECK: Right. Well, were you the secretary/treasurer of Lakeville? 432 DR. WALSH: Well -- yeah, Lakeville. There's more to the name -- no, there's no such thing as Lakeville Oil & Gas, so you have to be more specific. There was a Lakeville Gas Corp., I believe, and a Lakeville Holdings Inc., so you'd have to be a little more specific. 433 MR. CHINNECK: Sorry, I'll try to be slower. 434 Were you a director or officer of either of those corporations? 435 DR. WALSH: I was. 436 MR. CHINNECK: All right. And are they reflected in your current resume? 437 DR. WALSH: No, they are not. 438 MR. CHINNECK: All right. And why are they not reflected in your current resume? 439 DR. WALSH: They weren't pertinent to this application. 440 MR. CHINNECK: All right. But they were pertinent to your history, were they not? 441 DR. WALSH: No. 442 MR. CHINNECK: It's not something you would put on your resume? 443 DR. WALSH: There are a lot of things that aren't on my resume. 444 MR. CHINNECK: So it's not relevant that you worked for Lakeville. 445 DR. WALSH: That's correct. 446 MR. CHINNECK: Right. Did they ever sue you? 447 DR. WALSH: Yes. 448 MR. CHINNECK: What did they sue you for? 449 DR. WALSH: They were suing myself and a company for which I was consulting in regards to, in simple terms, acquiring confidential data and using it. 450 MR. CHINNECK: All right. Now, your old resume did not show a reference to CanEnerco; is that correct? 451 DR. WALSH: That's correct. 452 MR. CHINNECK: Right. But on cross-examination last year, you did admit to me that you were involved with CanEnerco; correct? 453 DR. WALSH: That's correct. I consulted for CanEnerco and had a position as an officer and a director in that firm. 454 MR. CHINNECK: And now you've got that in your current resume. 455 DR. WALSH: I do because it's pertinent to this application. 456 MR. CHINNECK: You show yourself as being the director and vice-president of corporate developments, gas supply, storage and marketing from June 1996 to August 1998; is that correct? 457 DR. WALSH: Subject to check, I think that's correct; yes. 458 MR. CHINNECK: All right. Thank you. 459 Now, CanEnerco, was, as I understand it, the first non-utility to be granted storage rights or storing designation in Ontario. 460 DR. WALSH: That's correct. 461 MR. CHINNECK: Right. And were you intimately involved with that application? 462 DR. WALSH: Yes, I was. 463 MR. CHINNECK: Were you one of the proponents of it? 464 DR. WALSH: In regards to internally or externally? 465 MR. CHINNECK: Well, either. 466 DR. WALSH: I would say both, yes. 467 MR. CHINNECK: All right. Now, I understand that CanEnerco went into receivership. 468 DR. WALSH: That is correct. 469 MR. CHINNECK: Right. And when did that happen? 470 DR. WALSH: Again, subject to check, I would say somewhere in the late 2000/early 2001. 471 MR. CHINNECK: Right. And then I understand it was put into bankruptcy? 472 DR. WALSH: Yes. Now, the reason I'm foggy on that is I was not employed by CanEnerco at that time when they went into receivership and bankruptcy. 473 MR. CHINNECK: And why was it that CanEnerco went into receivership and bankruptcy? 474 DR. WALSH: Well, I think that's still subject to dispute between certain parties but it was my understanding, at the time it happened, it was related to a lack of available funds as a result of trading losses undertaken -- or resulting from the undertaking of gas marketing and trading by a subsidiary of CanEnerco. 475 MR. CHINNECK: Did you have anything to do with the trading losses or the trading activity of that subsidiary? 476 DR. WALSH: No, I did not. 477 MR. CHINNECK: Now, did CanEnerco lose its storage facility? 478 DR. WALSH: I guess technically, because it was in the hands of the receiver, they did, and the receiver subsequently sold the storage assets of CanEnerco to both Union Gas Limited and Enbridge. 479 MR. CHINNECK: All right. And when CanEnerco had made its application to the Ontario Energy Board for a permit to operate a designated storage area, I understand that the Board ordered that there would be authorization for an initial five years only. 480 DR. WALSH: That sounds right but, again, subject to check. 481 MR. CHINNECK: All right. Well, I've got a copy of the decision right here. I can show it to you if you would like. 482 The Board, I understand, also advised the applicant -- 483 MR. BETTS: Excuse me a minute. 484 MR. SOMMERVILLE: I wonder, since you referred to that document, could you provide a copy? 485 MR. CHINNECK: I have only one copy now, sir, but -- 486 MR. SOMMERVILLE: On the break will be fine. 487 MR. CHINNECK: I'd be pleased to do it. 488 MR. BETTS: At that point when it is introduced, it will -- we will have to introduce it as an exhibit and make copies for everybody, and perhaps you can help Mr. Chinneck, because I'm sure he didn't bring a photocopy with him. 489 MR. LEWIS: Is this the CanEnerco decision we're talking about? 490 MR. CHINNECK: Yes, it is. 491 MR. LEWIS: I happen to have brought copies and I can put them on the back shelf or provide them to whoever would like one now. 492 MR. BETTS: That would be fine, but we will enter it as an exhibit. So, if you do have copies, Mr. Lewis, that would solve the problem, and we thank you for doing that. 493 MS. LITT: Exhibit 3.2 -- E.3.2, Board decision in the CanEnerco application. 494 EXHIBIT NO. E.3.2: BOARD DECISION IN THE CANENERCO APPLICATION 495 MR. CHINNECK: Shall I wait, sir, until the distribution has been made? 496 MR. BETTS: We might as well, and then everybody will be able to give your cross-examination the attention it requires. 497 MR. LEWIS: There are actually two, two documents. One is the decision with reasons in EBO-201/EBL0263. And the second one is a report to the Minister of Natural Resources in connection with EBRM109. I don't know if you want -- they were companion applications. I don't know if you want the whole thing on the record or just the -- 498 MR. SOMMERVILLE: My concern is simply if the document is referred to in cross-examination, I'd like to see it. 499 MR. CHINNECK: I will not be referring to the second document 500 MR. BETTS: I think we're ready to proceed now. 501 MR. CHINNECK: Thank you, sir. I'm now referring to paragraph 5.4.16 of Exhibit 3.2. 502 DR. WALSH: Yes, I have it. 503 MR. CHINNECK: Thank you. And in the middle of the paragraph, I note that the Board expressed that it: 504 "Expects CanEnerco to satisfy the Board that continuation of the use of that pool for the purpose of storing its own gas is in the public interest." 505 DR. WALSH: Yes. 506 MR. CHINNECK: Is that correct? Did CanEnerco ever make a submission to the Board about that? 507 DR. WALSH: I don't recall us ever filing a submission to that. But then I wouldn't have been responsible for doing that, our counsel would have been. 508 MR. CHINNECK: All right. In paragraph 5.4.18 there's a condition that: 509 "CanEnerco's undertaking cited earlier not to engage in the business of storage for third parties or any other activity that would reasonably be viewed by the Board as providing storage services..." 510 Correct? 511 DR. WALSH: Yes. 512 MR. CHINNECK: Did CanEnerco under your guidance, did it comply with that requirement? 513 DR. WALSH: I can't say. That wasn't my responsibility, unfortunately. 514 MR. CHINNECK: So you have no knowledge of that? 515 DR. WALSH: I have no knowledge. 516 MR. CHINNECK: Paragraph 5.4.19: . 517 "The Board reminds CanEnerco that for the duration of the first five-year authorization for storage rights, the operating management of the provincial resource must maintain within CanEnerco, as stated in the conditions, and also CanEnerco's annual filing with the Board shall report on the qualifications of the company's personnel as a storage operator and confirm its overall soundness and financial integrity." 518 Correct? 519 DR. WALSH: Yes. 520 MR. CHINNECK: Would you have a -- would you consent to a condition in this application that would contain similar language to that? 521 DR. WALSH: We can undertake to review that, perhaps during the lunch break, and respond back after lunch. 522 MR. CHINNECK: Thank you. 523 MR. BETTS: Let us for the record establish an undertaking number, please. 524 MS. LITT: F.3.4, an undertaking to review paragraph 5.4.19 of Board's decision in EBRM109. Pardon me -- EBO -- the correct reference is EBO201/EBLO263, and to advise whether the applicants will adhere to a similar condition of approval. 525 UNDERTAKING NO. F.3.4: TO REVIEW PARAGRAPH 5.4.19 OF THE BOARD'S DECISION EBO201/EBLO263, AND TO ADVISE WHETHER THE APPLICANTS WILL ADHERE TO A SIMILAR CONDITION OF APPROVAL 526 MR. CHINNECK: Thank you. Now, just, I would like to -- sorry, Dr. Walsh, I would like to just review quickly with you the reservoir. I understand it's about 268 acres? Is that correct? 527 DR. WALSH: More or less, yes. 528 MR. CHINNECK: And it's -- how much, how much gas is actually in it, or is it capable of holding? 529 DR. WALSH: Mr. Gorman's going to address that question. 530 MR. CHINNECK: Thank you. 531 MR. GORMAN: Can you clarify what you mean by "capable of holding?" 532 MR. CHINNECK: Well, at initial pressures or discovery pressures, what would the volume of gas have been in that well or in that -- those reservoirs? 533 MR. GORMAN: Okay. For the Tipperary north pool, 860 million cubic feet, and for the Tipperary south pool, 627 million cubic feet. 534 MR. CHINNECK: Thank you. 535 MR. GORMAN: And I'm reading directly from our pre-filed evidence. 536 MR. CHINNECK: Thank you. 537 And back to Dr. Walsh. The reservoir is, essentially, a container; correct? 538 DR. WALSH: Yes. 539 MR. CHINNECK: And it's only as good as its seal? 540 DR. WALSH: That's correct. 541 MR. CHINNECK: So if it has a bad seal then it may not be a good container. 542 DR. WALSH: That's correct. 543 MR. CHINNECK: In this case, as I understand the evidence from the applicant, the seal is an anhydrite caprock. 544 DR. WALSH: The seal is an anhydrite caprock and surrounding tight carbonate rock. 545 MR. CHINNECK: Right. And I understood the evidence that the seal drapes over the reef. 546 DR. WALSH: Yes. 547 MR. CHINNECK: Because when it was deposited, the structure of the reef was actually a positive feature over which the sediments would have fallen. 548 DR. WALSH: I wouldn't describe it exactly like that, but your general thoughts are correct, yes. 549 MR. CHINNECK: Now, my understanding from Mr. Welychka's report was that the thickness of the caprock, the anhydrite caprock, is only 4 to 15 feet thick. 550 DR. WALSH: The A2 anhydrite caprock is -- ranges in that thickness; that's correct. 551 MR. CHINNECK: So it could be 15 feet in one area and it could be as low as 4 feet in another area. 552 DR. WALSH: That's correct. 553 MR. CHINNECK: Right. And is anhydrite a good seal? 554 DR. WALSH: It's an excellent seal. 555 MR. CHINNECK: Right. But is there not a line of geological thinking that says that the anhydrite cap should be at least 30 feet in thickness? 556 DR. WALSH: Not that I'm aware of, and certainly that isn't the case in many storage pools in Ontario. 557 MR. CHINNECK: Right. But can there be problems with anhydrite as a seal? 558 DR. WALSH: I would say no. I would qualify that answer by saying that nothing is impossible, and for that reason we undertake the caprock analysis. 559 MR. CHINNECK: Okay. But what happens, for example, if there are vertical fractures in the anhydrite? Would that not allow the seal to be less efficient? 560 DR. WALSH: Well, the anhydrite is an evaporitic rock. And what I mean by evaporitic is it's like a salt, or similar to a salt. The A2 anhydrite was initially a gypsum. Anhydrite is really gypsum that has lost its water. 561 MR. CHINNECK: Right. 562 DR. WALSH: And, as a result of it being evaporitic, like a salt, it has a tendency, if it is subjected to pressures that could possibly fracture it - and these are intense pressures - that they would also heal relatively quickly because of the nature of the rock type. 563 MR. CHINNECK: Right. But it's possible, then, that there could be fractures in anhydrite that would allow the escape of gas; correct? 564 DR. WALSH: I would say it's unlikely. I'm sorry. It's very unlikely. 565 MR. CHINNECK: Very unlikely. Well, is it possible that the anhydrite could be too thin to provide a proper barrier for the escape of gas? 566 DR. WALSH: No, and I would use the analogy of saying, if you had -- if you can look at the tensile strengths of certain materials that are very, very thin and can hold greater pressures than materials that are much thicker. So I wouldn't -- I couldn't agree with that statement, no. 567 MR. CHINNECK: So then you'd be comfortable with an anhydrite cap that was an inch thick? 568 DR. WALSH: If subjected to the pressure analysis work that we're undertaking, and the results supported that that 1-inch thick anhydrite would be suitable to maintain the pressures that we plan to operate under, yes. 569 MR. CHINNECK: But have you ever seen a caprock of 1 inch? 570 DR. WALSH: No. 571 MR. CHINNECK: No. What about faulting and sheering? Is it not possible that the caprock could be breached by way of a faulting where there was movement of the -- or displacement of the sediments on either side of the fault? Or one side would go up and the other side would go down? 572 DR. WALSH: Well, when you consider in the typical sense, geologically, the faulting that we know exists, which in themselves become traps, trapping mechanisms, occur over millions of years, I think what you're referring to is something that we would classify as being somewhat catastrophic, where you would have a sudden event, such as an earthquake, for example, that might provide some sheering and fracturing. 573 And all I can say is -- recollect on the experiences that I had at Union when we had an earthquake in the Chatham area, and the vice-president of gas supply at that time, John Hunter, as our building was shaking, quickly called me and said: Phil, we've had an earthquake. How are our storage fields going to survive? And I said, John, I said, I am sure that over the last 200 or so million years we've had a few earthquakes and the gas was still there when we drilled it ten years ago. 574 So in response to your question, I would say that the issue of faulting or fracturing, as you're suggesting, is not an issue. 575 MR. CHINNECK: But I'm asking you, though, as a geologist, one geologist to another, whether or not it's possible that an anhydrite cap could be breached by virtue of a fault? 576 DR. WALSH: Subjected to the kinds of pressures that might, you know, fault the anhydrite, which, as I said earlier, would have to be fairly extreme, the answer then would be yes, and that's the reason why we test to certain pressures. 577 MR. CHINNECK: All right. 578 Now, this well, as I understand it, has relatively low discovery pressures for Ontario; would you agree with that statement? 579 DR. WALSH: Well, I'm not sure I'd agree to the descriptive aspect of that. But the pool itself had pressures lower than what might normally be found in areas such as Lambton County, for example. 580 MR. CHINNECK: Right. And I think the evidence from Mr. Gorman was that the discovery pressures on the Tipperary wells were in the neighbourhood of 425 psi? 581 DR. WALSH: That's correct. 582 MR. CHINNECK: Right? And the -- as I understand it, the pressure -- the initial pressures, the discovery pressures in the wells in the Lambton area are at least twice that amount, 800 to 900 and higher. 583 DR. WALSH: Generally speaking, yes. 584 MR. CHINNECK: Okay. Now, when you have an underpressured well like these wells, is it not possible that the cause of the underpressurization is faulting or fracturing? 585 DR. WALSH: Well, it might be argued that that's one possibility. However, if you look at the geology, you'll see that the depth of the overburden above the reef is of such extent that that reef is being subjected to tremendous pressures well in excess of the 400 pounds that sits within the reef. 586 In other words, an analogy might be, if I have a balloon and I blow that balloon up, the reason the balloon is inflating is because I'm subjecting it to pressures greater than the surrounding atmospheric pressure of approximately 14.7 pounds per square inch. Now, if I then held that balloon and brought in something that would subject that balloon to, say, 100 pounds per square inch, it would crush that balloon. 587 So, as we see the geology today, because there was 400 pounds there and because we had 1,800 feet of rock overlying it, which is more than likely subjecting the top of that pool to approximately 1,800 pounds per square inch, I would argue that if a fracture existed today that would be of concern, that we would be seeing gas leaving that pool, and that we would have no gas left at this point in time when we drilled and discovered it. 588 MR. CHINNECK: Right. But I'm really just asking you whether or not a fault or a fracture to that reservoir would be a reasonable explanation, one of the reasonable explanations, as to why that reservoir came in at lower pressure. 589 DR. WALSH: Well, as I said earlier -- I think I answered that question, your question, initially saying it could have been a reason that we have only 400 pounds initially because the gas would have migrated into that pool well before we had all of the overburden that we see today. 590 MR. CHINNECK: Right. 591 DR. WALSH: And so as a result, if there was a fracture and the overburden that was driving the gas into that reef, that pressure was in excess of 400 pounds, the argument that you're putting forward could be a possible explanation. 592 Conversely, the explanation could be that the amount of energy pushing that gas in the first place was only 400 pounds per square inch and it was trapped, then, within the reef itself and remained that way for the life of the pool. And the reason it wasn't crushed is because the integrity of the overlying rock as the sediment solidified allowed that 400 pounds of pressure to be protected. 593 MR. CHINNECK: Right. But if it was fractured, then would you agree with me that the reservoir could be compromised? 594 DR. WALSH: Yes. 595 MR. CHINNECK: Right. Thanks. 596 Now, as I understand the evidence, again, of the applicant, you are asking the Board to allow you to overpressure or delta pressure this pool to a rate that would be like 2.75 times the IP of the initial discovery pressure; is that correct? 597 DR. WALSH: Yes. 598 MR. CHINNECK: Now, is it possible, then, that, just speaking generally or with respect to this particular property, if there are fractures or sheers or thin spots in the caprock or displaced horizons of caprock, is it possible that gas could escape? 