Rep: OEB Doc: 13894 Rev: 0 ONTARIO ENERGY BOARD Volume: 5 13 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 Friday, 13 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 13 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. JED 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 JUG MANOCHA Ministry of Natural Resources 8 TABLE OF CONTENTS 9 PRELIMINARY MATTERS: [22] TIPPERARY STORAGE LANDOWNERS' ASSOCIATION - PANEL 1; CONTINUED - A. FEDDES, F. DUTOT, C. DUTOT: [32] CONTINUED EXAMINATION BY MR. CHINNECK: [36] CROSS-EXAMINATION BY MR. VEGH: [172] CROSS-EXAMINATION BY MR. LEWIS: [513] RE-EXAMINATION BY MR. CHINNECK: [755] QUESTIONS FROM THE BOARD: [852] PRELIMINARY MATTERS: [917] NORTHERN CROSS ENERGY PANEL 1 - THOMPSON: [953] EXAMINATION BY MS. PAULUS: [958] CROSS-EXAMINATION BY MR. VEGH: [1035] CROSS-EXAMINATION BY MR. LESLIE: [1085] CROSS-EXAMINATION BY MR. LEWIS: [1193] RE-EXAMINATION BY MS. PAULUS: [1222] QUESTIONS FROM THE BOARD: [1238] PRELIMINARY MATTERS: [1268] MINISTRY OF NATURAL RESOURCES PANEL 1 - MANOCHA: [1278] EXAMINATION BY MR. MANOCHA: [1288] CROSS-EXAMINATION BY MR. VEGH: [1309] CROSS-EXAMINATION BY MR. CHINNECK: [1467] CROSS-EXAMINATION BY MR. LEWIS: [1525] QUESTIONS FROM THE BOARD: [1595] PROCEDURAL MATTERS: [1642] 10 EXHIBITS 11 EXHIBIT NO. E.5.1: AMENDING AGREEMENT DATED AUGUST 10, 2004 [685] EXHIBIT NO. E.5.2: SECTION 5 OF OIL AND GAS SALT RESOURCES OF ONTARIO DOCUMENT [1274] 12 UNDERTAKINGS 13 UNDERTAKING NO. F.5.1: TO CONFIRM WHETHER THE ALLOCATION OF RESIDUAL GAS COMPENSATION AMONG LANDOWNERS AS PROPOSED IN SECTION 1 OF EXHIBIT E.2.1 IS THE SAME AS THE ALLOCATION AMONG LANDOWNERS THAT IS AGREED TO IN THE OIL AND GAS LEASES [323] 14 --- Upon commencing at 9:36 a.m. 15 MR. BETTS: Good morning, everybody. 16 Today we are sitting in day 5 of the application -- or the hearing of application RP-2003-0253. Yesterday we were in the process of hearing the TSLA witness panel leading evidence, and we will continue with that this morning. 17 I do have a couple of announcements before I ask for preliminary matters. 18 First of all, the Board has recognized that we will not be concluding this hearing as quickly or as we had perhaps expected it might be done, and that's fine. 19 Due to personal constraints of the Panel, we will not be able to sit on this hearing beyond Tuesday, so our proposal is to change our thinking in terms of arguments or submissions. We will not be expecting oral arguments; we will be asking for written arguments instead. That will allow us to manage the evidentiary portion on Monday and Tuesday and complete it by then, and we will establish at that time our expectation for a schedule for written arguments. 20 And to ensure that we can get things done Monday and Tuesday, we will ask everybody to note that we will be starting at 9:00 a.m. instead of 9:30, and if necessary, the Board will be asking participants to stay later than 4 o'clock. So the end of the day will not be certain, so it is our expectation to complete this proceeding by Tuesday and I think, if we all work together on that schedule, I think we'll be able to do it. 21 Okay, that's all the announcements that we have to make. Are there any preliminary matters that have arisen overnight? 22 PRELIMINARY MATTERS: 23 MR. VEGH: I have one, just really to announce to the room. There has been reference in this proceeding to the Board decision in the CanEnerco application, and I believe that an excerpt from the decision in the CanEnerco application has been identified or marked as Exhibit E.3.2. 24 That decision will be referred to in Board Staff's submissions, and when parties review that decision, they'll see there is a reference in that decision to the report of the committee of oil and gas resources part II, underground storage of natural gas, otherwise known as the Langford report. And that report, as I said, was referred to, interpreted and applied in that decision, and that report will also be referred to in Board Staff's submissions. 25 Mr. Lewis was provided with a copy of that report yesterday, and there were additional copies on the shelf at the back and Board Staff has additional copies as well. 26 And just to let people know, the portion of the report that was referred to and that is considered relevant is chapter 7, recommendations. Thank you. 27 MR. BETTS: Thank you. 28 Are there any other preliminary matters? I did say one thing I wanted to correct in my announcement -- I did say the Board could not sit on this matter beyond Tuesday. That is not quite accurate. It would mean that we would have to adjourn the proceeding on Tuesday night. We would be able to conclude it at a later time. But I think everybody hopes to be able to deal with this before that happens. So just for clarification. 29 Mr. Chinneck, are you prepared to continue with your witness panel? 30 MR. CHINNECK: I am, sir. In keeping with your thoughts this morning, I expect I'll be very short this morning with my questioning. 31 MR. BETTS: All right. 32 TIPPERARY STORAGE LANDOWNERS' ASSOCIATION - PANEL 1; CONTINUED - A. FEDDES, F. DUTOT, C. DUTOT: 33 A.FEDDES; Sworn. 34 F.DUTOT; Sworn. 35 C.DUTOT; Sworn. 36 CONTINUED EXAMINATION BY MR. CHINNECK: 37 MR. CHINNECK: Good morning, panel. 38 MR. DUTOT: Good morning. 39 MR. CHINNECK: Yesterday there was a little bit of confusion with some of the terms that were used. I know that you were talking about barrels when I believe that the Board was thinking that you were talking about tanks. 40 One of the terms that you used was Board evidence, and I am wondering, did you mean by that term Staff interrogatories? 41 MR. DUTOT: I think so. I believe I was. 42 MR. CHINNECK: All right, thank you. 43 Now, there was a mention yesterday of a quota. Mr. Feddes, would you be able to tell me what quota is? I don't think it was explained in much detail yesterday. 44 MR. A. FEDDES: Quota is a licence to produce milk or poultry or whatever it is issued for. 45 MR. CHINNECK: All right. And does it also involve any obligations? 46 MR. A. FEDDES: Well, yes, it is -- you get issued -- you buy the quota; you get issued -- if you get issued a thousand units, for instance, you have to fill your units in a certain time period. 47 MR. CHINNECK: All right. So there is an obligation -- I'm sorry? 48 MR. A. FEDDES: If you over-produce, you get a penalty; if you under-produce, you get a penalty. 49 MR. CHINNECK: Okay. So there are obligations, then, to produce if you have a quota. 50 MR. A. FEDDES: Oh, very much so. 51 MR. CHINNECK: And if the water supply of a producer with quota was impacted such that there was not enough water or the water was not good quality or not potable, what impact would that have on the holder of the quota? 52 MR. A. FEDDES: Well, immediately you would be under-quota shipping. You have so much quota for each day to ship whatever the quota is issued for. If you don't deliver what you have on your licence, a month later you're going to get fined for what you shipped under-quota. 53 MR. CHINNECK: Okay. Would it be fair to say that a quota obligation is like a contractual obligation, then, to deliver product? 54 MR. A. FEDDES: Yes, I would say so. I would say it is just like a franchise, the same as Tim Horton's. 55 MR. CHINNECK: Just for interest's sake, what would the quota for one chicken be worth? 56 MR. A. FEDDES: For one laying hen, it is $160; for one broiler chicken, it is $52 Canadian price legally; for one dairy cow, it is $27,000, and you can ship 1 kilo of butter fat. So you buy one kilo of butter fat, it's nearly the equivalent of production of one cow per year. So in order to sell this milk, you have to buy for $27,000 one unit, and you can use this unit for however long you have it for. It is not just for one year; it is until you sell it again. 57 MR. CHINNECK: All right. Now, are there regulations in Ontario that govern the quality of water that is used to clean the lines that move the milk from the cows into the processing facilities? 58 MR. A. FEDDES: Say the first part again, please. 59 MR. CHINNECK: I am just wondering if there are regulations or rules that you are aware of that deal with the quality of water that is used to flush the lines or to clear the lines in dairy operations. 60 MR. A. FEDDES: Yes, there is certain standards. The Board has come around, and they come around once a year so far to check the facilities, whether they are clean and efficient, and they check the water quality once a year. But it is in the workings right now, they're going to check it every month. 61 MR. CHINNECK: All right. And so if there was a problem with the quality of the water that you were able to draw from your wells, would that have an impact on your ability to comply with those regulations? 62 MR. A. FEDDES: Oh, definitely. 63 MR. CHINNECK: All right, thank you. 64 Now, there was some discussions yesterday about the farm that Dwayne Feddes, your son, owns. And I understand that there is an issue that I did not touch upon about him yesterday that relates to the zoning of that little strip along the east side of his property. Can you please provide the Board with some information about that issue? 65 MR. A. FEDDES: Yes. The property was bought -- I believe we bought it in '92, my son bought it, and like Ms. Lowrie said, it was zoned commercial then. 66 But I just want to point out, Ms. Lowrie bought it in '99, I believe; it was zoned commercial then, so she knows also that it was zoned commercial. 67 The reason it was zoned commercial, because there was a battery site on it, and the township felt they should have more taxes out of it because of the equipment and the buildings on it. And now, if they're going to designate this storage area, the battery site is not needed anymore, and it is being cleaned up, so it is being put back in the original agricultural land. 68 So it was put in commercial; the oil companies made it a commercial property. We feel they should move it back to agriculture, because all the buildings and all the equipment is moved away from it. 69 MR. CHINNECK: Okay. 70 MR. A. FEDDES: Because if my son has to move it out of commercial back to agricultural 1, there is a fee to it. And I am not sure how much the fee is, but it is a fair little bit. 71 MR. CHINNECK: All right. Is there anything else then -- well, actually, who do you feel should pay for the change of the by-law from commercial to agricultural for that strip? 72 MR. A. FEDDES: Oh, I feel Tribute should. 73 MR. CHINNECK: All right. Now, is there any other issue then with respect to that property that we haven't already discussed? 74 MR. A. FEDDES: It is just laneways, gravel laneways should really be moved and top soil brought in, hydro lines removed and poles removed. We were combining wheat last week, and we couldn't combine certain of the wheat because we couldn't combine because our combine couldn't get over the hydro lines we had to leave it. So they should be removed because there is no need for them anymore because all the facilities are being removed. 75 There is the underground pipeline that has been mentioned before, and apparently they have agreed to remove it, so -- 76 MR. CHINNECK: All right. Now, I just wanted to speak, to ask the Board -- pardon me, the Panel about the issues of landowner compensation. 77 Mr. Dutot, where are you with respect to the compensation issue at this point in time? 78 MR. DUTOT: My feeling is that we were at a stage where we acknowledged that Tribute has been willing to add this clause, and it has taken some time to get this draft, as we spoke about before. We have had a very quick meeting, some of the owners on the phone and some at our house on Saturday night of the holiday weekend, believe it or not. We felt that we would like to have someone from the legal -- or a lawyer to just look at that clause and see if we would re-write it and then we were prepared to hand it back and see if we could -- if they didn't like the wording. We are basically negotiating that clause 7, that is my position, and the time frame ran out. 79 MR. CHINNECK: And it ran out because of? 80 MR. DUTOT: Well, like I said, we didn't get that offer until the 28th of July. 81 MR. CHINNECK: Well, was it an offer, in your view? 82 MR. DUTOT: Well, it was an offer to -- I'm not a lawyer, but in my eyes, it was an offer to change the clause. It was -- it came on fax machine. Whether it's an offer or not, I don't know. They acknowledge -- we acknowledge they are willing to change the clause, and I think it wouldn't take a lot of effort for both parties to agree on that clause, but we just ran out of time, that is the problem. 83 MR. CHINNECK: All right. But where is the last piece of paper on this particular issue? 84 MR. DUTOT: Where is the last piece of paper? 85 MR. CHINNECK: Right. 86 MR. DUTOT: I believe you have that. 87 MR. CHINNECK: That wasn't exactly the answer I was looking for. 88 MR. DUTOT: Okay. 89 MR. CHINNECK: But did I do something with that document? 90 MR. DUTOT: Well, we would ask you to take a look at it, true. 91 MR. CHINNECK: And then perhaps I could ask your wife, Carol Dutot, if she knows what has happened with that document? 