599 DR. WALSH: If it could be proven that there were fractures in the caprock. Again, I think it's highly unlikely, but yes. I mean, you're putting a simple argument forward, and I would say yes, it could escape, yes. 600 MR. CHINNECK: Right. So is it possible that an underpressured well that was delta pressured almost three times its original pressure, is it possible that that delta pressuring could result in a loss of the well -- of the reservoir? Is that possible? 601 DR. WALSH: Well, I think any time you put a hole in a container, if you don't -- you don't go to the extent of putting certain, certain facilities in place, as Ms. McConnell spoke about yesterday in regards to appropriate casing, appropriate cementing jobs, appropriate plugging, if you leave a hole open to the reservoir, yes, you will see escape of gas. 602 However, we must remember that the escape of gas is something that doesn't occur simultaneously. It just doesn't all escape in one day. You know, if you get a leak or something, you will discover that leak and there could be ways that you rectify that. 603 MR. CHINNECK: Right. 604 DR. WALSH: But again, by following the standards as we're proposing to do, we could be in a position to ensure that that doesn't happen. 605 MR. CHINNECK: Well, I understand that but have there been wells that you're aware of -- not wells, but reservoirs -- that have been damaged by overpressuring? 606 DR. WALSH: In regards to storage operations? Or in regards to enhanced recovery operations? 607 MR. CHINNECK: Either. 608 DR. WALSH: I'm familiar with -- I'm familiar with that happening at enhanced recovery operations and, and -- and injection of fluids for the purposes of disposal. 609 MR. CHINNECK: And even though you think that you will be complying with the standards, you acknowledge, do you not, that it is possible that delta pressuring a well could result in the escape of gas and possibly the loss of the reservoir as an effective storage facility? 610 DR. WALSH: No, I don't agree with that. If the standards are followed as they're written, I believe that we will not see that happen. I think you must recognize that while I have experienced that situation occurring in enhanced recovery operations and disposal of fluid operations, neither one of those were subject to the same conditions at the time I experienced those operations. They did not follow the standards as we are proposing to do. 611 MR. CHINNECK: Now, I understand from evidence filed by my client that the average of the delta pressuring in the Lambton County area is approximately 1.15 percent of the original pressure or the IP or the discovery pressure. Is that correct? 612 DR. WALSH: It sounds right. I don't have it in front of me, but subject to check, the answer will be yes. 613 MR. CHINNECK: Right. And I understand that... 614 DR. WALSH: I'm sorry. 615 MR. CHINNECK: I understand that you worked with Enbridge -- sorry, Union Gas, as part of your earlier career? 616 DR. WALSH: That's correct. 617 MR. CHINNECK: And that's on your resume. 618 DR. WALSH: Yes. 619 MR. CHINNECK: Are you aware of an agreement between Union Gas and Enbridge whereby they have agreed that they will not exceed initial pressure plus 30 percent? 620 DR. WALSH: I'm not aware of that, no. 621 MR. CHINNECK: All right. I just want to talk about the caprock for a moment. 622 How many samples of caprock will be taken? 623 DR. WALSH: There will be one core taken through the caprock that will be analyzed as per the standard. 624 MR. CHINNECK: Okay. And how thick was the caprock core that was taken? 625 MS. McCONNELL: The entire core sample was nine metres. 626 MR. CHINNECK: Right. And now the question is: How thick was the caprock that was discovered in that sample? 627 MS. McCONNELL: We have to wait for the final analysis. 628 MR. CHINNECK: Oh. Did no one from your company measure the caprock when the sample was taken? 629 DR. WALSH: While Ms. McConnell was the supervisor of the drilling operations, I was in England at the time and was under phone conversations with her, which is why I'm chuckling, because the hour was quite late. 630 We did have a geologist, though, at the site to review the core sample to confirm the existence of caprock. 631 MR. CHINNECK: Well, actually -- 632 DR. WALSH: But until we have our analysis back from, I believe it's Agate Laboratories in Calgary, any estimation of caprock at this time is dependent upon their analysis. 633 But I would say, based on the results from a visual perspective, that it would appear that we were in the area of pure caprock, again, subject to the laboratory analysis, we did see approximately 2 metres of caprock. 634 MR. CHINNECK: I think what I asked was -- well, I'm going to ask you this. And how thick was the anhydrite? 635 DR. WALSH: That's what I'm referring to. It's the two metres of -- the analysis by -- the visual analysis by the geologist and the description provided to me from the well indicated approximately a two-metre section of pure white anhydrite, which, from a sample standpoint, is a typical visual identification. But the lithology of that core is going to end the porosities and permeabilities and structural integrity will be analyzed by the lab, and we will then have a more finalized or more definitive determination of the thickness to have caprock. 636 MR. CHINNECK: Who authorized the caprock sampling? 637 DR. WALSH: Pardon me? 638 MR. CHINNECK: Who authorized the caprock sampling? 639 DR. WALSH: Well, there was the project team here that was involved in that process. So, as far as authority, you're referring to technical authority or financial authority? 640 MR. CHINNECK: Technical. 641 DR. WALSH: Well, technical authority would have been myself. 642 MR. CHINNECK: Now, how important is it to identify the right horizon for the sample? 643 DR. WALSH: Oh, it's very important. You don't want to be in a position to undertake a core of something other than the caprock. 644 MR. CHINNECK: Okay. So then how important is it, then, to have a qualified geologist on the site at the time that they're picking a core interval? 645 DR. WALSH: Well, it is -- it is important. 646 MR. CHINNECK: So it's important. And you just said that you were in England at the time that the core interval was being picked; is that correct? 647 DR. WALSH: That's correct. But Ms. McConnell was available as a qualified geologist to deal with that issue in regards to the casing -- or the core pick. 648 MR. CHINNECK: Were you at the site when the core horizon was picked? 649 MS. McCONNELL: Yes, I was. 650 MR. CHINNECK: Did you pick it? 651 MS. McCONNELL: Yes, I did. 652 MR. CHINNECK: All right. And did you measure the anhydrite that was disclosed in the core that came up the well? 653 MS. McCONNELL: I had a quick look at the core. Neil Hoey was the geologist that was looking at the core. I was supervising the coring operations. 654 MR. CHINNECK: Who was the geologist? 655 MS. McCONNELL: Neil Hoey, H-o-e-y, I believe. 656 MR. CHINNECK: Okay. 657 DR. WALSH: And Mr. Hoey, because I was in England, when Kathy and I were discussing it, I asked -- or Kathy mentioned to me that she had discussed with Mr. Hoey to be available on a standby basis to provide her with the confirmation that caprock had been cored, as, essentially, a confirmation as a backup, given my absence and her inability, because of the time differences, to discuss with me her thoughts. 658 MR. CHINNECK: Mr. Hoey, was he at the well site when the caprock horizon was picked for sampling? 659 MS. McCONNELL: No, I picked the horizon for the sampling. 660 DR. WALSH: The core point -- 661 MS. McCONNELL: But he was there when we cored. 662 MR. CHINNECK: All right. I understood that there was not a geologist. 663 MS. McCONNELL: Yes, Neil Hoey was there. 664 MR. CHINNECK: All right. 665 MS. LOWRIE: Ms. McConnell is also a geologist. 666 MR. CHINNECK: I understand that. 667 MS. LOWRIE: So we had two geologists at the site. 668 MS. McCONNELL: But it's very difficult to do two jobs when you're out there because you want to do one job right. 669 DR. WALSH: And it's important to note that when you pick the core point, you're actually picking the core point based on the geology immediately above the caprock. It becomes a little bit late if you're through the caprock by the time you choose to -- you may see it in the sample. But if you see the caprock in the sample, you've gone too far. You will have -- 670 MR. CHINNECK: But the process of identifying -- 671 DR. WALSH: I will finish. 672 You will have to determine the overlying A2 shale horizon as the definitive formation for the purposes of beginning your coring. And that is the -- that was the pick that Ms. McConnell was responsible for making. We did confirm that by phone as well in regards to what she had determined, with my approval as, essentially, her technical boss. 673 MR. CHINNECK: Okay. Did you notice any vertical cracks in the caprock when you were inspecting it? 674 MS. McCONNELL: No, I did not. 675 MR. CHINNECK: Now, this one sample that you took is in a DSA, which I understand is about a thousand acres? 676 DR. WALSH: Again, subject to check, but more or less, yes. 677 MR. CHINNECK: Right. And there's only one sample of that caprock? 678 DR. WALSH: That's correct. 679 MR. CHINNECK: Right. And you would agree with me that the consistency and the thickness and other features of the caprock could change materially over and around the reef in that DSA? 680 DR. WALSH: I would say the answer to your question is no. And why I say that is your reference to "materially change." 681 MR. CHINNECK: Well, Mr. Welychka says that it could be 4 feet. It was 4 feet in one area and then 15 feet in another. Is that not considered by you to be a material change? 682 DR. WALSH: No, that's a thickness change. As far as the substance of the anhydrite caprock, it remains the same. It is an anhydrite, whether it's 4 feet thick or 20 or 30 feet thick. 683 MR. CHINNECK: Now, I understand that there's a considerable amount of fracturing and faulting in the Huron County area. Is that a fair statement? 684 DR. WALSH: No. 685 MR. CHINNECK: Is there more fracturing and faulting in the Huron County area than there is in the Lambton area? 686 DR. WALSH: The answer, based on my technical opinion/experience, is there is more faulting in Lambton County than there is in Huron County. And now again, I qualify that by pointing out that we've had a lot more wells drilled in Lambton County to provide us with the geological evidence than we have in Huron County. 687 MR. CHINNECK: Right. But you would agree with me that there are likely fractures and faults in the Huron County area? 688 DR. WALSH: Huron County and Lambton County are in the same geological basin, if you want to call it that, which is the Michigan basin, and therefore are subjected to the same types of structural changes over time. And again, as I said earlier, we're talking millions and millions and millions of years in dealing with structural change. 689 MR. CHINNECK: All right. Can you guarantee that the reservoir caprock has not been fractured and will not allow the escape of gas? 690 DR. WALSH: Well, we've guaranteed that to our board of directors, so, yes. 691 MR. CHINNECK: You can guarantee that? 692 DR. WALSH: Yes. 693 MR. CHINNECK: Will you agree, as a condition of granting an approval here, that you will not delta pressure the well if the caprock shows fracturing or is otherwise not found to be a suitable caprock? 694 DR. WALSH: If the analysis that's undertaken indicates that it is not suitable caprock, we will not delta pressure the pool. 695 MR. CHINNECK: Will you share the caprock report with my clients and the Board as soon as the information becomes available? 696 DR. WALSH: As soon as the analysis is completed, we will provide that information to all parties interested. 697 MR. CHINNECK: Now, Dr. Walsh -- 698 MS. LITT: Mr. Chinneck, should that be given an undertaking number? 699 MR. CHINNECK: Oh, sorry. Thank you. 700 MS. LITT: F.3.5, an undertaking to provide the results of the caprock analysis to the Board and all parties. 701 MR. BETTS: Thank you. 702 MR. CHINNECK: Forthwith upon receipt. 703 MS. LITT: Forthwith upon receipt. 704 MR. CHINNECK: Thank you. 705 UNDERTAKING NO. F.3.5: TO PROVIDE THE RESULTS OF THE CAPROCK ANALYSIS TO THE BOARD AND ALL PARTIES FORTHWITH UPON RECEIPT 706 MR. CHINNECK: Now, if gas does escape from the reservoir, it could migrate to the surface; correct? 707 DR. WALSH: If it has a path of communication to the surface, it will migrate to the surface. 708 MR. CHINNECK: Right. It could get into water that's above it in the rock. 709 DR. WALSH: If it has a path of communication to that water zone, it will migrate to that water zone. 710 MR. CHINNECK: Right. 711 DR. WALSH: Assuming, of course, that the water zone itself is not of a pressure higher than what the gas is at. 712 MR. CHINNECK: Right. It could get into water systems for animals and humans? 713 DR. WALSH: If the path of communication exists, yes, it can. 714 MR. CHINNECK: Okay. It could get into tap systems for delivery of waters into people's kitchens? 715 DR. WALSH: If the tap systems are tied into a subsurface aquifer, and that subsurface aquifer has a path of communication open between the gas and itself, yes. 716 MR. CHINNECK: All right. And, in fact, there have been situations where people have been hurt, injured, as a result of gas escapes. 717 DR. WALSH: As a result of? 718 MR. CHINNECK: Gas escapes, from wells, reservoirs, or other gathering systems? 719 DR. WALSH: I, I'm not aware of anyone being hurt, based on my experience. But I guess it's a question of how you define "hurt." I know people have been inconvenienced in regards to some production operations where there was issues of injecting disposal fluids, for example. 720 MR. CHINNECK: Right. If gas were to migrate away from this reservoir, how far could it possibly migrate? 721 DR. WALSH: I couldn't give you an idea on that without having more specifics. 722 MR. CHINNECK: Would it be reasonable to say that it could migrate into and beyond the 1-kilometre buffer zone that is around the DSA? 723 DR. WALSH: Again, perhaps Mr. Gorman can answer that from a reservoir engineering standpoint. But I can't answer that unless we have more specifics. But, again, you know, given the geology we have and the standards that we're adhering to, the answer would be no, it wouldn't. 724 MR. CHINNECK: Can you guarantee that gas will not escape and come to the surface or get into the water in this project? 725 DR. WALSH: Yes, I can give you my assurances that it won't, given the manner in which we're developing this pool. 726 I mean, why I qualify that is quite simply, you know, there are all kinds of things that could occur in this world that might be catastrophic that I have no control over. So when you're asking me to give you an answer, I have to qualify it somewhat. 727 MR. CHINNECK: Yes, but essentially you're saying you can't give me a guarantee, then? 728 DR. WALSH: No, I'm saying I can assure you that the water will be given -- the manner in which we're developing this pool that the subsurface aquifers will not be contaminated by our gas, or the gas stored on behalf of other parties. 729 MR. CHINNECK: Can you make the same promise with respect to brine or other hydrocarbon products that are related to your activities? 730 DR. WALSH: Yeah, our -- we don't see any way, given the manner in which we're developing this pool, that that would be a problem, the contamination of subsurface freshwater aquifers by brine or other hydrocarbons or any other type of fluid. 731 MR. CHINNECK: So you're giving a guarantee that that can't happen. 732 DR. WALSH: I'm assuring you that can't happen; that's right. 733 MR. CHINNECK: Now, in this designated storage area, you understand that all of the farmers and inhabitants of that area are relying on approximately 300 foot water wells. 734 DR. WALSH: Again, subject to check, the 300-foot depth level, yes. 735 MR. CHINNECK: Okay. Do you understand the water to be of good quality and good quantity? 736 MR. JORDAN: Yes. 737 MR. CHINNECK: And do you understand that it does not require any amelioration to be consumed? 738 MR. JORDAN: That would have to be an individual landowner taking their samples to a lab for confirmation on their own, as they should be doing on an ongoing basis. 739 MR. CHINNECK: Right. But generally these farmers don't have to have their water handled in any way, they can drink it directly from the wells; correct? 740 MR. JORDAN: You would have to ask each of the individual farmers referred to for that question. 741 MR. CHINNECK: All right. But if, if brine or hydrocarbons got into the water system for some reason, would you agree with me that that could cause some impairment of that supply? 742 DR. WALSH: Well, I can tell you this. I know that there are storage fields in Ontario, one of which I developed or helped develop with ICG Utilities, where there was a communication not between the storage field and the fresh water but what we call the kettle-point shale which naturally holds gas in it; which migrated up -- which was the immediate formation below the water aquifer, and landowners were consuming water which, when they turned the taps on, would have gas initially and then the water would come. And as far as I know, none of them suffered any detrimental effects. 743 But aside from that, I think the point is that we expect not. And I assured you of this already, we expect not to have any communication existing whatsoever between our storage facility and their storage reservoir and the freshwater aquifer you're referring to. 744 MR. CHINNECK: Right. That's your expectation but that may not be the reality. 745 DR. WALSH: No, that will be the reality. 746 MR. CHINNECK: Now, are you aware of any cases in Ontario where there have been contamination of water, potable water, by brine? 747 DR. WALSH: Yes, I am aware of that. 748 MR. CHINNECK: Now, which case is that? 749 DR. WALSH: In regards to disposal operations from production in Romney Township. 750 MR. CHINNECK: Will that be the case involving the Fields family? 751 DR. WALSH: I have -- other than knowing that there were issues associated with that, I don't have any other particulars I can give you. 752 MR. CHINNECK: All right. Would you agree with me that if there was an escape of petroleum products, gas, or brine into a pristine aquifer or water system, that it would or could have the impact of costing someone a lot of money to fix it 753 DR. WALSH: Yes. Yes. 754 MR. CHINNECK: That it would be very time-consuming for the individuals that suffered the escape of the noxious substance? 755 DR. WALSH: It could. It could. 756 MR. CHINNECK: Would you agree with that? That it could have a serious impact on the value of the property? 