92 MS. DUTOT: I typed up a new draft, and gave it to Jed and he presented it to Mr. Lewis on Tuesday morning. And we haven't heard anything back from him. Twice I believe he has asked to have a postponement on considering that draft, and we haven't heard back from him. 93 MR. CHINNECK: All right. And how long ago was that that the draft was delivered to Mr. Lewis? 94 MS. DUTOT: On Tuesday morning. 95 MR. CHINNECK: All right. Now, Mr. Dutot, do you feel that the TSLA, your group, has been negotiating in good faith with respect to the issues of landowner compensation? 96 MR. DUTOT: Well, I do, but there hasn't been a lot. 97 MR. CHINNECK: I'm sorry, a lot of what? 98 MR. DUTOT: A lot of negotiations. 99 MR. CHINNECK: All right. Are you prepared to continue negotiating in good faith? 100 MR. DUTOT: We certainly are. 101 MR. CHINNECK: In your view, what would be the best way to complete the negotiations and finalize an arrangement with the applicant? 102 MR. DUTOT: Well, I think the quickest and the simplest would be for our negotiating panel to meet with somewhat more than Mr. Jordan and sit down around a table and I don't think it would take a long time. 103 MR. CHINNECK: And -- 104 MR. DUTOT: But it is subject, though, to being approved at a meeting with all of our people. I want that understood, because I don't feel that I have the capacity to make a judgment call on everybody's lands, and that's -- that was the agreement that this organization was put together under. 105 MR. CHINNECK: Yeah, but are you prepared to move quickly to get the ratification of your group once an agreement in principle has been reached? 106 MR. DUTOT: Well, yeah, yeah, we are. 107 MR. CHINNECK: And what time frame do you think would be most reasonable to conclude these negotiations? 108 MR. DUTOT: I would say that this has to be done before -- definitely before the injection process; otherwise, we have no leverage at all, or better still would be before the tribunal would make a call on this application. 109 MR. CHINNECK: All right. But how long do you think it would take you to reasonably get the issues settled from today's date, for example? 110 MR. DUTOT: Well, I think 60 days would be quite adequate, if everybody would agree to come together. 111 MR. CHINNECK: All right, thank you. And then what are you asking the Board to do with respect to this particular issue? 112 MR. DUTOT: Well, there has got to be some time for some negotiations. There just has to be. 113 MR. CHINNECK: All right. Now, I understand that there are some things or some matters or issues that are outstanding with respect to the McCulough property? 114 MR. DUTOT: There are, and we have gotten a fax as well on the 28th of July, and again, it is very close. There were three items, and subject to approval from a lawyer, I believe that's almost finished. 115 MR. CHINNECK: All right, thank you. Can you tell me about Mr. McCulough? 116 MR. DUTOT: Yes, I can. We described him in our first evidence. He is an 87 year old man, lives alone, never married, he never owned a motor vehicle, he has never had a driver's licence. Some might call him a recluse, but you know, he has been a neighbour and friend as long as I have been around. And he doesn't really understand what is going on here. If you went there today, he would tell you that they are drilling another well, and he will tell you it is going to be dry because it is right beside the one they drilled 50 years ago. 117 But anyways, that is the situation, and we have tried to help him. I guess that has been part of the reason too that this organization was put together. We were never really given any particular reason why everything had to go on his farm. 118 MR. CHINNECK: Is this the farm where the injection well is being drilled? 119 MR. DUTOT: That's right. 120 MR. CHINNECK: All right, thank you. Now, I understand that there are also some issues regarding the Vermue lease. 121 MR. DUTOT: Yes, there are. 122 MR. CHINNECK: And are you working to solve those issues as well? 123 MR. DUTOT: A little bit. We need some direction and I think I have explained this to Mr. Jordan and he has agreed that, when this is all over and done, I am going to be living where I am, and he is going to be living where he is, and we have got to live there in some kind of harmony. So if I could go back a little farther on that, please. 124 MR. CHINNECK: All right. 125 MR. DUTOT: We are coming to the residual gas problem, as I see it. Mr. Brown, Mr. Murray Brown, Tribute's first land agent, he came into our community there and he doesn't have very good ethical ways, I might say, but anyway, what happened was he was able to obtain some leases through promises that people, when their lands became part of this, as we were understood, the DSA area, that you would be entitled to residual gas payments. And he had some whopping numbers he was carrying, like a million dollars. 126 And he was able to obtain some leases under those circumstances, and we found a letter from Mr. Brand on that topic. 127 So what has happened, there is actually three ways that came to our thoughts as to how residual gas should or could be paid out. And since Mr. Brand's property, I want to just -- there is quite a few Mr. Brands here, so this would be the John Brand property. I believe it is parcel number 13 on that map on the lower right. 128 He has property that has became part of the DSA. It is not in the boundary of the new 3-D seismic test. Mr. Vermue's property was not in the old unit agreement, if you can follow me. He has property that's now inside the boundary of the new 3D testing -- 129 MR. CHINNECK: And by that do you mean that the new 3-D testing has disclosed that a portion of the reef underlies Mr. Vermue's property? 130 MR. DUTOT: It does. 131 MR. CHINNECK: Thank you. 132 MR. DUTOT: And then, of course, the first residual gas payments were offered to the people that were inside the two old unit agreements. So we have looked this scenario over and we have discussed it amongst our group, and we were looking for some kind of rules or regulations that would determine how that gets paid out. 133 And I realize not everybody is going to be happy, and I don't feel that it is up to me or our negotiating group to make this call without some kind of regulation. We felt there should have been some regulation or something that would indicate what the writer of the three positions would be. 134 MR. CHINNECK: Are you prepared to attempt to negotiate a solution to that issue with the applicants? 