757 DR. WALSH: Yes, it could. 758 MR. CHINNECK: It could have a serious impact on the production that -- issued from that property? 759 DR. WALSH: Production, I'm sorry? 760 MR. CHINNECK: Let's talk about dairy cattle. 761 DR. WALSH: Oh, I understand now. Yes, of course it would have some influence on that, yes. 762 MR. CHINNECK: Right. And that it could have a serious effect on the value of a business, any business that would be affected by that contamination? 763 DR. WALSH: Yes. It would have some effect. 764 MR. CHINNECK: Okay. And you understand that your activities could have -- could have -- a significant effect on one of Ontario's prime farming communities? 765 DR. WALSH: I don't agree with that. 766 MR. CHINNECK: So you don't agree that this reservoir is located in one of Ontario's prime farming communities? 767 DR. WALSH: I didn't say that. I said that I don't think it would have an effect. In fact, if it has any effect whatsoever, it will provide added resources to this area, in the form of additional gas supply and in the form of additional taxes to the municipality. 768 MR. CHINNECK: Now, if you saw the replies to interrogatories that were filed by my client, you would have seen one document that indicated that about 36,000 gallons of water are used per day in the DSA? 769 DR. WALSH: Again, subject to check, yes. 770 MR. CHINNECK: And would you agree with me that's an awful lot of water? 771 DR. WALSH: It's a relative thing, I guess. 772 MR. CHINNECK: Yeah. Seven truckloads, seven big truckloads of water. 773 DR. WALSH: To an individual, seven truckloads of water is a large amount of water. 774 MR. CHINNECK: Yeah. Do you have a risk assessment plan to deal with the impact of your operation on water, animals and humans in the area? 775 DR. WALSH: Well, I personally don't have it in front of me. And I would -- my understanding is that anything we do in regards to the operations of this pool, and the effect these operations have environmentally or anything else, will be subject to Mr. Fisher's position and responsibility. 776 MR. CHINNECK: But I'm just asking you, do you have a risk assessment plan that you can produce to me now? 777 MR. FISHER: No. 778 MR. CHINNECK: Will you undertake to produce one as a condition of granting the approval? 779 DR. WALSH: We can undertake to review that and provide you with a response after lunch. 780 MS. LITT: Undertaking F.3.6. 781 MR. BETTS: Can I have someone describe that so that everybody knows what's being undertaken? 782 MR. CHINNECK: Okay. I have asked the applicant to undertake to produce a risk assessment plan as a condition of the Board granting approval. And they've undertaken to respond after lunch. 783 UNDERTAKING NO. F.3.6: TO PRODUCE A RISK ASSESSMENT PLAN AS A CONDITION OF THE BOARD GRANTING APPROVAL 784 MR. LEWIS: I'm just wondering so that we're clear on this, what -- could you describe the type of risk assessment plan that you're wanting us to address in our answer to this undertaking? 785 MR. CHINNECK: Well, simply, Mr. Lewis, my clients have been operating farms in this area for a half-century or more, and they've not ever had a problem with the quality or the quantity of water. And they are most concerned about -- 786 MR. LEWIS: No, I understand -- 787 MR. CHINNECK: -- what these activities are going to impact those operations. 788 MR. LEWIS: Sorry. I understand your clients' concerns completely. 789 What I don't understand is what you mean by "a risk assessment plan." 790 MR. CHINNECK: Well, it would be a plan that would outline the -- the likelihood of a problem, and the extent of the problem, quantify the damages and losses, and make recommendations about the plan for the emergency response. In other words -- 791 MR. LEWIS: Sorry, what was that last part? 792 MR. CHINNECK: Make recommendations as to what should be done by way of emergency response and by way of short-term solutions and long-term solutions to the problem, including consideration of the costs of implementing each of those plans, an indication of who it is that would be providing the services in the short-term and long-term plans, the availability of those parties, and the costs of timing of implementing of them. 793 By way of explanation, one of the problems that we have with respect to water in this area is that there are no other alternative solutions. If this reservoir is damaged, then my clients believe that the only solution, really, is to provide municipal water, which would mean that there would have to be a pipeline. And they are very, very expensive, and it takes quite a bit of time to implement them. 794 And as part of that risk assessment plan, I think it would be helpful if there were some indication as to how the plan would be funded and what type of security would be appropriate to ensure the farmers that if there is a problem, that there will be monies to remedy the problem, notwithstanding that the applicants may no longer be viable business entities. 795 MR. BETTS: Is the undertaking understood? 796 MR. CHINNECK: Hopefully it is. 797 MR. FISHER: Yes. 798 MR. BETTS: Thank you. 799 Mr. Chinneck, if you could, I don't want to interrupt your cross-examination at any critical stage, but if you could find an opportunity for us to break in the next 15 minutes, that would be... 800 MR. CHINNECK: I'm ready now, sir. 801 MR. BETTS: Then let us do that. We will break now, and I think I'll allow an hour and 15 minutes for lunch, which will bring us back at 1:30. We'll adjourn at this point. 802 --- Luncheon recess taken at 12:14 p.m. 803 --- On resuming at 1:35 p.m. 804 MR. BETTS: Thank you, everybody. Please be seated. Were there any preliminary matters that arose during the break? 805 PRELIMINARY MATTERS: 806 MR. LEWIS: Mr. Chairman, we undertook to provide you with an answer to -- or the Board with an answer to Undertaking No. F.3.6. Now, I think when that undertaking was given, that answer to receive after lunch, we had not received Mr. Chinneck's explanation of what that assessment plan entailed. We would like to have more time to study that before responding to that undertaking. 807 MR. BETTS: That's fine. Yes. Are there any other items in terms of preliminary matters? 808 Mr. Chinneck, please proceed or continue with your cross-examination. 809 TRIBUTE/TIPPERARY PANEL 1 - WALSH, McCONNELL, GORMAN, FISHER, LOWRIE, JORDAN, FRANCIS; CONTINUED: 810 P.WALSH; Previously Sworn. 811 K.McCONNELL; Previously Sworn. 812 J.GORMAN; Previously Sworn. 813 J.FISHER; Previously Sworn. 814 J.LOWRIE; Previously Sworn. 815 H.JORDAN; Previously Sworn. 816 D.FRANCIS; Previously Sworn. 817 CONTINUED CROSS-EXAMINATION BY MR. CHINNECK: 818 MR. CHINNECK: Thank you, sir. 819 I take it that the applicants are not going to be acquiring environmental insurance, is that correct? 820 MR. FISHER: Could you repeat the question? 821 MR. CHINNECK: I take it that the applicants will not be acquiring environmental insurance. 822 MR. FISHER: Beyond what what's included in our $5 million general liability policy, which would be typical type of insurance for associated -- issues associated with well problems, that sort of thing. 823 MR. CHINNECK: I'm not sure I understand the answer. Are you going to have environmental insurance other than the liability insurance policy you spoke of earlier? 824 MR. FISHER: Yes. 825 MR. CHINNECK: And where is that insurance going to be? 826 MR. FISHER: Again, in our general liability policy. 827 MR. CHINNECK: Does your general liability policy cover the sorts of damages we've been talking about, such as polluting or fouling the water supply? 828 MR. FISHER: No. 829 MR. CHINNECK: All right. So you won't have any type of insurance that will protect the farmers and the businessmen and inhabitants if there is a fouling of the water supply as a result of operations at your facility? 830 MR. FISHER: To date, because we don't believe it's necessary, no, we haven't allowed for it. 831 MR. CHINNECK: Thank you. Now, the farmers, the clients I represent in the DSA, they would like a risk assessment study, not a plan. They've asked you for a plan, and you're going to give us an undertaking on that, but they would like a study that is complete with a remedial plan and review and consultation provisions whereby they can have some input into the terms of the plan; and they would like a provision that provides for approval by the landowners or the Ontario Energy Board; and they would like it to have mitigation strategies and security, to secure any obligations that might arise -- that might arise as contemplated by the plan. 832 Are you prepared to make the order to be issued by the Board conditional on such a term being included in the order? 833 MR. LEWIS: Again, as I see this request for a commitment or an agreement to a condition, it's very closely related to the risk assessment plan and the undertaking that we've given in that regard. So I would, I would prefer to defer answering that -- give you an undertaking to answer that, in addition to Undertaking F.3.6, because as I see them, they're very closely related. And perhaps, Mr. Chinneck, just so we are clear on the record, if you could explain the difference between the risk assessment plan and the risk assessment study, then we can be clear. 834 MR. CHINNECK: With your permission? 835 MR. BETTS: Yes, please. 836 MR. CHINNECK: Yes, the study is, in my view, a study by a third-party professional that reviews the issue objectively and makes recommendations that are appropriate in that individual's professional opinion, with respect to each of the items that I have just recently categorized, with a view to having that study consulted with the farmers and, hopefully, approved by them, if not them, by the OEB. 837 And a plan, in my view, is simply your plan as to how you would deal with those issues. In our view, the four short sentences that you offered in your response to interrogatories RP-2003-0253 submitted by Tribute Resources is not an adequate plan. And we think that any plan that is augmented should be recommended by a third-party professional and approved by the farmers and the Board. 838 Does that answer your query? 839 MR. FISHER: No. He didn't explain the difference of what he said the study was. He didn't say how that differs from the plan. I heard the same thing twice. I still don't understand the difference between a risk assessment plan and risk assessment study. The plan as described this morning, in my opinion, included all the things he's described in the study, and vice versa. 840 MR. CHINNECK: Well, the plan -- the plan will be a result. The plan that is approved by the farmers and by the Board will be one that is a result of a -- 841 MR. FISHER: Study? 842 MR. CHINNECK: Study, that's correct. Right. 843 MR. FISHER: Okay. 844 MR. CHINNECK: And so we're asking for a study which will result in recommendations, which is essentially a plan. 845 MR. FISHER: So the study is a first step and the second step is a plan that would be a set of the information, details, et cetera, falling out of the study? 846 MR. CHINNECK: That's correct. 847 MR. FISHER: Understood. 848 MR. BETTS: Thank you. And I think we need to establish an undertaking number for at that as well. 849 MS. LITT: F.3.7. 850 MR. BETTS: Thank you. 851 UNDERTAKING NO. F.3.7: TO CONSIDER WHETHER TIPPERARY IS WILLING TO PROVIDE A RISK ASSESSMENT PLAN 852 MR. CHINNECK: If I could refer you to -- I need some assistance to this, as to where it is in the materials, the response to interrogatories, Huron County Federation of Agriculture, RP-2003-0253, submitted by Tribute Resources Inc. and Tipperary Gas Corp. I understand it might be at the back of the first book of answers, which is book number 4. 853 MR. BETTS: Has anybody found it in their books yet? 854 MR. LEWIS: I believe it's tab -- yellow tab 15. And we're talking about the book that's entitled: "Response to interrogatories." It's the big volume. It's the applicant's response to interrogatories. 855 MR. BETTS: I think I got that book. 856 MR. LEWIS: Okay. And I think it's tab, buff tab 15, white tab 4. 857 MR. BETTS: Thank you. 858 MR. CHINNECK: Thank you, Mr. Lewis. I apologize, sir. I was not provided with a complete set of the records when I was retained so -- 859 MR. BETTS: That's quite all right. 860 MR. CHINNECK: -- so I appreciate my friend's assistance. 861 MR. BETTS: We'll find our way through it, and I appreciate the help of Mr. Lewis in getting there. 862 MR. CHINNECK: Thank you, Mr. Lewis. At the bottom of the paragraph indicated at the bottom of page 3, at the bottom of page 3, paragraph B, there is a contingency plan recited therein. It consists of four paragraphs 863 MR. LEWIS: I'm sorry. Just so we're in the right -- I mean, sorry. Just so we're in the right spot. 864 Now, I believe you've given me a -- is this a supplementary interrogatory or was it the initial interrogatory? I turned to the response to interrogatories from the Huron Federation of Agriculture, because that's what I thought -- 865 MR. CHINNECK: I believe that's correct. 866 MR. LEWIS: But were there any supplementaries or is this -- 867 MR. CHINNECK: It's supplementary to question 1. 868 MR. LEWIS: Wrong volume. It's the supplementary interrogatories. 869 It's the -- sorry, it appears that it's the -- it's the C2 exhibit, which is "Response to Supplementary Interrogatories." It's the thinner white book. 870 MR. BETTS: Yes. We have it, too. It's a book that's entitled "Admin.," in our case. I don't know whether you have a similar book or not. Anyway, as long as everybody's found it. 871 MR. CHINNECK: I do apologize again, sir. 872 MR. BETTS: No apologies required. That's fine, Mr. Chinneck. 873 MR. CHINNECK: I understand from my client that he didn't get a book. 874 In any event, it appears that your contingency plan is at the bottom of page 3 of that document; is that correct? 875 MR. JORDAN: Can I address the contingency plan that it is in the -- what we're referring to? 876 In discussions with the landowners when we first went up there, groundwater and the aquifer were an issue of concern because most of the landowners that are currently in the DSA haven't experienced the drilling operations of an oil and gas well on their properties or in the vicinity of their properties. 877 So there was all these questions about, Is it going to affect my water? And we said it wasn't going to affect their water through good drilling practices, following the regulations, standards, as laid out by our explanations earlier. 878 But to appease the concern, because it was across several landowners, we put in a -- of our own free will, we offered them some comfort and we -- with the big farm operators that were close to the well that we were proposing, we put in a temporary tank that would meet their adequate water volume supply for their operations. 879 We had the local company from Clinton that has worked on their water wells and supply come in and plumb that pumping and hosing systems up so that in the event that there was any kind of discoloration of the water when we were drilling through the potable water zone that might excite the landowners or affect the -- the feeding nipples for chickens are very fine, we had in place where they would shut down their well and utilize water from these temporary reservoirs. 880 We anticipated no affect on the groundwater, but we wanted to comfort the landowners in doing that contingency plan. And that's what this refers to. It was put out at our own free will to give comfort and appease the landowners that haven't experienced the drilling of the wells. 881 MR. CHINNECK: All right. That's your plan, though, is it not, the four paragraphs on page 3 of that document? 882 MR. JORDAN: For the time during the drilling of that well. 883 MR. CHINNECK: Well, do you have another plan? 884 MR. JORDAN: The drilling of the well, through the potable water table, has had no impact on the groundwater to the wells of the landowners in the DSA, or anywhere else. 885 So hopefully we have shown by the conduct and the ability of the group here to drill a well through their aquifer, that it has been proven that it can be done efficiently, safely, with no impact on themselves, the groundwater, their livelihood, their animals, or anything else. 886 DR. WALSH: Mr. Chinneck, I think that if you're referring to a broader-based contingency plan as it relates to the entire storage operations, just not what my colleague is referring to, the direct answer is no. That is something that is currently being undertaken in regards to all of our operating plans for the pool. 887 I do want to comment this time, though, that a lot of the questions that we're talking about here that relate to environmental issues really require Mr. Wessenger's involvement as well. I know we put him forward as a witness in this proceeding. And I would love to be a little more accommodating in regards to providing you with expedient responses. But without him being here, there are some issues that we are uncomfortable addressing that are tied into the questions that you're asking. So I beg your indulgence on that. 888 MR. CHINNECK: If there were a catastrophic problem, or a problem other than just a problem arising from the drilling of the well, if it was a problem that related to the operations of the well or the reservoir or some of the equipment, like the pipeline, who would respond to an emergency call dealing with that? 889 MR. FISHER: Between now and the time the pool's operational, we will review existing personnel within Tribute as well as contact and try to identify people who are closer to the pool site to cut down on potential travel time, identify any experience gaps there might be, and then train as required. So it's possible it's existing personnel or someone closer to the site. 890 MR. CHINNECK: Well, where are these people that you would have -- where are they located now? 891 MR. FISHER: I believe -- and Kathy would be the best person to answer the current operations. But a person I'm going to hire, I can't know where they live now. 892 MR. CHINNECK: Right. So you don't have the person on board as yet. 893 MR. FISHER: No. 894 MR. CHINNECK: Right. 895 MR. LEWIS: Just so we're clear, and I'm having a hard time following this, are we talking about who would be contacted after the facility is up and running and pressured up? Or are we talking about who somebody would contact between the date an order is received and the point in time when the facility is ready to be pressured up? I'm just not clear on your question. And I don't mean to interrupt to be difficult, but I just wonder whether the witness is clear. 