135 MR. DUTOT: Well, I believe there was some information received the day before we came here on the Mandaumin situation, that it had been paid out on the 3-D test, which would be the most recent scientific information. And that's -- you know, the time again ran out, so the decision had not been made. 136 MR. CHINNECK: Right. But are you prepared to negotiate with the -- 137 MR. DUTOT: Yes, we are, and this is -- I think Mr. Jordan told me one day, we'll throw the money in the pot and you divide it the way you see fit. 138 But we feel there must be a better way than that. So if we could -- you know, we are prepared to negotiate, and I -- the people -- the farmers have to agree on this as well, eh, but we were looking for some direction that would indicate what the proper way would be. 139 MR. CHINNECK: All right. 140 Now, there was -- you had indicated at the beginning of your testimony that there was a condition about, you know, no injecting, that you were requesting that the Board have a condition that there be no injection until these various matters that you have raised have been dealt with. Do you feel that would work a hardship on the applicant? 141 MR. DUTOT: Well, if the injection period -- I am not sure. That -- it has got pushed out to 2006; am I correct on that? I am not sure what the injection date is, but it's got to be somewhat down the road. We've got wells to drill and pipelines to put in; correct? 142 So it seems to me there would be a large time frame to negotiate this, but we would like to see this over and done as much as anybody else. 143 MR. CHINNECK: All right. Is there anything else that any of you on the panel would like to express to the Board to assist them with this decision? 144 MR. DUTOT: I would just -- my comment would be, if we could get this time frame, be it 60 days or more, now that we have a little bit of direction, if -- you know, I haven't even got evidence that this was a telephone conversation on the Mandaumin situation. So if we could get some paperwork that indicated that's exactly what happened, then we could go to our people and say, Okay, you know -- like I said, everybody is not going to be happy here. This is the most recent thing. This is what's been historical. And I don't know if it has ever been paid out to the DSA area, in fact, and I guess that could be entertained and maybe at least one of Mr. Brown's promises would have been kept. 145 I think that's all I would like to say on that. Are we ending, or is this the end of your questions? 146 MR. CHINNECK: This will be the end of my questions, but I believe Carol would like to make a statement to the Board. 147 MR. DUTOT: Okay. 148 MS. DUTOT: I would just like to comment a little bit. I have written some topics out here. 149 When the evidence for Tribute was presented to the Board, I assume that Dr. Walsh and Tribute, they must have been in agreement with this evidence that they have presented, because they prepared it and sent it to the Board in December of 2003. 150 Tribute has chosen now to exclude Mr. Welychka from the -- I maybe don't pronounce that right, from their panel so that he could support his own evidence and we could maybe have asked him some questions also. 151 So I have a questioning with Dr. Walsh's new interpretation of the reservoir compared to what was originally interpreted, in his opinion, that these two old wells, 368, I am speaking of, and 397, are not in the reservoir and that they will not be affected by this proposal to delta pressure to the 1,096 pounds. 152 The explanation, as I understand it when we have gathered information from the Ministry of Natural Resources and that the panel presented earlier, the Tribute panel at this hearing, that the reservoir is like a sponge; you pressure gas into it and the gas flows out into the pockets of the sponge. Ms. McConnell has stated in her evidence that well 368 and 397 had no show of gas or only a trace at that discovery pressure that they are calling 425 pounds. 153 The well records in the evidences that they filed showed lower discovery pressures in some of the wells that are present there, as low as 185 pounds on their records. So I question whether the gas will flow to these two old wells when the delta pressure to 1,096. 154 Ms. McConnell has testified about her caprock sample; she says it was only 2 metres thick. Ms. McConnell testified that they took the caprock sample and it was only 2 metres thick. And the well records that they filed have also caprock depths in them. 155 I would like to make a comparison to, for example, a pig farmer being granted a permit to build a liquid manure tank in the ground. So he proceeds and then he runs out of cement and still has a hole in the top, say, maybe a foot around, so he decides to go and get a plug of wood and plug the hole, like these wells are plugged now. So then he puts the gravel over top of it and the dirt over top of that and he carries on business. He has a pig operation, the manure filters into the pig tank, and it eventually becomes full. It becomes full, the pressure builds up, it is going to pop the wood out and put the liquid manure into the ground. Therefore, there will be a big pollution. 156 Now, Dr. Walsh stated that he would guarantee the reservoir not to leak, but we all know that the only guarantees in life are death and taxes. The people of the DSA have spent all their working lives, and in our case 40 years, trying to build a good way of life for our families and safe food for the community. 157 You cannot run a competent business from 60 to 80 miles away and only show up on payday to reap the rewards. I do not feel the landowners should have to police this company and only have them react to complaints, which has been their practice in the past, and we have tried to demonstrate this. 158 The TSLA, the landowner group, have tried very hard since our information meeting in November of 2003 with Tribute to have our concerns addressed. Fred and I have spent hundreds and hundreds of hours gathering information and informing our group, trying to make agreements, and most recently, preparing to come to the Board with our issues and they have fallen on deaf ears. 159 We were advised by the Board Staff that we should not appear here without a lawyer, so we acquired Mr. Chinneck because he had dealt with UFA on their first admission and was a little bit up to speed on it, so we brought him to help us in the process of explaining our case to you people. 160 I only ask that this project be assessed in a safe and responsible manner, so that the people in the TSLA will have the opportunity to enjoy the same way of life they have in the past and provide the same safe food for years to come. Thank you. 161 MR. CHINNECK: Thank you, those are my questions. 162 MR. BETTS: Thank you, Mr. Chinneck. 163 It is the Board's practice to, first of all, have cross-examination done by parties that are somewhat in support of the position that is being presented by the intervenor. Can I have an indication of anybody that would be in that position? 164 Can I have an indication of any parties that would then like to cross-examine this witness panel? 165 Mr. Lewis, and it appears that you are the only party that would like to do that, so please begin your cross-examination. 166 I assume that it is understood that Board Staff may have -- in fact, it perhaps would be -- Mr. Vegh, would it be appropriate for you to proceed prior to the applicant with cross-examination? 167 It doesn't really matter to me. Is there a preference between the two of you in who would go first? 168 MR. VEGH: We had understood that I would go first to clarify some points. 169 MR. BETTS: Please proceed. And Mr. Vegh, would you bring your mike down for me. 170 Just a word of warning for everybody, it is better not to point the mikes up, and I see there are many of them up here. You can kind of tuck them away to the side, but we have discovered that because they are directionally sensitive, they pick up the sound from all of these speakers and we will get feedback if that is the case. So you are going to know so much about the speaker system before we are through here. 171 Mr. Vegh, please proceed with your cross-examination. 172 CROSS-EXAMINATION BY MR. VEGH: 173 MR. VEGH: Thank you. And thank you, panel, for expressing your views over the last couple of days. The points were made quite clearly, and what I'd asked you to do, and your counsel can do this, perhaps, in making their submissions, is you did indicate that you had -- you expressed your concerns and indicated that you thought the proposed conditions were just not good enough to meet those concerns. So perhaps, in your counsel's submissions, you could identify specifically how it is you would like to change these conditions, if there are specific additions you would like to make, you'll provide some text to address that? 174 MR. CHINNECK: I am expecting to do that, and I'll circulate it to other counsel as well. 175 MR. VEGH: Thank you. 176 Now, my list of the concerns that were raised indicated about seven of them, so I would just like to go through each of them and just, again, ask questions for clarification on each of them, and then I have a little clean-up after that as well. 177 The first issue is what you, Mr. Dutot, identified as the most important, and both yesterday and in your pre-filed submissions, and consistently, I think, as I go through the record, the most important concern is obviously the water. 178 MR. DUTOT: It is. 179 MR. VEGH: And in terms of the water, I wanted to get a better understanding of how that issue was addressed during the environmental impact assessment process. 180 MR. DUTOT: Okay. 181 MR. VEGH: And specifically you are aware that the applicant had retained Stantec Consulting to carry out an environmental impact assessment? 182 MR. DUTOT: Yes, I've read that report some time ago. 183 MR. VEGH: And that report has been filed in this case, and I am going to direct you to some portions of it, so if you could have it available, it is at book 3, blue tab 6. 184 Do you have it handy? That's the one, yes. 185 MR. DUTOT: Thank you. 186 MR. VEGH: And I want to ask you first some questions about the consultation process that was a part of Stantec's work, and that is described in section 4.3 of the report where it starts at page 4-11. 187 Do you have that? 188 MR. DUTOT: I do. 189 MR. VEGH: And that -- the first reference in the consultation is to a public open house that was held on November 18, 1999; that is addressed at the top? 190 MR. DUTOT: Did you say page 4.12, sir? 191 MR. VEGH: I have page 4.11, so under the heading "4.31", there is a first public open house. 192 MR. DUTOT: Yes. 193 MR. VEGH: So I wanted to make sure I had the dates correct, we had open house on November 18th, 1999. 194 MR. DUTOT: That's correct. 195 MR. VEGH: And then over at page 4.13, there is a reference to a second public open house, and that was on January 18, 2000. 196 MR. DUTOT: That's true. 197 MR. VEGH: And then on page 4-15, there is the reference to the third public open house on December 9, 2003? 198 MR. DUTOT: That's right. 199 MR. VEGH: And did you or other members of the TSLA attend at these open houses? 200 MR. DUTOT: I think I could safely say that everyone attended each one. 201 MR. VEGH: And at those open houses, were you given the opportunity to express your concerns about the water issues for this application? 202 MR. DUTOT: We were, and we handed in sheets, signed sheets with those facts on them. Other things too, but the water was the number one issue, yes. 203 MR. VEGH: And I think I have seen -- I didn't mark them specifically, but in reading through the Stantec report, I think they reprinted a lot of the material that was provided. 204 MR. DUTOT: Yeah, they did. 205 MR. VEGH: I'm sorry, I was speaking over you. Sorry? 206 MR. DUTOT: They did record it in this book, yes. 207 MR. VEGH: And did they give you opportunities as well to express these concerns outside of those formal public hearing processes? 208 MR. DUTOT: The Stantec people? 209 MR. VEGH: Yes. 210 MR. DUTOT: They gave us handouts that we were to fill in and send back. Would that be the answer you are looking for, sir? 211 MR. VEGH: I guess so. I mean, were they available if you were to sort of meet with them off line? Did you have any additional meetings with them? 212 MR. DUTOT: Not really. They give you the handout, ask you to fill it out, mail it back, and they give you a phone number if you have further inquiries to call them, but there has been no other that I can recall. 213 MS. DUTOT: Could I add a comment to that, please? 214 MR. VEGH: Please. 215 MS. DUTOT: The first open house that they held, they had a table at the front of the place with some papers sitting on it, and nobody knew they were there until half the people had gone home again. And somebody discovered that they didn't -- they didn't have anybody handing them out to the people as they came in. 216 So we did take a lot of -- a lot of the landowners took them then afterwards when they discovered that they were there and signed the book. 217 MR. VEGH: So is your point of that that they didn't do a really good job communicating that people had the chance to give input like that? 218 MS. DUTOT: Not at the first meeting that they did at the beginning. They did at the second meeting. 