896 MR. CHINNECK: Well, I'm simply trying to understand what your plan is. And it sounds like your plan is to hire somebody at some point in time. You don't have anybody now who would deal with those matters other than a person that works for the applicant. 897 MS. McCONNELL: The current operation personnel are located in Bothwell, Ontario, at Eastern Oilfield Services Limited. 898 MR. CHINNECK: And how far is that from -- 899 MS. McCONNELL: Miles? 900 MR. CHINNECK: -- the DSA, approximately. 901 MS. McCONNELL: I don't know about the miles. I can tell -- 902 MR. FISHER: An hour's drive. 903 MR. CHINNECK: An hour's drive? 904 MR. FISHER: Hence the need to find someone closer. 905 MR. CHINNECK: All right. Can you provide us with assurances that you'll respond immediately to every landowner call? 906 MR. FISHER: Yes. 907 MR. CHINNECK: Can you -- if you look at the fourth paragraph of your contingency plan, you say that: 908 "If Tribute Resources Inc. causes the problem, they will initiate a remedial problem." 909 MS. McCONNELL: I'm sorry, I closed the book. Just a second. Sorry about that. 910 MR. CHINNECK: You don't really mean you're going to create another problem, do you? 911 MR. FISHER: Can you be more specific? Are you talking about drilling a well? Are you talking about putting a pipeline in? Are you talking about building a compressor? Are you talking about running a station after it's in a position to do so? 912 MR. CHINNECK: Mr. Fisher, I'm simply asking you about your plan. 913 MR. FISHER: I think that that plan, as indicated by Mr. Howard, is in relation to drilling a well, and that well has just about been completed except for the horizontal leg which we're waiting for the Board to say, Go ahead and drill. 914 MR. CHINNECK: But is that clear from the response -- 915 MS. McCONNELL: No, I'm sorry, that was a typo. It should have said "remedial plan" not "remedial problem." "Problem" should have stated "plan." 916 MR. CHINNECK: No, I realized that. I'll deal with Jamie's query. 917 My point, simply, is that you don't have a plan that's satisfactory to the farmers. And the questioning by my friend, Mr. Lewis, suggests that there should be a plan. And I'm simply wondering, now, if you'll agree with me, that it's difficult to establish who caused the problem. If it's a gas seepage problem into the water or the air or the houses, or if it's a brine problem into the water. Wouldn't you agree with me it would be difficult to establish who it was that caused that problem? 918 MR. FISHER: I think your question is a little vague in the sense that you were a minute ago talking about an operator on the site being there to respond immediately, and now you're talking about something that's occurred over a period of months in assessing where responsibility lies. I'm not clear on what you're asking, to be honest. 919 MR. LEWIS: Again, I don't want to be difficult, but it seems to me you've got to explain whether you're talking about a problem relating to production or the production phrase, or a problem relating to injection and storage operations if and when that ever proceeds. We might be mixing things up here. I just don't know whether you're talking production problems when you talk brine and so forth, or whether you're talking storage problems relating to the pressurization of this facility. 920 MR. CHINNECK: I'm interested in knowing if this plan is your only plan for dealing with any type of problem that deals with gas escape or brine escape resulting from operations. 921 MR. FISHER: It's my understanding, I explained earlier to Mr. Vegh, that we will submit a set of operating and maintenance manuals as well as a document referred to as an emergency response plan that will address issues such as that. 922 We've stated we'll do that already, in the future. 923 MR. CHINNECK: Thank you. Are you prepared to undertake to take responsibility for every water and gas issue in the DSA without proof of responsibility? And are you prepared to fix it at your expense? 924 DR. WALSH: No. 925 MR. CHINNECK: Why not? 926 DR. WALSH: Because unless it can be proven without a shadow of a doubt that we're responsible for it, we would not take responsibility. 927 MR. CHINNECK: So that means that if a farmer had a problem with gas escaping into his house, for example, there would be an issue, in your minds, about whether or not you're responsible for it? 928 DR. WALSH: There's a difference between responsibility for an action and attempting to remediate a problem. 929 Obviously, as our friends at Union Gas have done for many of the Ontario gas producers, there is always co-operation amongst parties regardless of who may be responsible for whatever has happened. And in this particular -- excuse me, may I finish? 930 MR. CHINNECK: Yes. 931 DR. WALSH: But in this particular case I'd like to point out that the difference between who is responsible for it and who might need to be involved in a remedial action are two distinct things. 932 Now, obviously, as operator of the pool, if we are told that there is a gas leak regardless of where it may be coming from, we will do our best to attempt to remediate that problem. But we would not be in a position to accept responsibility for the reason why that gas may be there. And I think I might also like to point out that it is not that difficult to determine if the reef gas is the gas in question. 933 Stantec, and again, I apologize, you probably should have requested that Mr. Wessenger be here for your -- for some of these questions, but -- and he could answer it better than I, but it is my understanding from his evidence that we will be undertaking a water-well monitoring program. We've done it -- monitored the wells before, during, and after construction. We've agreed to that, I believe, in response to one of the interrogatories. And we will be in a position to be able to determine if gas is found after the fact, to take a sample of that gas to determine if it is consistent with the gas that we're storing in our reef. And it's a very simple procedure. And we'll be in a position to quickly determine if, in fact, that aquifer is in communication with the storage field. 934 MR. CHINNECK: Okay. So if there's a leak of gas in a basement in the DSA, will you fix it? 935 DR. WALSH: We probably would, yes. 936 MR. CHINNECK: Right. And if there was a gas explosion in a house in the DSA, would you be responsible for replacing the house? 937 DR. WALSH: No. 938 MR. CHINNECK: If there were a problem -- 939 DR. WALSH: Excuse me. Let me clarify. No, if it was not our responsibility. We're not going to be showing up within an hour and being able to replace a house that's just exploded. But the fact is that, if we are at fault for anything that occurs as a result of our operation, we will be liable to replace whatever's been damaged, to remediate the situation. That's why I answered the way I did. 940 MR. CHINNECK: So, then, if a farmer's house blows up and you take the position that you're not responsible, then what happens to the farmer's house? Does it stay destroyed or does he have to fix it himself? 941 DR. WALSH: I think there are certain legal elements involved here that I am not qualified to discuss or talk about. But, again, if proof indicates that it is not our responsibility for the gas being there, and again, if the person has absolutely no source of gas whatsoever to his house, one would question, initially, our responsibility since we are the closest gas operation to this person's dwelling. 942 But I can't take a generic statement that you've just suggested without knowing the particulars. He may end up having propane gas tanks in the back of his house which were responsible for any explosion or any accident that takes place. I hope you understand that. 943 MR. CHINNECK: I understand what you've said. If there is a large problem in the DSA with water, will the farmers be put to a court action to enforce your rights -- enforce their rights as against you? 944 DR. WALSH: I can't respond to that question without discussing it with counsel. I mean, I don't know the legal implications of what we're referring to. 945 MR. CHINNECK: Well, for example, would you -- if you discovered that their concerns about the brine polluting the fresh water, if that were to happen, were accurate, would you undertake to build a municipal water system for them? 946 DR. WALSH: Well, the direct answer is no at this point, primarily because, and I think our response is clear on this in prior evidence, is that we would look at every solution to the problem, not just that particular problem. I know I've had discussions with municipal representatives in Clinton about how, generally speaking, the community is desirous of a water -- a municipal water pipeline, other than the wells that they use in and around Clinton. 947 But the fact of the matter is that we don't see it as a risk. Certainly not from the standpoint of brine contamination, and certainly not from the standpoint of hydrocarbon contamination. But, again, taking the position that anything can happen in this world, if we were at fault, we would look at every practical solution involved with providing a solution. And, in the end, it could very well be a pipeline but it could be something as simple as drilling a replacement water well to 300 feet. As long as, as you've just pointed out, the water being quite good, as long as it puts the landowner whole in regards to the quality of water that he's receiving. 948 MR. CHINNECK: Thank you. Now, what would your short-term plan be if there was a problem with water in two houses in the DSA? What would you do to -- how -- 949 MR. FISHER: I think we've agreed to document that in future. I consider this issue at rest, myself. I mean, we'll figure it out. 950 MR. CHINNECK: Well... 951 MS. LOWRIE: We have a plan. We install tanks at close locations to the well when we were drilling the well. There's no problem. We're through the fresh water zone, I... 952 DR. WALSH: I'm not familiar -- I'm not sure why two houses. 953 MS. LOWRIE: Why would you do it? 954 DR. WALSH: Perhaps you could be a little clearer in regards to your question. 955 MS. LOWRIE: Yeah. 956 MR. CHINNECK: It doesn't -- it could be any house in the DSA. But the water tanks you've got at the properties are with respect to the properties where there was drilling activities; correct? 957 MS. LOWRIE: Correct. 958 MR. CHINNECK: Right. And those tanks have now been decommissioned, they are disconnected; right? 959 MS. LOWRIE: We're through the zone. 960 MR. CHINNECK: Right. But if there were a problem that arose after the fact -- 961 MS. LOWRIE: After designation? After injection in. 962 MR. CHINNECK: Say after designation. At any time, what is your plan to deal with, with that water issue on a short-term basis? 963 MS. LOWRIE: Isn't that what you were asking for when you were asking for a study? 964 MR. CHINNECK: That's correct. 965 MS. LOWRIE: Isn't that the same thing as you were dealing with 20 minutes ago? 966 MR. CHINNECK: Right. It is. 967 MS. LOWRIE: Okay. 968 DR. WALSH: Well, I think as good corporate citizens, we probably would be in a position to help the landowner out as quickly as possible. I know I wouldn't want to be left without any fresh water. 969 MS. LOWRIE: I think that our conduct is -- 970 DR. WALSH: -- in the short term. However, once again, in the long term, there has to be some evidence that we're the people at fault. And I've said it clearly on the record that if we are the ones liable for that, then we would do what we could, from a practical standpoint, to get the water to the landowner. 971 MR. CHINNECK: Right. Would you agree with me that the only real solution to a pervasive problem with the water in this area would be to install a municipal water system? 972 DR. WALSH: No. I think the people who manage the water utility in Clinton are using a system they feel very comfortable with, which is drilled water wells. 973 MR. CHINNECK: But we're all on drilled water wells now in the DSA. 974 DR. WALSH: That's fine, and there's no evidence to suggest that they're not, at least not that I've been given. 975 MR. CHINNECK: Right. 976 DR. WALSH: And there's no evidence to suggest that that will be a problem in the future. And there is no evidence to suggest that, even if one well were to be contaminated, that you couldn't drill an alternative well into that fresh water zone to replace whatever damage had occurred in the first well. 977 MR. CHINNECK: All right. But I'm asking you, what would happen if all of the wells in the DSA were fouled by brine? 978 DR. WALSH: Well, it wouldn't matter whether it was brine -- if water wells are fouled, if all of the water wells, if the entire water aquifer, fresh-water aquifer in Huron County suddenly became damaged for whatever reason, then you'd have to find a practical alternative source from wherever, whether it's pipeline, whether it's large tanks and trucked water. I mean -- 979 MR. CHINNECK: Well, I'm asking you, in your opinion, what is the practical source in that scenario? 980 DR. WALSH: I'm telling you I can't answer that question because you're asking me to speculate about something that doesn't exist. 981 MR. CHINNECK: Okay. Are you prepared to post security to secure the farmers with respect to any problems that might arise as a result of your operations on the surface? 982 DR. WALSH: No. I think we're clear on the record that the answer's no. 983 MR. CHINNECK: All right. 984 Now, in a worst-case scenario, then, if you ruptured the well, the value of the well would presumably drop to zero or something close to that; right? 985 MR. FISHER: The value of the well? 986 MR. CHINNECK: Right. Not the well, the reservoir, pardon me. The reservoir. 987 DR. WALSH: Well, again, the value of the reservoir -- the reservoir will exist regardless of what happens to that well. I think -- again, perhaps you can rephrase your question. 988 MR. CHINNECK: All right. 989 DR. WALSH: And if I might help, I think you're referring to the value of the gas in the reservoir? 990 MR. CHINNECK: No, I'm actually referring to the value of the reservoir itself. 991 DR. WALSH: Well, no, then the answer to that is no. The well can be worked over and recompleted. And if it can't be recompleted, the standards are clear. As Mr. Gorman pointed out this morning, we would have to plug and abandon that well and obviously redrill a well if we felt that was required. 992 MR. CHINNECK: So now let's talk about -- thank you for your answer with respect to a well. I'd like to make the same inquiry with respect to the reservoir. 993 If it turns out that your activities result in a rupturing of the reservoir, that it no longer functions, presumably the value of that asset would decline significantly in value; is that a fair statement? 994 DR. WALSH: That's a fair statement. 995 MR. CHINNECK: All right. And if you were to pollute the waters that service the farmers and residents that live above the reservoir in the DSA, if you were to do that, would that not be the worst-case scenario? 996 DR. WALSH: Well, I gather in regards to the water quality issue, which is what you're discussing, I think the answer is yes, and that's the reason why we will carry insurance. 997 MR. CHINNECK: But that insurance won't deal with the water quality issue. 998 DR. WALSH: It becomes a function of definition in regards to what you're addressing. You're talking about an event that would have to be catastrophic in nature. What you're referring to is something that would be catastrophic in nature. 999 MR. CHINNECK: Right. 1000 DR. WALSH: And that type of catastrophe would be covered under the insurance from an operating standpoint. 1001 The only way that we would end up doing what you're suggesting is through some operation technique that we might employ, and we will be carrying operational insurance. Perhaps Mr. Fisher would add to that, or maybe I have sufficiently answered that question. 1002 MR. FISHER: I have nothing to add, no. 1003 MR. CHINNECK: Thank you. 1004 So, if there were a problem such as we've just outlined, do you think that Mr. Crich would be inclined to put more money into the business venture? 1005 DR. WALSH: I can't answer that question. 1006 MR. CHINNECK: Would you be, as an investor, Mr. Walsh? 1007 DR. WALSH: if the -- if there was a problem, would I be responsible -- that's why I pay insurance premiums, then. If I were an investor in this limited partnership, I obviously will be contributing funds that will cover the premiums paid under the insurance plan, so the answer is yes, I'm doing that. 1008 MR. CHINNECK: So you would actually invest in this venture, this business venture, if there was this type of catastrophe I've just spoken of? 1009 DR. WALSH: I'm saying that I would invest in a property knowing that the risk is there from an operational standpoint, and that is the reason why we have operational insurance. And as a result, I would be paying for that insurance through my premiums as a shareholder. 1010 MR. CHINNECK: I don't think you're answering the question, though, Mr. Walsh. 1011 DR. WALSH: Well, I don't think I understand, obviously, your question, so perhaps you could -- 1012 MR. CHINNECK: Well, the question is, if tomorrow we discovered that you had ruptured the reservoir and rendered it essentially useless, and the effects of your rupturing the reservoir was that it caused pathways, conduits to the water horizons and thereby damaged the water supply, effectively ruining it, would you be, at that point in time, interested in making further investment in the applicant? 1013 DR. WALSH: I would if my insurance is covering it. 1014 MR. CHINNECK: All right. Thank you. 1015 MS. LOWRIE: We have requested of our current insurers, AON Reed Stenhouse, who have our liability policy for the oil and gas operations, a policy to deal with storage operations. They tell us that they have other policies for other storage companies and we have requested a policy coverage similar to that, and that Mr. Fisher's currently evaluating that. Our intention is to have insurance consistent with other storage operators in the province. 1016 MR. CHINNECK: Right. But I think we've had a discussion with Mr. Fisher about whether or not that covers this type of loss, and I believe he said that it did not. 1017 MR. FISHER: Not currently. 1018 DR. WALSH: No, No, I'm sorry, I think you have to redefine what you're talking about. 1019 As I say, it's an operational issue. There is -- I don't think -- I think you're talking about pollution liability insurance. I mean, you're not clear in your question so it's difficult. You talk about environmental insurance. And my background in this -- in this area understands that there is something else called pollution liability insurance, and that's -- that's a matter where you have insurance to cover anything that is polluting as opposed to an operational catastrophe that might cause damage to third parties. 