219 MR. VEGH: And did you have the feeling throughout the process with Stantec that your concerns were being listened to and taken seriously? 220 MR. DUTOT: Difficult to answer, but I believe they were reading them and there was some handouts as the meetings unfolded that addressed some of the things we were asking for, but there were no specific real reasons or -- you know, they weren't really saying how they were going to solve our problems. They were saying more like they would be addressed if that's -- I am not sure I am being plain enough here, but can you add something? 221 MS. DUTOT: I would like to also add that at the first meeting, a lot of the landowners pointed out that their maps were not correct. 222 MR. VEGH: The Stantec maps? 223 MS. DUTOT: The Stantec maps, yes. They had drawn their information only from old records. They had not approached the landowners, and we were looking for our tile drains, municipal drains being marked incorrectly on the maps. Our particular property, the farm that we milked our cows at, on that road, they had our municipal drain that runs through the front corner field running on the east side of our house; they had it marked on the west side of our house, quite a ways. It was nowhere in the right position, and all the drains in that section were wrong. 224 This was pointed out to them, and when we had our second meeting, nothing had ever been corrected on the maps; they were still the same way. 225 MR. DUTOT: If I could just add to that, the excuse was they were using drainage maps supplied by the township, so they felt it was the township's problem to rectify the maps. I think a simpler way would be to just go up and down the road and talk to the people and draw your own maps, but... 226 MR. VEGH: In terms of the environmental mitigation generally and water in particular, the Stantec report does produce an environmental management plan at chapter 6 of the report; have you been through that? So that starts at page 6-1. 227 MR. DUTOT: That's correct. 228 MR. VEGH: And why don't we turn to the part of this report that deals with water in particular. That's at 6-11 under the heading "Hydrology". 229 And you see on that page there is a discussion of groundwater that addresses potential impacts and protective measures. Have you reviewed that part of the report? 230 MR. DUTOT: I have read it, but it is some time ago. 231 MR. VEGH: I take it from your evidence today that you -- well, I don't want to put words in your mouth. Are you satisfied with the recommendations in this report, or you don't think they go far enough, or... 232 MR. DUTOT: I think I referred yesterday that they were not following this report. Is that where we're going? 233 MR. VEGH: Well, that's what I'm not really clear on. Is your concern that the report doesn't go far enough in its recommendations, or is your concern that they will not follow the recommendations? 234 MR. DUTOT: I would say this report does not go far enough. And I could relate to why they are not following this and it's more to do with the construction practices of the well site and the roadways. 235 There is an environmental -- if you wanted to back up, sir, to page 6-10, which is one page back from where we are. 236 MR. VEGH: Yes. 237 MR. DUTOT: Protective measures. And then in the second paragraph it says: "Construction access roads, drill pads, should be done during summer months, in drier summer months." 238 MR. VEGH: Yes. 239 MR. DUTOT: And it goes on and on there. It talks about wet-weather precautions. On page 6-13, again, at the top we're talking about stockpiling and stripping during dry conditions. Farther down in "Protective Measures": 240 "Tipperary Gas should contact the landowner to determine the precise location and configuration of tile systems prior to construction. They should be marked." 241 I don't believe that was done, sir. 242 MR. VEGH: So -- 243 MR. DUTOT: Page 6-16, and then I'll turn it back. 244 MR. VEGH: Okay. 245 MR. DUTOT: It talks again in "Protective Measures" that the landowners or tenant farmer should once again be contacted, and it has to do with entries to the farm. 246 The first day that construction was supposed to start on this farm, I got a call from the tenant farmer wondering if I knew that they were coming to start, and I said no, Mr. Jordan and I and Mr. McCulough's nephew had had kind of a verbal agreement that when the piece of property was staked by the surveyor, so we knew exactly what was going on, that we would have a meeting and discuss, you know, if that was what we thought where the roadway was going to be, because it would be surveyed and such. And that meeting never happened. 247 And I got the call from Mr. Middleton, who owns the crop on that property, saying that Merner's Construction is starting to do the roadway tomorrow morning, had he missed that meeting, and I said, Well, no. Merner's Construction were to start that roadway the next morning, and really there was no consent from anyone at that stage. 248 I think Merner's withheld construction for a day or two because they were to get matting to put down on this property. And in the meantime, Mr. Jordan and I had some discussion as to, you know, why they could or could not go on the property. 249 But I feel that the Stantec's conditions are not being followed, and I feel that they themselves are somewhat vague. 250 Just in reference, I have documents back in the room -- excuse me, back in the room. It's called a construction letter of understanding which would be offered to a farmer if he were living in Lambton County from I believe it's Union Gas, and before they would enter your property, they would come and talk with you and offer you this letter. And it's 27 pages, with 17 conditions that you would -- the company would be committing to follow as they entered your property and had done construction on your property. And it's very good, and I believe that, you know, if Ms. Lowrie's company had offered something like that to the landowners, or in this case one landowner only, it gives the landowner some comfort that there is some conditions that they are trying to meet; and if they don't, you can come back and point your finger to it and say, You didn't do this. 251 But right now, there is really no recourse, other than the legal system, I guess, if it's severe enough. 252 MR. VEGH: So in that case, in particular, you're saying that, in your view, the requirements here aren't specific enough? 253 MR. DUTOT: I would say, no, they are not anything like what is in that letter I am speaking of. 254 MR. VEGH: Right. And with the other areas you've talked about, those on page 6-10 and the other ones that you went through, it seemed to me you were saying that there was nothing so much the matter with the requirements but that the applicant really wasn't following those requirements? 