1020 MR. CHINNECK: All right. Are you telling me that you think you have insurance coverage if some operational activities result in damage to the water supply and damage to the reservoir? 1021 DR. WALSH: That's my understanding, yes. 1022 MR. CHINNECK: Thank you. 1023 Let's talk a moment about the two Imperial holes or wells that we talked about earlier. 1024 Mr. Walsh, I'm showing you your cross-section A to A prime. Imperial 397 is a dry hole but is it -- does it intersect the reservoir? 1025 DR. WALSH: No, it does not. 1026 MR. CHINNECK: It doesn't. Does it intersect the reef? 1027 DR. WALSH: Yes, it does. 1028 MR. CHINNECK: Yes. Imperial 368, a dry hole as well? 1029 DR. WALSH: Yes. 1030 MR. CHINNECK: Does it intersect the reservoir? 1031 DR. WALSH: No, it does not. 1032 MR. CHINNECK: But it intersects the reef? 1033 DR. WALSH: Yes, it does. 1034 MR. CHINNECK: Can you tell me what the contractual obligations are currently with respect to the residual gas in the contracts with the landowners? 1035 MR. JORDAN: The residual gas payment is set out in the application. I'm not sure if we referenced it earlier, but -- anyway, in the amending agreement and the offer of compensation, residual gas component -- 1036 MR. CHINNECK: I'm not speaking about the amending agreement. I'm speaking about the current situation with the landowners. They haven't signed the amending agreement; correct? 1037 MR. JORDAN: The TSLA member have not. 1038 MR. CHINNECK: That's right. 1039 MR. LEWIS: You're talking about the arrangements under the gas storage leases? 1040 MR. CHINNECK: Yes. 1041 MR. JORDAN: It would be -- I would just say, state 1. There's 12.5 percent of the gas in place shared on the area shown as the participating area under the unit agreements, at the wellhead price down to 50 pounds PSIA. Now, the south Tip. may be a six and a quarter percent split. The two pool versus a different rate in the contract, but we have offered them both for 12 and a half percent. 1042 MR. CHINNECK: All right. So I need a little bit of assistance in locating one of Mr. Walsh's diagrams. It is in -- it's the isopach -- 1043 DR. WALSH: Gross gas pay? 1044 MR. CHINNECK: I think that's the one. So I'm referring now to figure 10 revised, prepared by Dr. Walsh. 1045 MR. LEWIS: Just so we're clear for the record, would that be one of the figures that's in Exhibit E.1.5, the revised isopach? Or have I got it wrong? 1046 DR. WALSH: No, you have it wrong, Mr. Lewis. 1047 MR. LEWIS: Okay. 1048 DR. WALSH: It would be figure 10 revised, contained within the additional evidence. 1049 MR. LEWIS: In Exhibit E.1.4, at tab 1, figure 10. 1050 DR. WALSH: Yes. 1051 MR. LEWIS: Sorry to interrupt. 1052 DR. WALSH: It's the last map in that tab, buff tab 1. The last map. 1053 MR. CHINNECK: It is figure 10? 1054 DR. WALSH: It's figure 10 revised is the one. 1055 MR. CHINNECK: Let's go to the -- it's figure 10 but not the revised one. 1056 DR. WALSH: Correct. The original interpretation filed, pre-filed by the applicant. 1057 MR. CHINNECK: Right. What I'd like to understand is that the proposal that the applicants are making to the landowners now, the current landowners, would involve paying the residual gas to members of the existing units; is that correct? 1058 DR. WALSH: That's correct. 1059 MR. CHINNECK: Right. But it appears from the new geology that you have prepared, Mr. Walsh, that a portion of the reef resides outside of the unit area; correct? 1060 DR. WALSH: A portion of the reef exists? 1061 MR. CHINNECK: Of the reef, that's right. 1062 DR. WALSH: I'm sorry, I can't hear you when you're looking away. 1063 MR. CHINNECK: A portion of the reef resides out it was the unit area. 1064 DR. WALSH: That's correct. 1065 MR. CHINNECK: And that resides on the Vermue properties; right? 1066 DR. WALSH: Yes, the 3-D seismic interpretation that derived the outer boundary of the reef indicates that it does cross into the Vermue property. 1067 MR. CHINNECK: Right. And if you look at Exhibit E.1.4, figure 10, it appears that the isopach number 10 actually can be found on Mr. Vermue's property? 1068 DR. WALSH: That's what figure -- that original figure 10 indicates, yes. 1069 MR. CHINNECK: Right. And also that the isopach number 20 can be found on Mr. Vermue's property. 1070 DR. WALSH: That was the interpretation of Mr. Welychka, at that time, yes. 1071 MR. CHINNECK: Okay. And that would mean that, according to this interpretation, that there's actually gas on Mr. Vermue's property. 1072 DR. WALSH: That's according to his interpretation, that's correct. But it's wrong. 1073 MR. CHINNECK: You don't agree with his interpretation? 1074 DR. WALSH: No. That's the reason why I had to revise this and is the reason for figure 10 revised mind you. You will note that I have different gross gas paying numbers for the wells, as opposed to Mr. Welychka, who had derived his numbers from I'm not sure where, but certainly not from the same type of analysis that I understood took. 1075 You should be aware that each of the wells in that pool were analyzed by myself, the sample analysis, the geophysical well-log data, to determine appropriate gross gas-pay isopachs. And my evaluation was completely different than his, and my evidence stands to that effect. 1076 MR. CHINNECK: Okay. Thank you. So the landowners have indicated to me that they would be happy to distribute the residual gas amongst themselves based on the location of the reef as opposed to the interpretation of where the gas might be. Is that -- is that a way of distributing or sharing the residual gas payment? 1077 DR. WALSH: All right. When you refer to "landowners", do you refer to each and every landowner in the pool? 1078 MR. CHINNECK: I'm speaking of the members of the TSLA. 1079 DR. WALSH: Well, as I indicated yesterday in my evidence, it's just not an appropriate away of doing it unless you have 100 percent of all landowners agreeing. 1080 MR. CHINNECK: Right. But, but the Mandaumin case of this particular Board, I understand, provides for a precedent, essentially, for sharing residual gas on that basis, does it not? 1081 DR. WALSH: I'm not aware of the Mandaumin decision. 1082 MR. CHINNECK: All right. Thank you. 1083 Now, we've had some discussion about liability insurance. And I understand you don't have a policy as yet? 1084 MS. LOWRIE: Pardon? 1085 DR. WALSH: I'm not aware of a policy existing as of yet. 1086 MR. CHINNECK: Right. 1087 DR. WALSH: We put our request into the insurance company for quotations. 1088 MR. CHINNECK: All right. 1089 MS. LOWRIE: We have not yet started, started storage operations. So we would not have a policy in effect. We currently have an oil and gas liability policy in effect. 1090 MR. CHINNECK: Okay. Thank you. Will you undertake to name the farmers as named insureds under the policy of insurance? 1091 MS. LOWRIE: No. 1092 MR. CHINNECK: Now, at this point in time, you do not have any agreement of purchase and sale -- or lease with the TSLA landowners with respect to this amending agreement; is that correct? 1093 MR. LEWIS: Just so we're clear, are you talking about a gas storage lease or P&NG lease? 1094 MR. CHINNECK: I'm talking about the amending compensation agreement. 1095 MR. LEWIS: Which one? We've got two in evidence. 1096 MR. CHINNECK: You have no written compensation agreement with the TSLA landowners other than the existing older P&NG leases and gas storage leases. Is that correct? 1097 MR. JORDAN: That is correct. The amounts of the compensation are consistent with what Union Gas is currently paying, and those numbers were agreed on at clause number 7 of the amending agreement that was submitted the other day with the Brand agreements executed. 1098 MR. CHINNECK: Right. 1099 MR. JORDAN: Clause 7 with the TSLA was written to leave -- 1100 MR. LEWIS: If I can just interrupt, just so we again get the record straight. The Brand agreements were Exhibit 2.2 and 2.3; they're the signed ones. Exhibit 2.1 was the amending agreement that is underlined that is dated July 27th, 2004. Is that the one you're referring to, Mr. Jordan? 1101 MR. JORDAN: That was the one that TSLA was given last, on May 14th. 1102 MR. CHINNECK: Yeah. Now, again, I need some help with this. 1103 The location of the initial amending agreement that was delivered to the TSLA. Is that handy? 1104 MR. VEGH: I believe the original amending agreement is at Board Staff IR 108. 1105 MR. LEWIS: Thank you. 1106 MR. CHINNECK: Thank you. 1107 Is this the document that you say constitutes an offer to the landowners for compensation? 1108 MR. JORDAN: That was delivered to the landowners behind a cover letter, which are the numbers consistent with what Union Gas has offered at the request of the TSLA. 1109 MR. CHINNECK: Okay. But is this the document that you say is the offer that was submitted to the landowners that essentially puts the applicants in a position of forcing the compensation issues under section 17 of the -- of those leases? 1110 MR. JORDAN: It was delivered to the landowners on May 14th, that document. 1111 MR. CHINNECK: This is the one. Okay. So is the document dated? 1112 MR. JORDAN: It was behind a cover letter. 1113 MR. CHINNECK: All right. But it's not dated, though, is it? 1114 MR. LEWIS: Perhaps it might be instructive so that we can establish the date to get the cover letter on the record, I don't know. 1115 MR. CHINNECK: Well, can you tell me when it was sent? 1116 MR. JORDAN: I hand-delivered them on May 14th. 1117 MR. CHINNECK: All right. Thank you. But just -- it's a simple question. Was it dated? It doesn't appear to be dated to me. 1118 MR. JORDAN: The cover letter is dated May 11th, and I hand-delivered it on May 14th. 1119 MR. CHINNECK: Okay. Is it -- is it signed? 1120 MR. JORDAN: The one that was sent, no. 1121 MR. CHINNECK: Okay. So it wasn't signed. And does your copy have the word "DRAFT" written diagonally across the page -- 1122 MR. JORDAN: It does. 1123 MR. CHINNECK: -- like my copy does? All right. And the question, I think, again, was: Is this document what you're relying on to suggest that you're in a position, under section 17, to proceed with compensation adjustments? 1124 MR. JORDAN: Yes, it is, and the rates in there were agreed to. 1125 MS. LOWRIE: The covering letter was signed. That document was attached to the covering letter and sent out, as requested by the Landowners' Association, to be reviewed by them. Individual amending agreements would then be signed with individual landowners if it was acceptable to the Landowners' Association. 1126 MR. CHINNECK: So this wasn't, then -- well, did you only deliver one of these documents, then? Did you deliver one to each of the farmers that -- 1127 MR. JORDAN: Everybody was delivered that document. 1128 MR. CHINNECK: Okay. And everybody got a document that was unsigned? 1129 MR. JORDAN: That is correct. 1130 MR. CHINNECK: Okay. And everybody got a document that was undated? 1131 MR. JORDAN: It was behind a cover letter. 1132 MR. CHINNECK: Right. And that said it was a draft; right? 1133 MR. BETTS: Sorry, I should have caught this. Is this document a part of the record right now? 1134 MR. CHINNECK: Yes, it is, sir. 1135 MR. BETTS: And is the covering letter with that? 1136 MR. LEWIS: The covering letter is not with it, and I would suggest for clarity, since it's been referred to, that we perhaps make it part of the record. 1137 MR. BETTS: I think it's important to look at this as a package so we understand, in the direction that Mr. Chinneck is moving, what was delivered and when it was delivered. So perhaps if we can have that entered as an exhibit also. 1138 MS. LITT: Exhibit E.3.3, cover letter accompanying May amending agreement. 1139 MR. CHINNECK: May 11th amending agreement. 1140 MS. LITT: May 11th, 2004 amending agreement. 1141 EXHIBIT NO. E.3.3: COVER LETTER ACCOMPANYING MAY 11, 2004 AMENDING AGREEMENT 1142 MR. BETTS: Is that -- am I correct that there are not a lot of copies of that? 1143 MR. LEWIS: There's only one copy, and I think, until we get copies, we should maybe wait for questions. 1144 MR. BETTS: That's probably -- well, I think, let us proceed on that basis, even though -- 1145 MR. CHINNECK: I could ask some other questions about other matters. 1146 MR. BETTS: Okay, let's go on that, and we'll all have a copy of that as soon as possible. 1147 MR. CHINNECK: Now, Mr. Jordan, you're pretty familiar with documents agreeing -- dealing with the -- with land, are you not? 1148 MR. JORDAN: Any particular document you're referring to? 1149 MR. CHINNECK: Well, leases. 1150 MR. JORDAN: In general, sure. 1151 MR. CHINNECK: Right. Agreements of purchase and sale. 1152 MR. JORDAN: Purchase and sale of property as in real estate? 1153 MR. CHINNECK: Yes. 1154 MR. JORDAN: I don't sell real estate, sir. 1155 MR. CHINNECK: You don't sell real estate? Okay. 1156 Well, my understanding from the TSLA representative is that you forwarded the letter - it's dated May 11th - and that they, shortly thereafter, within a day or two, on May 20th, responded and told you that the document, the draft, wasn't acceptable; is that fair statement? 1157 MR. LEWIS: Just -- I was reading the transcript last night, and I believe the answer to this is already on the transcript. 1158 MR. CHINNECK: No. I just wanted to make sure that I'm on the same page with your witness. 1159 MR. JORDAN: May 20th? 1160 MR. CHINNECK: Right, May 20th? 1161 MR. JORDAN: Subject to check, okay. 1162 MR. CHINNECK: Right. So you heard from the landowners that the offer wasn't acceptable. And did they make a request for you to provide them with another offer or another document or another draft proposal? 1163 MR. JORDAN: Not being sure of those dates you reference, clause 7, which is the timing of the renewal or reflection of the compensation, was the only issue, not the rest of the document, as far as rates and prices. 1164 MR. CHINNECK: But -- okay. I just want to try and understand the sequencing of events. 1165 You sent them this letter with the draft on May 11th. They got back to you around the 20th and told you that it was not acceptable; please get back to us. Correct? 1166 MR. JORDAN: Subject to those dates, okay. 1167 MR. CHINNECK: Okay? And in the interim between May 20th and July 28th, there was some contacts with the members of the TSLA; correct? 1168 MR. JORDAN: Yes. We revised -- we discussed the term -- the wording of clause 7, and then Mr. Dutot was going to have a meeting with the rest of the group. 1169 MR. CHINNECK: Well, you had requests, did you not, from a number of the members of the TSLA that you would provide them with an amending document during that time frame, during that period between July 28th and May 20th? 1170 MR. JORDAN: The May 14th delivery of the draft went to all the landowners. Since then, any comment or amendment has been dealt with directly with Mr. Dutot. 1171 MR. CHINNECK: Okay. But were there any requests during that period for you to deliver to him, during that period or quickly, copies of your amending agreement? 1172 MR. JORDAN: We faxed up a revised copy of the clause 7. 1173 MR. CHINNECK: Okay. And when was that done? 1174 MR. JORDAN: Some of the dates I have are on July 28th, we faxed Mr. Dutot the draft amending agreement with revisions on it underlined, which was the Exhibit E.2.1. 1175 MR. CHINNECK: Okay. So, then, really, you didn't get a revised document back to them for approximately two and a half months -- May 20th, June 20th, July 20th's two months; Correct? 1176 MR. JORDAN: I'm not sure on the date of -- of when Mr. Dutot came back on that. 1177 MR. CHINNECK: Well, if you accept that he got back to you on the 20th, if you accept that he got back to you on the 20th and rejected the offer, and requested more documentation, then would it be fair to say that it was more than two months before you actually got him a revised draft of the agreement with his clause 7 in it? 1178 MR. LEWIS: I think he said, if I can just interject, subject to check, the May 20th date was a date that Mr. Dutot got back to him. So I don't know that we want to be assuming that that was the date when he hasn't had an opportunity to check. 1179 MR. CHINNECK: All right. Will you undertake to provide me with your evidence as to what date it was that Mr. Dutot got back to you and rejected your initial proposal? 1180 MR. JORDAN: I might not have that date. If Mr. Dutot has a record, that's fine. I'd like to bring it forward, though, to the next step, being, if we are doing clause 7, then the landowners has a meeting and we talked about the wording of clause 7 to revise it, would it be suitable with the landowner group. And it was ready to go, subject to check by TSLA counsel on the wording in hopes to have it turned around quickly to have it agreed on by TSLA in order to have all the amending agreements executed prior to this hearing. 1181 MR. CHINNECK: Right. 1182 MR. JORDAN: We haven't had -- that was delayed. 1183 MR. CHINNECK: Right. But for some reason or other you just didn't get back to him until the 20th, 28th of July? That's really the point I'm trying to make. 1184 MR. JORDAN: Fine. 1185 MR. CHINNECK: Yeah. You were on vacation? 1186 Now, just referring to the letter that accompanied the amending agreement, the draft amending agreement -- what exhibit is that, please? Exhibit E.3.3, you've advised them in the first paragraph that you are prepared to offer the rates to the Tipperary landowners and you have forward add draft amending agreement. This letter doesn't say that they're offering to lease or to amend the agreement on those terms, does it? 1187 MR. JORDAN: It says that: 1188 "We are pleased to advise you that we are prepared to offer these rates." 1189 So I would say that would be an offer. 1190 MR. CHINNECK: But what you've said in the next paragraph is you're just enclosing the draft amending agreement. 1191 MR. JORDAN: But the dollar numbers of the agreement were the numbers requested by TSLA. We're responding back to them, Yes, we will grant you the numbers you've requested, to match the Lambton group's. 1192 so we're saying yeah to their offer. They're the ones that requested these numbers. We're saying sure. 1193 MR. CHINNECK: All right. Thank you. 1194 Now, you've been operating a well on Dwayne Feddes' property; correct? 1195 MS. McCONNELL: Yes. 1196 MR. CHINNECK: Is that this property right here? 1197 MS. McCONNELL: Yes. There's actually two wells on Mr. Feddes' property. 1198 MR. CHINNECK: Right. And he's been at you to remove equipment, to clean up the spills and to give him a clean environmental report; correct? 1199 MS. McCONNELL: He has never approached us about a spill at a well. 1200 MR. CHINNECK: He hasn't requested that from you? 1201 MS. McCONNELL: Not from me, no. We don't have any written request from him in our files. 1202 MR. CHINNECK: To the knowledge of anybody on the Panel, has he made any request for an environmental cleanup of the spill on his property? 1203 MS. McCONNELL: In relation to the wells? 1204 MR. CHINNECK: Yes. 1205 MS. McCONNELL: Not to my knowledge. 1206 MR. JORDAN: Can you ask the question? 1207 MR. CHINNECK: I asked if Mr. Feddes, Dwayne Feddes, has made a request to anybody for a cleanup of the spills of oil on the property, and a request for a certificate of environmental clean health. 1208 MR. JORDAN: In a letter from -- to the Ontario Energy Board of May 20th, from TSLA, page 3, top question was to that nature. 1209 MR. CHINNECK: Right. 1210 MS. McCONNELL: But not with respect to the wells. That was with respect to the battery site. 1211 MR. CHINNECK: So there was a request, then, to clean up spills of oil near the battery site? 1212 MR. JORDAN: There was no comment of spills or anything like that. It says: 1213 "To provide Mr. Feddes with a letter from the Ministry of Environment that his land was inspected and is now free from any contamination from the former production procedures." 1214 MR. CHINNECK: Right. That was what he had requested? 1215 MR. JORDAN: That's in their letter, TSLA letter. 1216 MR. CHINNECK: Right. And has he received that? 1217 MR. JORDAN: The obligation under the lease is that when we decommission a site, parts of sites or whatever, that we clean them up as stated in the oil and gas leases. 1218 MR. CHINNECK: Right. But are you not required to comply with the environmental legislation as well? 1219 MR. LEWIS: Could you be more specific as to what environmental legislation you're referring to? 1220 MR. CHINNECK: The Environmental Protection Act. 1221 MR. LEWIS: What section? Like ... 1222 MR. CHINNECK: Well, are you not bound to clean up well sites to MOE standards and the MNR standards? 1223 MR. LEWIS: If you can identify for us where in the Environmental Protection Act there's a requirement to clear -- clean up oil and gas well sites, then perhaps we can -- I can take that to my client and we can advise you as to whether we're aware of that because I can tell you, I'm not aware of any such section in the EPA that deals with oil and gas well sites. 1224 MR. CHINNECK: Well, is your client aware of that? Any section of the EPA? 1225 DR. WALSH: All I can tell you, Mr. Chinneck, is that, as a matter of corporate policy, we will put the site back to its original condition, practically, once we've completed oil and gas production operations. 1226 MR. CHINNECK: Right. But are you not required by law to do that as well? 1227 DR. WALSH: Not that I am aware of. I mean, we have -- we basically have a lease with the landowner that stipulates that we have that responsibility for the cleanup. There are certain provisions, and Ms. McConnell can comment, perhaps, in the Oil and Gas Salt Resources Act and the standards and the operating asked that relate to operations. But nothing that you're referring to. 1228 MS. McCONNELL: You have to rehabilitate a site after you plug a well. 1229 MR. CHINNECK: Right. 1230 MS. McCONNELL: That's the standards. 1231 MR. CHINNECK: That's under the MNR legislation. But are you not also bound by the same rules that apply to spills of gasoline in gas stations in -- in, say, London? 1232 MR. JORDAN: Are you insinuating that there is an environmental spill that we have ongoing out there that hasn't been reported that we should be acting on? 1233 MR. CHINNECK: I'm asking you if you have ever been requested by Mr. Feddes to clean up oil spills on his property and whether or not you've done it? And I'm also asking you whether or not you have ever been requested by Mr. Feddes to clean up oil spills on his property and whether or not you've done it, and I'm also asking you whether or not you have given him a clearance certificate from a proper entity that the spill has been cleaned up as he's requested. 1234 MR. JORDAN: We don't have a spill. 1235 MS. LOWRIE: We don't have a spill. 1236 MR. CHINNECK: Say again? 1237 MS. LOWRIE: There's no spill. Where is the spill? 1238 MR. CHINNECK: Has he made a request? 1239 MS. LOWRIE: No. 1240 MR. JORDAN: The request is in the letter here. 1241 MR. CHINNECK: Correct. 1242 MS. LOWRIE: Mr. Feddes purchased a small piece of property from the township. It was regarding a road-widening, I believe. There was a tank battery that was sitting on that site that has been there -- was there when we purchased the property. I think the confusion is, was there a spill in 1970 or something, Mr. Jordan? 1243 MR. JORDAN: You know, maybe Mr. Dutot can help me on that. But if there was a historic spill from a prior operator, the way I have understood the story from a landowner, not Mr. Feddes, was that a certificate for that incident was issued and the site was dealt with at that time with due authorities. 1244 MR. CHINNECK: When was that, approximately? 1245 MR. JORDAN: Do you know that stuff, Rick? 1246 MR. LEWIS: You've got to either say "I don't know" or -- 1247 MR. JORDAN: Right. I'm used to talking to landowners, sorry, on a freely basis. 1248 DR. WALSH: Mr. Chinneck, I think we can probably settle this fairly quickly. 1249 If there are Ministry of Environment guidelines that apply to our oil and gas production operations, we will adhere to them. 1250 MS. LOWRIE: The normal procedure in the industry is, we operate under -- with MNR guidelines. If there is a spill, the MOE is notified, we file a report, and they will come in and investigate. It's only when there is a spill that -- 1251 MR. CHINNECK: That it happens, right. But the spill is any escape or -- of one of these contaminants; correct? 1252 MS. LOWRIE: Yes. 1253 MR. CHINNECK: Right. So, if there was a spill on your front yard by a third party and they caused oil to leak into your property, would that affect the value of your property, Jane? 1254 MS. LOWRIE: Yes. 1255 MR. BETTS: Mr. Chinneck, just -- I've got to get this straight in my mind. I haven't heard any of the panel identify a spill. Are you aware of a spill that you can identify to help them answer your questions? 1256 MR. CHINNECK: Well, yes, sir, I am. There was a spill, I understand -- 1257 MR. BETTS: Now, are you giving evidence at this point? 1258 MR. CHINNECK: No, I better not -- there is, yes. 1259 MR. BETTS: Is there evidence on the record that there has been a spill? The panel is unable to identify a spill, and we're kind of going around in a circle and I'm trying to cut across that circle. 1260 MR. CHINNECK: Let me just check with my client. Thank you. 1261 I understand there was a spill of oil on Mr. Feddes' property during the tenure of the applicants, and that's what is at issue. And I believe from my client that he filed documentation with respect to that, some of which are photographs of the spill. So I can perhaps produce that? 1262 MR. BETTS: Can you tell me who he filed it with and how it was filed? 1263 MR. CHINNECK: It's a letter dated July 19th, 2004 to the Board that -- he's got a notation that says it's the second evidence. 1264 MR. BETTS: Ms. Litt seems to have a identified a document that may be helpful, and I'm going to ask her if she can help us identify it. 1265 MR. CHINNECK: Thank you. Again, I apologize for not... 1266 MS. LITT: It's been correctly identified as the July 19th letter. There's a cover letter with a document called "TSLA number 7," dated April 24th, attached. "TSLA number 8," a photocopy of a newspaper article attached. "TSLA number 9," two photocopies from newspapers. And there are four pages of colour photographs attached, for a total of 15 photographs. 1267 In the exhibit list, it's been assigned evidence -- pardon me, Exhibit B3. 1268 MR. CHINNECK: Sorry? 1269 MS. LITT: Exhibit B3. 1270 MR. CHINNECK: B3, thank you. 1271 Are you familiar with the photographs on TSLA number 10 as part of that exhibit? 1272 MS. McCONNELL: I have seen the photographs, yes. 1273 MR. CHINNECK: You've seen the photographs. Do you recognize the location? 1274 MS. McCONNELL: I have no knowledge of when these pictures were taken. I assume that it's the one well on Mr. Feddes' property. 1275 MR. CHINNECK: Right. 1276 MS. McCONNELL: I did not take these photographs. 1277 MR. CHINNECK: No, I know you didn't. I'm just trying to assist you to identify the area that we're inquiring about now. 1278 MS. McCONNELL: I believe that it is one of the wells located on Mr. Feddes' property. 1279 MR. CHINNECK: So, the question for you, then, Katherine, is -- 1280 MS. McCONNELL: Just plain Kathy, thank you. 1281 MR. CHINNECK: Kathy, sorry, is, has anyone that is employed by the applicant or that is associated with them received a request from Mr. Dwayne Feddes to repair the spill and remove the equipment that is on his property? 1282 MS. McCONNELL: I have no knowledge of when this -- I have no knowledge of this. I know nothing about it. 1283 MR. CHINNECK: Okay. The top photograph is dated 2000. 1284 MS. McCONNELL: Okay. 1285 MR. CHINNECK: Is that of assistance to you? 1286 MS. McCONNELL: When in 2000? I'm sorry, I was not out on the site on that day. I cannot -- I do not have any knowledge of this. 1287 MR. CHINNECK: No, that's fine. Thank you. You can't speak to that issue, then. 1288 MS. McCONNELL: I cannot. 1289 MR. CHINNECK: Jane, I was asking you about -- 1290 MR. BETTS: Can I ask you to go to last names, please -- 1291 MR. CHINNECK: Pardon me, sir. 1292 MR. BETTS: -- so that everyone reading the record will know who we're talking about. 1293 MR. CHINNECK: Ms. Lowrie, I was asking you about the effects of a spill of oil on your property at home. Would you agree with me that that would have a deleterious effect on your property? 1294 MS. LOWRIE: Yes. 1295 MR. CHINNECK: Right. And would you agree with me that, if I had caused that spill on your property, that I should clean it up? 1296 MS. LOWRIE: Yes. 1297 MR. CHINNECK: Yes. 1298 MS. LOWRIE: And we do. 1299 MR. CHINNECK: Right. And would you agree with me that you would likely want some evidence that you could give to a third party who might want to buy your property that the spill had been cleaned up and there was no longer any contaminants on the property? 1300 MS. LOWRIE: Yes. 1301 MR. CHINNECK: Right. 1302 MS. LOWRIE: The common practice is to rehabilitate a site. And then, usually, if it's a landowner's property, there's a crop grown on the site and you review it annually and give land damages if compensation's required, if there's some damage. 1303 MR. CHINNECK: Right. But here, if Mr. Feddes requests that you remove the spill and provide him with a certificate from someone that's capable of giving a certificate that the spill has been cleaned up, would you give him that certificate? 1304 MS. LOWRIE: That spill was four years ago. It does not exist. It was -- it has been remedied -- 1305 MS. McCONNELL: We never received a request for crop damages from Mr. Feddes for that. 1306 MS. LOWRIE: I don't know when it occurred. And the property, quite frankly, was a mess when we acquired it. We acquired a number of properties from Paragon Petroleum and we re -- as I think I stated in my evidence, we're in the business of purchasing oil and gas properties. Some of them are in bad states of repair. The properties in Huron County were in a bad state of repair. They were not producing. 1307 We installed new production equipment, a new compressor, made them profitable, plugged two wells, or was it three, Ms. McConnell, in the field, which is always our -- the first thing we do is an evaluation of the property. Then we usually try to plug wells, you know, evaluate which wells have potential for oil and gas, which ones don't, plug any, and clean up the site. 1308 This site has been substantially cleaned up since we purchased it in 1998. I believe we went in in 1999 and cleaned quite a bit of the battery up, and did more -- well, ongoing. 1309 MR. CHINNECK: But you haven't given him a certificate from -- 1310 MS. LOWRIE: No. There's no requirement to give a certificate. 1311 MR. CHINNECK: So you're just not going to give it to him. 1312 MS. LOWRIE: That's correct. 1313 MR. CHINNECK: So if it turned out that I spilled oil on your property and I cleaned it up, and you still had a tainting of the property, you would be satisfied by me saying that I don't have to give it to you? 1314 MS. LOWRIE: We are still on the property. We are -- we are an ongoing operator of the property and deal with any -- any problems of that nature in our operations. 1315 MR. CHINNECK: Right. Well, that's interesting. Do you understand or do you know that the -- that that little narrow piece of property that is part of his property but that Mr. Jordan spoke about recently, that that is zoned commercial and not agricultural? Do you understand that? 1316 MS. LOWRIE: No, I did not. 1317 MR. CHINNECK: No? 1318 MS. LOWRIE: The Township property you're referring to? 1319 MR. CHINNECK: That's been conveyed to him. 1320 MS. LOWRIE: Yes. 1321 MR. CHINNECK: And I understand that that was as a result of the battery equipment that you folks are using on the property. 1322 MS. LOWRIE: I -- I have -- I don't know. That was -- the zoning would have been before we purchased it. The Township owned the property when we purchased that. 1323 MR. CHINNECK: Are you prepared to assist Mr. Feddes to have the zoning on that strip of land changed from commercial to agriculture? 1324 MS. LOWRIE: No. That would have been -- we offered to purchase the property from the Township at the time, and they offered it to Mr. Feddes instead, as the adjoining landowner. I would think that that should have been negotiated with the Township at the time he purchased it from the Township. 1325 MR. CHINNECK: So even though it was your use of that property, and even though it was your activity as an oil and gas operator, you don't feel that you have any responsibility to have the zoning changed to agriculture? 1326 MR. JORDAN: He bought the property with that already in place. 1327 MR. CHINNECK: So the answer's no? 1328 MS. LOWRIE: That is correct. 1329 MR. CHINNECK: Now, I understand you're decommissioning the battery that is on his property? 1330 MS. LOWRIE: We will when we -- when we go to storage. 1331 MR. CHINNECK: And -- 1332 MS. LOWRIE: If approval is granted. 1333 MR. CHINNECK: If approval's granted. Right. And if it's granted, are you -- are you planning on removing all of the existing works that you have placed on his property? 1334 MS. LOWRIE: Yes. Mr. Jordan? 1335 MR. JORDAN: Further to the same letter that we referred to earlier, there were a series of requests on the Feddes property. For example: A, to remove tanks; B, to abandon pipelines that -- at landowner's discretion; remove gravel driveways; restore the surface; abandon a well, and remove a powerline, a pole line that went to a well. And we have told Mr. Feddes that we would do all those as part of the decommissioning of the production operations, if designation's granted. 1336 MR. CHINNECK: Okay. And so you're undertaking to do that now, then? 1337 MR. JORDAN: We have already given that undertaking to him numerous times. 1338 MR. CHINNECK: All right. Thank you. 1339 MR. BETTS: Mr. Chinneck, if you could find an appropriate time to break, I think everyone could use a refreshment break. 1340 MR. CHINNECK: This would be a fine time, yes. 1341 MR. BETTS: This would be okay? I didn't want to interrupt your cross. 1342 MR. CHINNECK: No, that's okay. 1343 MR. BETTS: We will just take a short break, if we can. Let's try to be back here at about 3:10, please. 1344 --- Recess taken at 2:59 p.m. 1345 --- On resuming at 3:13 p.m. 1346 MR. BETTS: Thank you, everybody. Please be seated. Any preliminary items arising during that short break? 1347 Mr. Chinneck, please continue. 1348 MR. CHINNECK: Thank you, sir. I'd like to ask permission to just enter as an exhibit an extract from the OGSRA operating standards version 2. Can I do that? 1349 MR. BETTS: Yes. 1350 MR. CHINNECK: Thank you. What would the next exhibit number be? 1351 MS. LITT: 3.3. 1352 MR. LEWIS: I don't think so. 1353 MR. BETTS: Got to be more than that. 1354 MS. LITT: 3.4, pardon me. 1355 EXHIBIT NO. E.3.4: EXTRACT FROM THE OGSRA OPERATING STANDARDS VERSION 2 1356 MR. CHINNECK: I'll be directing this question to Kathy McConnell. 1357 Kathy, do you have a copy of that? 1358 MS. McCONNELL: I have a copy of the standards with me, Mr. Chinneck. 1359 MR. CHINNECK: Oh, great. And could you refer to operating standard 5.1.1. 1360 MS. McCONNELL: Yes. 1361 MR. CHINNECK: You see references in paragraph A to the Environmental Protection Act? 1362 MS. McCONNELL: Yes. In section a(iii) says: 1363 "Oil field fluid produced from a well is disposed of, placed in an MOE-approved waste disposal facility or otherwise handled and disposed of in accordance with the Environmental Protection Act." 1364 MR. CHINNECK: Right. And do you see in paragraph C it talks about the Environmental Protection Act again? 1365 MS. McCONNELL: Yes. 1366 MR. CHINNECK: Good. And are you aware, then, that your operations have to comply with the Environmental Protection Act as it pertains to these sections? 1367 MS. McCONNELL: As far as I'm aware. At any site that I've been out to. 1368 MR. CHINNECK: All right. Thank you. Now, there was -- I think Mr. Lewis referred to a well -- I think he was calling it "the injection well." I believe it's the well on Mr. McCulough's property; is that correct? 1369 MS. McCONNELL: Yes, the proposed injection well. 1370 MR. CHINNECK: A stereo answer there. Now, I understood that well was drilled to storage specifications? 1371 MS. McCONNELL: Yes. 1372 MR. CHINNECK: Was the permit that you obtained for a storage well or development well? 1373 MS. LOWRIE: A development well. 1374 MR. CHINNECK: It was for a development well? All right. But I understand that you're not supposed to drill storage wells unless you've got approval to do so. Did you have approval? 1375 MS. LOWRIE: We did not drill a storage well. That is -- it was drilled as a development well under the MNR regulations. I discussed this with the MNR, and our reasons were acceptable to them. With Mr. Rudi Rybanski, their engineer. 1376 MR. CHINNECK: But if you drill a development well, what's the purpose of a development well. 1377 MS. LOWRIE: To test the reef. 1378 MR. CHINNECK: Right, to discover, to explore for additional hydrocarbons? 