255 MR. DUTOT: And that's why we had filed those certain pictures that we talked about yesterday. 256 MR. VEGH: Right, and I'll probably have some questions of clarification around those as well. 257 MR. DUTOT: Okay. 258 MR. VEGH: When we get back to the groundwater which, as you say, is the number one issue here, and the review of that by Stantec and the list of its -- or what its proposed protective measures are, again, I'd like to know, is your concern that it's not detailed enough, or is your concern that it's inadequate, or are you saying that you think it's fine but you have concerns about whether the applicants will follow it? 259 MR. DUTOT: I almost have to read that again, but -- I think I would have to read it again, sir. 260 MR. VEGH: Okay. And just one point on that. That's a fair answer. 261 You understand that your counsel was given the opportunity to cross-examine the Stantec consultants in this case and declined to do that? 262 MR. DUTOT: Yes, I do. 263 MR. VEGH: Another issue that you raised that I wanted to ask you about was number 2 in your list, and it is also an issue that you have addressed before, and that is insurance and the type of insurance that the applicants should have. 264 And it would be helpful if you could turn to your -- the evidence that you filed, both your June 7th evidence, which I think has been marked as B.3.1. 265 MR. DUTOT: I have it, sir. 266 MR. VEGH: As well, I wanted to ask you a question about an interrogatory on that, interrogatory responses that you provided, and that is the July 30th, 2004 document. 267 MR. DUTOT: I have it. 268 MR. VEGH: Okay so on liability insurance, going first to your June 7th document, B.3.1, you discussed this point at page 6. 269 MR. DUTOT: I have that spot. 270 MR. VEGH: And you see you made the point here, and I am reading this, it says: 271 "TSLA has requested the amount of liability insurance that would be provided on this project many times and has not received a firm answer to this amount." 272 And then Board Staff asked an interrogatory asking you, Well, what is it that you think is the minimum amount of insurance? And then you answered that in your July 30th document, quite reasonably, I thought, that you said that -- and this is document 3.3.1, you answered that at page 4, section 7, and you said: 273 "TSLA, not having any expertise on liability insurance, feel it would be inappropriate to request a set amount of general liability insurance on this project..." 274 And then you referred to the other examples you talked about yesterday, Hydro One asking for 5 million to cut grass, and there was someone else I think asking for 11 million. 275 Can you tell me, has anything in the evidence so far in this case provided any more guidance on what you think would be a specific proposal on the type of insurance or the amount of insurance that the applicant should enter into as a condition for operating this project? 276 MR. DUTOT: You're saying the type of insurance? 277 MR. VEGH: Well, I am asking you both, in terms of how you describe the type or the amount. 278 MR. DUTOT: My understanding, from speaking with two insurance, that general -- or commercial general liability insurance does not cover pollution, been confirmed by two people. 279 And a pollution insurance that would be what we would consider as landowners that would contaminate our water supply would better fall under environmental liability insurance. 280 And like I said, we are not experts, but we have been able to find that much information out, so it almost indicates there should be two coverages here. 281 MR. VEGH: We haven't -- I think it's a fair thing to say, and it is helpful to hear someone come up on the stand and say that they're not an expert in some of these areas. 282 MR. DUTOT: Thank you. 283 MR. VEGH: Because one of the -- you know, one of the concerns we have, of course, is we don't really have an expert giving evidence on what is the right type of insurance and what is the right amount of insurance. 284 MR. DUTOT: I would agree. 285 MR. VEGH: And so Board Staff has asked the applicants if they would undertake to agree to have an independent third party -- independent from the applicant -- give an opinion on what is a reasonable type and amount of insurance for this sort of operation. 286 What do you think of that project to this insurance issue? 287 MR. DUTOT: I would think that's the place to probably start, sir. 288 MR. VEGH: The third -- thank you. 289 The third issue you raised was the plugging of the two wells, and I think those were Imperial 368 and 397, those were the two wells that you were talking about? 290 MR. DUTOT: That's right. 291 MR. VEGH: And again, just so I am clear on what it is you would like to see on that, you would like to see those two wells plugged to meet modern or current standards? 292 MR. DUTOT: I believe so, sir. 293 MR. VEGH: The next issue you raised was compensation, and I think, from hearing your evidence, most of my questions are answered on that, and so again, I just want to make sure I am clear on a point. When I look at the document E.2.1, which is the amending agreement that has your name on it that was filed in this case; do you have that? 294 MR. DUTOT: Jed has my copy -- or Mr. Chinneck, I should say. Now, since we spoke of three different copies, I am presuming I have the right one, 2.1. 295 MR. VEGH: 2.1, yes. 296 MR. DUTOT: Okay. 297 MR. VEGH: And when I asked Mr. Jordan about this agreement and I asked him what issues were left outstanding between the applicant and the landowners, he told me it was just the wording around section 7, but that everything else in the agreement had been agreed to. Was -- is that your understanding as well? 298 MR. DUTOT: Since item number 1 is residual gas compensation, which again we have those three scenarios, we are looking for something that works, probably that's also not decided. 299 MR. VEGH: Okay. So items number 1 and number 7? 300 MR. DUTOT: 1 and 7, sir. 301 MR. VEGH: But the rest are -- the rest of the sections are on compensation in terms of the amounts, you are agreeable to that. 302 MR. DUTOT: Yes, we have agreed to that a long time ago, the numbers were awhile coming, but yeah, we have agreed to the financial rewards there. 