1379 MS. LOWRIE: Yes. 1380 MR. CHINNECK: Right. But this well wasn't drilled into a producing portion of the reef, was it? 1381 DR. WALSH: Well, are you talking about the intent of the well or are you talking about the results of the well? 1382 MR. CHINNECK: The intent of the well. 1383 DR. WALSH: The intent of the well was to be drilled to test the centre of the reef, which means that the intent was, hopefully, to see if gas existed in the centre of the reef. 1384 MR. CHINNECK: And did you find there was some gas? 1385 DR. WALSH: Now you're talking about the results of that well? 1386 MR. CHINNECK: Yes. 1387 DR. WALSH: Well, we haven't completed the well yet. 1388 MR. CHINNECK: Oh. What depth are you at? 1389 DR. WALSH: I'm not sure. I know we're very near to the bottom, the last that I was informed. 1390 MR. CHINNECK: So approximately what depth, then, can you tell me that? 1391 DR. WALSH: I'm going to say about 640 metres. We've been involved in this hearing so I haven't had an opportunity to touch base with the operating personnel out there. 1392 MR. CHINNECK: Have you encountered any hydrocarbon products in that well? 1393 DR. WALSH: I am not aware of any -- I think there was a show, possibly, of gas, a small -- that had dissipated, so -- but higher up in the hole. So I don't know exactly where that was. 1394 MS. LOWRIE: We do not yet have results from any logging. I don't even know if they've logged it yet. They've been busy with the hearing. 1395 DR. WALSH: I'm sorry. In other words, I think we still have a little bit of work to do before we know what we have there. 1396 MR. CHINNECK: When did you start drilling the well? 1397 MS. McCONNELL: I believe it was toward the end of March or early April. I don't know the exact date, I'm sorry. 1398 MR. CHINNECK: And you're still not complete? 1399 MS. LOWRIE: That's correct. 1400 MR. CHINNECK: And you've been drilling continuously? 1401 MS. LOWRIE: Yes. Not on weekends. 1402 MR. CHINNECK: All right. So March, April, May, June, July; you've been drilling for five months? 1403 MS. LOWRIE: Yes. Four months. 1404 MR. CHINNECK: Four months? When did you start again? 1405 MS. LOWRIE: I think it was the end of March. 1406 MR. CHINNECK: End of March? 1407 MS. McCONNELL: End of March or early April. Sorry. 1408 MR. CHINNECK: Four months, all right. And how long does it normally take to drill a well to 640 metres? 1409 MS. McCONNELL: By what method? 1410 MR. CHINNECK: The method you're using. 1411 MS. McCONNELL: I've seen wells take six weeks and I've seen wells take five months. 1412 MR. CHINNECK: All right. Well, when you commenced drilling this well, how long did you expect that it would take? 1413 MS. McCONNELL: Four or five months. 1414 MR. CHINNECK: Really? 1415 MS. McCONNELL: Yes. 1416 MR. CHINNECK: All right. 1417 If I could direct you to an exhibit, I think I actually have the exhibit number for this one, exhibit number -- I believe it's E.1.8, Tribute application organizational chart, dated August 9th, 2004. And the applicants are Tribute Resources Inc. and Tipperary Gas Corporation; correct -- 1418 MS. LOWRIE: That's correct. 1419 MR. CHINNECK: Jane, or Ms. Lowrie? And both are for-profit corporations. They're profit corporations; right? They're looking to make money. 1420 MS. LOWRIE: Yes. 1421 MR. CHINNECK: Right. Neither of them is a utility. 1422 MS. LOWRIE: That is correct. 1423 MR. CHINNECK: And neither has access to a rate base like Union Gas does, if it runs into an expected -- an unexpected problem or liability. 1424 MS. LOWRIE: Yes. 1425 MR. CHINNECK: All right. Now, Tipperary Gas Corporation's the general partner of a limited partnership with limited partners; correct? 1426 MS. LOWRIE: Yes. 1427 MR. CHINNECK: Right. And this structure, essentially, allows the assets of the limited partners to not be exposed to the liabilities of the limited partnership. 1428 MR. LEWIS: Could you say at that again. 1429 MR. CHINNECK: This structure essentially allows the assets of the limited partners not to be exposed to the liabilities of the limited partnership. 1430 MS. LOWRIE: I believe that the limited partners -- my understanding is that the limited partners are only responsible to the amount of the capital accounts. I'd need a legal definition on that. That's my understanding. 1431 MR. CHINNECK: All right. So, then -- 1432 MS. LOWRIE: To the amount of their investment. 1433 MR. CHINNECK: Okay. So their exposure is limited to the amount of their investment, but they -- 1434 MS. LOWRIE: Unless they are involved in the management -- oh, sorry. 1435 MR. CHINNECK: Let me put it this way: The exposure of the limited partners is limited to the amount of their investment unless they're involved with the operational management of the limited partnership. 1436 MS. LOWRIE: That is correct. 1437 MR. CHINNECK: Okay, that's your understanding of it. So that means that Mr. Crich, for example, if he makes a $1.2 million investment as a limited partner, he would have no more exposure in above -- in excess of or above the $1.2 million he put into that limited partnership. 1438 MS. LOWRIE: That is correct. 1439 MR. CHINNECK: All right. So it's a structure that allows limited partners to cap their exposure to liability. 1440 MS. LOWRIE: Yes. 1441 MR. CHINNECK: All right. Okay. It also allows the limited partners to share in any losses that might arise from the operations. 1442 MS. LOWRIE: Yes. It has tax benefits. 1443 MR. CHINNECK: There's a flow-through benefit, is there not? 1444 MS. LOWRIE: Yes. 1445 MR. CHINNECK: Right. Now, if I could refer you to the letters that were submitted by Mr. Crich, or with respect to Mr. Crich. I believe it's 2.6 and 2.7. 1446 I believe that you agreed with my friend, Mr. Vegh, that the Exhibit 2.6, which is Mr. Crich's letter -- have you got a copy of that? 1447 MS. LOWRIE: No, but I remember what it says. 1448 MR. CHINNECK: And this letter doesn't represent a guarantee that he's going to support this the program. 1449 MS. LOWRIE: No, it states approximately what he has invested to date -- 1450 MR. CHINNECK: Right. 1451 MS. LOWRIE: -- at a more risky point in the project -- 1452 MR. CHINNECK: Right. 1453 MS. LOWRIE: -- than we currently are at. 1454 MR. CHINNECK: But you would agree that he doesn't have to commit any more monies to this project at any point in time if he decides that it's not needed. 1455 MS. LOWRIE: That is correct. But he will be offered the first right to contribute. 1456 MR. CHINNECK: Right. But if he doesn't contribute, then you won't have his money. 1457 MS. LOWRIE: That's correct. 1458 MR. CHINNECK: All right. 1459 Now, your financial statements for the applicants, do they budget any amount to pay for a municipal water system in the event of a catastrophic loss to the water table and the water system? 1460 MS. LOWRIE: No. 1461 MR. CHINNECK: Would Mr. Crich assist to obtain a bond or security for the posting of security for the landowners? 1462 MS. LOWRIE: No. As a responsible operator, we will have insurance. This protects us as well as the landowners. We will have a sizeable investment in the project, and do not wish to lose this investment, so would obtain sufficient insurance to cover what we consider to be risks. 1463 MR. CHINNECK: Right. 1464 Now, Mr. Crich is a fairly senior gentleman, is he not? 1465 MS. LOWRIE: Yes, he is. 1466 MR. CHINNECK: Right. And how old is he? 1467 MS. LOWRIE: He just had a 75th birthday. 1468 MR. CHINNECK: Okay. And so what were to happen if he were to die or become incapable with respect to his investments in the business? 1469 MS. LOWRIE: I really can't -- cannot answer that. He has two children currently working in the business. I assume, with his assets, that he's done proper tax-planning and estate... 1470 MR. CHINNECK: Thank you. 1471 You spoke of plugging as being part of your business. Yesterday, you mentioned it, and you also talked about it today. Have you ever been ordered to plug wells? 1472 MS. LOWRIE: Yes, we have. 1473 MR. CHINNECK: Okay. And how many have you been ordered to plug? 1474 MS. LOWRIE: I don't recall. I don't know. 1475 MR. CHINNECK: One or two? 1476 MS. LOWRIE: I believe we've had more orders than that on Lagasco. We purchased a company, I can't remember, maybe three years ago with about 100 wells. It was formerly owned by -- the production originated with Union Gas's -- Union Gas's Ontario production. It has a number of wells. We've evaluated them and are -- it is our plan and intent to plug approximately five wells a year. 1477 MR. CHINNECK: Okay. But the question really was, you know, how many have you been ordered to plug? 1478 MS. LOWRIE: I don't know. 1479 MR. CHINNECK: I'm just trying to get a sense. You've been in the oil and gas business for how long now, Jane, or Ms. Lowrie? 1480 MS. LOWRIE: I've been in the oil and gas business for over 20 years. 1481 MR. CHINNECK: All right. So during that time frame, how many times have you been ordered to plug wells by the Ministry? 1482 MS. LOWRIE: I don't know. We have 200 wells. We have never -- we have a well bond for the wells. We have never had them seize the well bond or do anything. There's sometimes -- if a well is suspended for a year, you may receive a plugging order on that well. There may be reasons other than -- there are a number of reasons wells can be suspended. 1483 MR. CHINNECK: Can you find out for me how many -- how many wells that you've been ordered to plug? 1484 MS. LOWRIE: I -- no, not really, because I -- do you mean me personally? My father's previous company, Lagasco? 1485 MR. CHINNECK: No, you or the companies that you've been involved with. 1486 MR. LEWIS: I am not sure where this is going, or what issues on the issues list this relates to, and I don't even know that if we were to agree to undertake to make those inquiries, whether the information is readily available. I'm not even sure what my friend's asking in terms of the scope of this inquiry. I'm beginning to wonder whether we're venturing forth on to matters that might be irrelevant to these proceedings or on the edge. 1487 MS. LOWRIE: I can answer a related question, like -- any -- any wells that we have been ordered to plug, we have plugged or posted additional security for. We have no outstanding orders to plug wells that have not been dealt with. If that helps at all. 1488 MR. CHINNECK: So you've plugged all the wells that you've been ordered to plug? 1489 MS. LOWRIE: Plugged or posted additional security, as required by the MNR. 1490 MR. CHINNECK: Well, go back to the question that I asked you. 1491 MS. LOWRIE: Mm-hm. 1492 MR. CHINNECK: Would you undertake to let me know how many wells you've been ordered to plug? 1493 MS. LOWRIE: No -- 1494 MR. BETTS: Actually, Mr. Lewis objected to that question. I'd be interested to your response to Mr. Lewis' objection. 1495 MR. CHINNECK: Well, sir, the applicants are seeking to have your authority to have a designated storage facility. And I think that it is relevant for your consideration that the track records of the applicants' senior staff be brought to your attention where it's relevant. And this line of inquiry is germane. There are landowners in other areas of the province where Ms. Lowrie has been operating that have had very serious issues with the way that the wells have been managed and one of the problems has been that there's been real difficulty in getting -- or other companies to plug the wells. 1496 MR. BETTS: Mr. Chinneck, I think perhaps the latter part of your point may be valid if there's examples where there's been problems that have not been rectified. I'm not sure that the question of how many wells have been plugged, since plugging wells seems to be a matter of almost normal course in the gas business, how that will lead you to your answer, other than provide a number. 1497 MR. CHINNECK: Well, it's -- it -- the number, sir -- well, in light of her answer that all of them have been plugged, I don't think that I need to pursue that inquiry. 1498 MR. BETTS: Very well. Thank you. Please continue. 1499 MR. CHINNECK: Now, Ms. Lowrie, would it be fair to say that the landowners in the zone have had issues with the way you've dealt with them and operated your wells in that area? 1500 MS. LOWRIE: I believe you were referring to Lagasco, which was previously owned by Peter Goot. This is -- and formerly Union Gas. This is the property -- the company I've spoke of that we purchased approximately three years ago. 1501 MR. CHINNECK: Right. 1502 MS. LOWRIE: The landowner complaints originated long before my time. We have been attempting to clean up the sites and plug wells and are plugging five wells a year in Lagasco. 1503 MR. CHINNECK: Right. The landowners had, in the zone area, they had serious issues, did they not, about the financial health of your company in that area? 1504 MS. LOWRIE: Yes, they did. As you know, you were -- you acted for the landowners, I believe, on a mining and lands commissioner -- commission hearing, the unitization hearing that we brought before the mining and lands commissioner, in which we were granted unitization. 1505 MR. CHINNECK: Right. The landowners had issues, did not, about the condition and safety of your operations? 1506 MS. LOWRIE: Yes, they did. 1507 MR. CHINNECK: Right. There were rusted pipes and there were pipes that were fixed with duct tape, were there not? 1508 MS. LOWRIE: I -- I'm not aware of the duct tape. 1509 MR. CHINNECK: There were blowouts on the lines that they were complaining about? 1510 MS. LOWRIE: No. There were issues with lines. Last summer we conducted pipeline survey of all Lagasco properties. As I've previously stated, we made a decision to purchase the property when Mr. Goot died. There are approximately 100 wells. It takes some time to evaluate these wells, determine which ones need to be plugged; which don't. We've changed the compression. We have had a leak detection survey of all of the pipelines. But the problem is, some of these wells, we own the Dawn number one pool, which was an original production pool, I think, in Ontario, of Union Gas, and the wells date back to the 1920s. 1511 MR. CHINNECK: Right, but people live in those vicinities, don't they? 1512 MS. LOWRIE: That is correct. 1513 MR. CHINNECK: And they deserve to be protected. 1514 MS. LOWRIE: That is correct. That's why our first -- when we purchase a property of that nature, the first thing that we do is evaluate the wells. 1515 MR. CHINNECK: Well, in this case, the first thing you did was to bring the unitization application, wasn't it? 1516 MS. LOWRIE: No. 1517 MR. CHINNECK: You evaluated the wells before the unitization application? 1518 MR. LEWIS: Mr. Chairman, again, I don't want to be difficult here, but I must object, and I'll tell you the reason I'm objecting. My friend, as already has been indicated, attended on that unitization application before the mining and lands commissioner. I happened to be counsel for Lagasco on that. All of these issues were canvassed before the mining and lands commissioner, and as the witness has said, the mining and lands commissioner, in light of all this evidence that Mr. Chinneck brought forward, granted the unitization in favour of Lagasco. 1519 I don't see the relevance of revisiting and reliving a unitization application that was brought before the mining and lands commissioner some months ago that resulted in a successful decision in favour of one of Ms. Lowrie's corporate entities. 1520 Again, I'm objecting on the basis of relevance. Where is this going? 1521 MR. CHINNECK: I'm finished with the line of questioning anyway, sir. 1522 MR. BETTS: Thank you. Sorry. You said you were... 1523 MR. CHINNECK: I'm finished with the line of questioning. 1524 MR. BETTS: Okay. 1525 MR. CHINNECK: Yeah. 1526 MR. BETTS: Thank you. So, are you -- you're not concluded with your cross, though? 1527 MR. CHINNECK: No, not yet, sir. 1528 MR. BETTS: Please proceed. 1529 MR. CHINNECK: Thank you. 1530 MR. BETTS: Mr. Chinneck, I'm making the assumption that you're just checking to make sure you've asked all your questions. 1531 MR. CHINNECK: That's correct, sir. 1532 MR. BETTS: Thank you. 1533 MR. CHINNECK: I haven't gone to sleep yet. 1534 Now, Mr. Fisher, you had indicated in the examination yesterday that you have a group of investors that are putting their capital at risk in this undertaking. And you indicated that you wanted to capture the full value of those assets by getting firm contracts for supply and delivery of gas. You also indicated that they could suffer extreme financial consequences in the operation of the business, these investors, and that your business was underpinning the contractual obligations that you have. 1535 Would you agree with me that the same philosophy would extend or should extend to the farmers that own properties above the reservoir in the DSA? 1536 MR. FISHER: Would I agree that sound business practices should be used by farmers? 1537 MR. CHINNECK: Yeah, well -- 1538 MR. FISHER: Is that your question? 1539 MR. CHINNECK: No, my question was what my question was. 1540 MR. FISHER: I'm trying to understand it. 1541 MR. CHINNECK: Do you agree with the philosophy that your statements about your investors and your business, that those philosophies and statements would apply to farmers? 1542 MR. FISHER: Yes. 1543 MR. CHINNECK: Right. Good. I didn't think that was a difficult one. 1544 And you also made a comment when you were talking about the exfranchise -- just after you were speaking about the term "exfranchise," you made the comment that you were looking for the Board's direction, you would not care if -- as long as credits were in place. I think you were talking about sort of dealing with third parties. As long as the credits were in place, then you wouldn't have a problem, you know, doing the transaction. Do you remember making that statement? 1545 MR. FISHER: Yes. 1546 MR. CHINNECK: Yeah, all right. And would you agree with me that that would make good sense for farmers, too; that they should deal with people as long as the credits are in place? 1547 MR. FISHER: Yes. 1548 MR. CHINNECK: Good. And the idea I'm getting at there, of course, is, would you agree with me that it makes sense for them to be interested in being sure that the operators will have the financial means to effect remedial work if that becomes a problem down the road? 1549 MR. FISHER: I think it makes sense to look at the potential risks in the study that you identified earlier, and if there are recommendations in that study that identify risks that could have large financial implications, I would expect the farmers to ensure they can be carried out. That makes sense, yes. 1550 MR. CHINNECK: Okay, yeah. So if you were going to do a trade with somebody for a big volume of gas, you want to make sure you're going to get paid, you want to make sure the credit is available so that once you deliver the gas, you get paid. 1551 MR. FISHER: I don't mess with that. 1552 MR. CHINNECK: No, that's right, you don't mess with that. 1553 MR. FISHER: Absolutely. 1554 MR. CHINNECK: Right. So then my question is: It makes sense, doesn't it, that the farmers wouldn't mess with that when it comes to making sure that the people that are going to go into their lands and, potentially, affect their livelihood, their businesses, that they should make sure that there's a credit there to look after fixing the problem if you folks go down the drain. 1555 MR. FISHER: I believe they're being wise, yes. 1556 MR. CHINNECK: Right. All right. 1557 Mr. Jordan, Mrs. Guindon, have you been able to sort of make any inquiries about -- about her lease situation? 1558 MR. LEWIS: We have an undertaking on that, and we will answer that as soon as we have all the facts ready. 1559 MR. CHINNECK: All right. 1560 MR. LEWIS: I don't know -- no, we're not ready now, but we will -- we will get back to you. 1561 MR. CHINNECK: All right. That's fine. Would you be able to give me an undertaking as well to provide me with details of payments to her of rents since she acquired the property in 1980? 1562 MR. LEWIS: Um... 1563 MS. LOWRIE: No. We purchased the property subsequent to that date. 1564 MR. SOMMERVILLE: Mr. Chinneck, could I ask a question? Do you act for Mrs. Guindon? Is she a member of the Association? 1565 MR. CHINNECK: I believe that she's not. 1566 MR. SOMMERVILLE: Okay. 1567 MR. BETTS: Is someone looking to me for an answer here or...? 1568 MR. CHINNECK: No. I just asked for an undertaking. I'm not sure if I received an answer. 1569 MR. LEWIS: I think you got -- my client's answer, I think, was no. 1570 MR. CHINNECK: Okay. Those are my questions. 1571 MR. BETTS: Thank you very much. 1572 MR. CHINNECK: Thank you. 1573 MR. BETTS: Ms. Paulus, I think we have about 15 minutes, and as it is, I think it's probably important to make as much use of our time as possible. Does it make sense for you to begin your cross for the next 15 minutes? 1574 MS. PAULUS: I guess "sense" is a relative thing. It will take a couple of minutes for us to move positions, so I leave it in your hands. I'm agreeable to commencing either now or commencing tomorrow morning. 1575 MR. BETTS: Well, I think for 15 minutes, let's commence now. 1576 It's not mandatory that you sit in that seat, by the way. I see you're set up there, your microphone works from there. I appreciate you would be looking at the backs of the witnesses, and that -- and I think we better move you, actually. I already see the problem. The problem will be, the witnesses will look at you and then I won't hear them, so we'll ask you to move over there. 1577 MS. PAULUS: No problem. 1578 MR. BETTS: Please. 1579 MR. LEWIS: I don't know whether it would be appropriate to make this request now, Mr. Chairman. I don't know how long Ms. Paulus intends to be, but it would certainly be helpful to me, if she doesn't intend to be too long and if the Panel was prepared to sit a few minutes longer, that she finish her cross so that tonight my witnesses aren't under oath and I can begin to prepare cross-examinations tomorrow. Again, we could hear from her as to how long she thinks she might be, and I'm not trying to inconvenience anyone, but I don't know if the Panel might be prepared to sit a few extra minutes to possibly get this cross-examination finished. 1580 MR. BETTS: I'm certainly prepared to ask Ms. Paulus that question. 1581 Have you any idea how long you'll be in cross? 1582 MS. PAULUS: I think the question will really be determined by how long and how straightforward the answers are from the panel themselves. I would hope that I could complete everything well within an hour. 1583 Having said that, I -- just looking around the room and the fatigue factor, I would prefer to ask questions at a time when people are receptive to answering and everyone's bright. So if we were to commit to continue, I think a break would be appropriate, at least. 1584 MR. BETTS: I'll just confer with our Panel for a moment. 1585 [The Board confers] 1586 MR. BETTS: I think -- well, the Panel feels as though it may go too late tonight, based on commitments that have been made at this end, as well, so unfortunately, Mr. Lewis, we won't be able to help out with that. And we will stick with our schedule to try and finish as close to 4 o'clock as possible, Ms. Paulus. 1587 MS. PAULUS: Thank you. 1588 CROSS-EXAMINATION BY MS. PAULUS: 1589 MS. PAULUS: If it's appropriate, while we're dealing with scheduling matters, to ask the panel to refer to their schedule that pertains to their project. And give me a moment, I'll give you the reference number. 1590 I believe your timetable schedule was submitted in response to an interrogatory of Northern Cross, it was Interrogatory No. 1, and I believe it's located under tab 6, your materials. 1591 Do you have that in front of you now? All right. That schedule was prepared or dated May 2nd of this year. I ask you to review that schedule for me, please, and then let us know whether there are any changes in the schedule. And to assist us in staying organized, I'd ask you to provide your response in the same order that the items are listed on the schedule. 1592 MR. GORMAN: Well, I haven't had a chance to revisit this schedule since the last revision, so I'll -- 1593 MS. PAULUS: Perhaps you're not the appropriate person, then, to answer the question. I would anticipate that there are at least some items on this schedule that your panel should be aware of, starting with regulatory and legal matters 1594 MR. GORMAN: Yes. Well, I can go through the items one by one here, and then we can pick them off, I guess. 1595 MR. FISHER: And as backup, I have reviewed it and am very familiar with Gantt chart project management techniques. 1596 MS. PAULUS: Why doesn't the panel take a moment, and then let us know who is in a position to answer the question. 1597 MR. BETTS: Ms. Paulus, would it be helpful, rather than going through this step by step, simply to ask them to undertake to update this chart? 1598 MS. PAULUS: I would prefer to have an answer on the record at this time, since I think we may be in the position of having to complete our cross-examination, and I'm not sure how I'm going to be able to complete it if I just have responses to undertakings, and then we're back to asking to sit again and cross-examine on the responses to the undertakings. 1599 MR. BETTS: Very well. 1600 MR. LEWIS: Can I just -- 1601 MS. LOWRIE: Can I just say something? Yesterday, I referred to a timely decision by the Board. If we receive a decision by September 1st, it significantly alters the schedule. So that's our difficulty from this end. Do you want us to speak to it as if we do receive a decision September 1st? Because we were going to try to see if we could get the pipeline put in this fall, and the well. 1602 If there's -- if there's a delay, it would mean spring construction, and summer construction for the pipeline. 1603 MS. PAULUS: There are many items on your schedule that indicate commencement dates prior to today's date and so I'm most interested in knowing whether you're on track for those. 1604 MS. LOWRIE: Mr. Fisher? 1605 MS. PAULUS: So I really would ask if you would look at your own schedule and let us know where you're at. 1606 MS. LOWRIE: Okay. 1607 MR. FISHER: We are -- we haven't commenced with anything requiring capital commitment to this point beyond studies and investments and getting designation. 1608 MS. PAULUS: I'm sorry, I couldn't hear the last part of your answer. 1609 MR. FISHER: The majority of the capital has been spent on getting designation. What I mean by that, the major items: Pipe, compressor, dehydrator; we haven't ordered yet. Also the engineering study, we haven't committed any dollars to nuts and bolts, details of the design yet. So that has been delayed. 1610 MS. PAULUS: So, looking at your chart, then, it appears to me it would be fair to say that with respect to regulatory and legal matters, you have been proceeding according to the schedule more or less? 1611 MR. FISHER: Yes. 1612 MS. PAULUS: We are sitting here. Then, looking down from there at drilling the vertical well, which was scheduled to start beginning of April. 1613 MR. FISHER: Yes. 1614 MS. PAULUS: Yes, that would be you're on track to have it completed at the end of June or yes, what? 1615 MS. LOWRIE: It will be completed within several weeks. 1616 MS. PAULUS: So in response to the question of whether you're on track according to the schedule that you've delivered, the schedule indicates that you would be completed with drilling that well at the end of June. The answer would be... 1617 MR. FISHER: It's irrelevant to me as project manager when it's completed. It's not a critical path item and it's not -- 1618 MS. PAULUS: I appreciate it may not be relevant to you, but I'm the one asking the question, so -- 1619 MR. FISHER: Well, okay, if it's not completed, I'll colour it in then. 1620 MS. LOWRIE: End of August. 1621 MS. PAULUS: Thank you. 1622 And then the next item on site restoration and the gathering system? 1623 MR. FISHER: Yes. 1624 MS. PAULUS: Yes, you're on track? 1625 MR. FISHER: I've asked for a more current one. I was looking at an older copy. 1626 MS. PAULUS: I'm sorry, could you please speak into the mike? 1627 MR. FISHER: I have now a current copy, and I'm not sure I understand your question. Looking at the schedule, it doesn't show anything. Starting November, for the gathering system. Starting in the end of September for the site restoration. 1628 MS. PAULUS: Excuse me. First, to make sure we're all on the same page, when you say you now have a current copy, is that the same copy that I have that you prepared and submitted in response to interrogatory? 1629 MR. FISHER: May 30 is the date I have at the bottom. 1630 MS. PAULUS: Great. Thank you. When I ask you if you're on track, I take it that there would be work that has to be done preparatory to taking these steps, so I'm asking you whether you now believe that you're on track to complete these steps as indicated on the schedule. 1631 So if you're scheduled to do something like site restoration at the beginning of October, is it your belief that you will be doing that in October or has something occurred that has changed your schedule? I think it's a fair question. 1632 MR. FISHER: Sure. I'll address it. That item is contingent on a horizontal well being drilled. 1633 MS. PAULUS: Right. 1634 MR. FISHER: And we show that item being the beginning of September. And based on a decision by the Board, if we are able to spend capital by the beginning of September, yes, the well would commence in that time frame; yes, the site restoration would proceed accordingly. 1635 MS. PAULUS: So, even though you said it's contingent upon the well being drilled, the fact that you've had a delay in the anticipated time for completing the well, you don't anticipate impacting those items? Is that what I understand? You know, often a delay in one thing pushes out your whole schedule; right? And so I'm trying to ascertain whether you believe -- 1636 MR. FISHER: I don't anticipate a material impact on anything we're doing with respect to the grander project, be it a move one way forward or backward, with respect to these items you're discussing. They -- from my -- in my opinion, are on track, period. 1637 MS. PAULUS: And so, could you please explain for us what you mean by assuming you're able to spend capital? Do you need to raise that capital? 1638 MR. FISHER: I -- we can't buy a compressor and pipe for a storage pool until we have designation to build a storage pool. It would be foolhardy for us to do that. 1639 MS. PAULUS: And what is the delivery expectations on those pieces of equipment? 1640 MR. FISHER: It moves around four to six months. Things in Calgary are busy, so from the time the -- 1641 MS. PAULUS: I recognize that. 1642 MR. FISHER: -- schedule was put together early in -- earlier, May. It's probably gone up by a month or two, the delivery for a compressor. Could be six to eight months now. 1643 MS. PAULUS: So, to understand, when you say, being prudent or cautious, you wouldn't have ordered the equipment until you have the approvals, so I understand, then, this equipment has not been ordered? 1644 MR. FISHER: Yes. Because we're prudent, we didn't order it. 1645 MS. PAULUS: And you would order this after you received the approval and after you had a funding commitment? 1646 MR. FISHER: Yes. 1647 MS. PAULUS: And do you have a funding commitment now? 1648 MS. LOWRIE: Yes. 1649 MS. PAULUS: And where is that funding commitment? 1650 MS. LOWRIE: Mr. Crich, as stated in his letters. 1651 MS. PAULUS: And I thought I understood that we all agreed that that wasn't a commitment. That was a statement of what he has done in the past and the hope to participate in the future? 1652 MS. LOWRIE: I have been dealing with him since 1989 as a partner. He has never committed to something that he hasn't followed through on. 1653 MS. PAULUS: I recognize that he may have a very good reputation, and you may have a very good relationship with him, but business is business, and I must say we -- 1654 MS. LOWRIE: Absolutely. I've had other people inquire as well about the project. I have other sources of financing. But he will be offered the project first. 1655 MS. PAULUS: He will be offered it. But you would -- 1656 MS. LOWRIE: I'm not worried about the financing. If I were, I would not have brought the application. 1657 MS. PAULUS: I appreciate that you're not worried, but of course we all have our own -- our own standards and the expectation that business is conducted a certain way. 1658 And so I'm asking whether, when you say you haven't made any financial -- you haven't made any commitment to spend capital, and you wouldn't make it until you have the approval, and then we're talking about scheduling and how this would proceed, I'm asking what that financial wherewithal would be. And I think what I've heard is that what you're relying on is a good-faith expectation that Mr. Crich would continue to fund and that this wouldn't take any inappropriately long time; is that a fair statement? 1659 MS. LOWRIE: That's a fair statement. I have the funds -- 1660 MS. PAULUS: Thank you. 1661 MS. LOWRIE: -- to meet my current commitments, which is all that is necessary at this point in time. 1662 MS. PAULUS: But the current commitments don't include the commitments for the capital expenditures that will be required for this project. 1663 MS. LOWRIE: No, I don't have cash in the bank for that. 1664 MS. PAULUS: Thank you. 1665 You talked about the time that would be required for the compressor. Are there other types of equipment that would also have to be ordered? 1666 MR. FISHER: A dehydrator and the pipe can have a long lead time, too. 1667 MS. PAULUS: I'm sorry, I can't hear the ends of your answers, only the beginnings. 1668 MR. FISHER: There's a piece of equipment called a dehydrator. 1669 MS. PAULUS: Yes. 1670 MR. FISHER: And there is a pipeline that requires a pipe. Those two items have longer lead times, too, for delivery. 1671 MS. PAULUS: And when you say longer, do you mean -- longer than what? 1672 MR. FISHER: Than most other pieces of equipment on the site. 1673 MS. PAULUS: And again, because we may not all have the same ideas of what a long time is, or longer is, can you be more precise? Are you talking about -- 1674 MR. FISHER: Well, a valve I can go and buy tomorrow, and a piece of pipe often takes eight to ten weeks. 1675 MS. PAULUS: So eight to ten weeks is what you expect. 1676 And are you planning to build the pipeline yourselves, or will it be a turnkey kind of contract? What's your expectation and what's your plan? 1677 MR. FISHER: We'll buy the pipe and hire a construction outfit to install it. And we'll also have some inspection personnel in place to ensure that we are building it per standards and that the codes are met. 1678 The compressor will have a station around it. That station, we're talking to engineering firms in Calgary. I've hired several of them in the past, so I have experience at this. And it will be a hybrid. I'll be doing a lot of the work and the consulting firms will help us. 1679 MS. PAULUS: So you'll more or less act as project operator or contractor and not have an independent contractor -- 1680 MR. FISHER: Project manager, I guess, would be the term I'd use. 1681 MS. PAULUS: Thank you. 1682 MR. FISHER: And then after the design package is put together, we're then in the position for the station to get a contractor to build it. 1683 MS. PAULUS: So would he be taking bids on the contract or...? 1684 MR. FISHER: For the construction of the compressor station? 1685 MS. PAULUS: Either the construction of the compressor station or the pipeline. 1686 MR. FISHER: Yes. 1687 MS. PAULUS: And how long do you think the bid process will take? 1688 MR. FISHER: A couple weeks, maybe. 1689 MS. PAULUS: Okay. So the anticipated bid process first, and then ordering the equipment? 1690 MR. FISHER: I think we can order the equipment the same time we put a bid out. I think if it takes four to six weeks to get the pipe, in that period of time we can find a contractor and do all the stuff in between. Eight to ten, I mean, it changes. It's a moving number right now due to the high commodity prices in Alberta. 1691 MS. PAULUS: Exactly, which is why, you can appreciate, I'm asking you about whether the schedule has been moving, because certainly that's our experience in Alberta, that things are taking longer than they had in the past. 1692 MR. FISHER: My brother is a foreman at a compressor shop so I keep in touch with him on a pretty regular basis as to what the backlogs are like, et cetera. 1693 MS. PAULUS: Do you have anything else to add to the scheduling? 1694 MR. FISHER: I think schedules are kind of like cooking instructions. They're there to help you get a good dinner together, but at the end of the day, after a couple of beers, you know, you're putting a bit too much sauce in sometimes but it still comes out tasting good, okay? 1695 So we want to get the gas in at the beginning of August. And we know we're not going to fill the pool all the way up, we're going to pause when we get to the old reservoir pressure. And with that, I'm comfortable we have the time to meet what we've stated we will do. 1696 MS. PAULUS: But, like you say, it's not a perfect recipe, and might have to move a little... 1697 MR. FISHER: Couple beers, yeah. 1698 MS. PAULUS: With the discussion of beers, this may be an appropriate time to break. 1699 MR. BETTS: What is the connection here? I won't pursue that. 1700 Thank you. It is time to break. I appreciate you helping us by taking at least a few minutes to begin your cross. 1701 With that, we will move on that offer and adjourn for today, and we will reconvene tomorrow morning at 9:30 and continue cross-examination from Ms. Paulus. Thank you very much. Good night. 1702 --- Whereupon the hearing adjourned at 4:07 p.m.