303 MR. VEGH: Okay. And on section 7, I understand you to be saying you are basically -- you are working that out, the lawyers are working out the language that both sides can live with? 304 MR. DUTOT: That's right, we just -- originally I was asked to write that clause, and I was reluctant. I pointed out what we felt it should say and felt that maybe someone more qualified should write it. 305 So Mr. Jordan suggested Mr. Lewis would write it and he would fax me a draft that we could pass around to our owners, our landowners, and see if we could agree that that was the proper wording. 306 MR. VEGH: Okay. And so that's section 7, and then you mentioned also section 1 that deals with the residual gas, so why don't I ask you some questions around the residual gas issue. 307 Now, when you look at section 1 and how it proposes the allocation of the compensation for residual gas among the landowners, the language that is used in section 1, that's the same language that's in your -- which document would it be? Sorry. That's in the storage lease now; is that right? Sorry, your oil and gas lease? 308 MR. DUTOT: You're relating to item 1 called "residual gas compensation"? 309 MR. VEGH: Yes. 310 MR. DUTOT: And you are asking me if that paragraph is exactly what is in my oil storage lease, gas storage lease? 311 MR. VEGH: I am asking you whether the method of allocation among the landowners that's put forward in this paragraph is the same allocation method that is in the oil and gas lease? 312 MR. DUTOT: I would have to double-check that, sir. I really would. 313 MR. VEGH: Okay, well, perhaps -- 314 MR. DUTOT: Some of these leases are not all the same. Are you asking my particular one, or in general, or -- like some of these leases were taken at different stages of time. 315 MR. VEGH: Well, I was actually asking about your particular one, but if -- but that was on the assumption that they're all pretty well -- that they are all the same. 316 MR. DUTOT: I believe this company has said they would pay us all equally, even though some of the leases are not the same. So if we could agree on one scenario, that they would pay us all equal. Some of the old leases are only 6 percent or something, I believe. 317 MR. VEGH: Yeah, and I was going to qualify that by saying some are 6 percent and some are 12 and a half. 318 MR. DUTOT: That was my understanding, that they intend to treat everyone equally that way. 319 MR. VEGH: Right. So subject to that difference between 6 and 12 and a half, the method of allocation using the entitlements under the unit operating agreement as opposed to using the 3-D seismic, is really what I'm getting at, that method of allocation, that's in the current agreement, isn't it? Or did you want to check that to be sure? 320 MR. DUTOT: I think I should check that, sir. 321 MR. VEGH: Okay, I'll leave that. 322 MS. LITT: Undertaking F.5.1. 323 UNDERTAKING NO. F.5.1: TO CONFIRM WHETHER THE ALLOCATION OF RESIDUAL GAS COMPENSATION AMONG LANDOWNERS AS PROPOSED IN SECTION 1 OF EXHIBIT E.2.1 IS THE SAME AS THE ALLOCATION AMONG LANDOWNERS THAT IS AGREED TO IN THE OIL AND GAS LEASES 324 MR. VEGH: And just to assist in that, the Dutot oil and gas lease is at volume 2, tab 14 of the evidence. And you don't have to go through it now, but I'll just leave that reference with you. 325 MR. BETTS: Mr. Vegh, could you just restate what the description is for that undertaking? 326 MR. VEGH: The undertaking is to confirm whether the allocation of residual gas compensation among landowners as proposed in section 1 of Exhibit E.2.1 is the same as the allocation among landowners that is agreed to in the oil and gas leases. 327 MS. DUTOT: What was the undertaking number on that again, please? 328 MS. LITT: F.5.1. 329 MS. DUTOT: Thank you. 330 MR. VEGH: So that's -- in terms of the allocation, that's one method of allocation, what is set out in section 2.1, and then I want to understand your -- well, I want to understand the other options that you're looking at. 331 And so one of the -- I guess the two places to look to identify those options, one is at the results of the -- well, the gross gas isopach originally filed, and that's at volume 1, tab 3 -- volume 1, orange tab 3, white tab 2, figure 10. 332 MR. DUTOT: I don't have that, sir, but I think is this map over here -- 333 MR. VEGH: No, it doesn't address that. 334 MR. DUTOT: No, that is not -- 335 MR. VEGH: Perhaps your counsel can provide you a copy. 336 MR. DUTOT: There's a map on the floor here, I think, showing that, is there not? A big map? 337 MR. VEGH: I don't think it shows the original one, no. Volume 1, coloured tab 3 -- oh, is that it? What figure does that say? 338 MR. DUTOT: Figure 13. 339 MR. VEGH: Yeah, no, that's not the one. 340 MR. LEWIS: Which figure is that? 341 MR. VEGH: Figure 10. 342 MS. CRNOJACKI: Here it is. Here is a copy for your use, the original figure 10. 343 MR. CHINNECK: My assistant is on the panel. 344 MR. VEGH: Okay. So I think that you have that? 345 MR. DUTOT: I have a copy, thanks. 346 MR. VEGH: So there is that, and then the one to compare that to is the one you have just set up on the easel; that's the revised figure 10, and for the record, that's at Exhibit E.1.4. 347 Now, when you look at these two isopachs, going to the original figure 10, you see that the gas is found outside of the unit operating agreement? 348 MR. DUTOT: I do. 349 MR. VEGH: And then when you see the revised figure 10, you see that the gas -- I think it's right to say that the gas is not outside the original unit operating agreement? 350 MR. DUTOT: I'm looking at lot 39, concession 8. 351 MR. VEGH: Lot 39, concession 8, yes. 352 MR. DUTOT: Is there not a section there, sir, that's -- or am I not looking at the right map? 353 MR. VEGH: We're looking at the revised map now, the new figure 10. 354 MS. DUTOT: That's it there? 355 MR. DUTOT: Yeah. Is there not an indication that the boundaries there are outside there? Or what boundary are we looking at? There are several boundaries shown. 356 MR. VEGH: Okay. So if we look at revised figure 10 -- 357 MR. DUTOT: I have it. 358 MR. VEGH: -- I'm looking at the -- 359 MR. BETTS: Just for clarity, does the witness have the revised one in his hands? 360 MR. DUTOT: It's written on here that it's -- 361 MR. CHINNECK: Sorry, I'm not sure. It doesn't look like he's got the revised one. 362 MR. DUTOT: No, I don't. It is not, I'm sorry. 363 MR. BETTS: So the revised one is the one that's on the tripod. 364 MS. CRNOJACKI: Okay, here is a copy. Here is for your use. 365 MR. DUTOT: Okay, we'll try again. 366 MR. VEGH: Okay, sorry about that. 367 So the original figure 10 has gas outside of the boundaries of the unit operating agreement? 368 MR. DUTOT: It does. 369 MR. VEGH: And as I see the revised figure 10, the gas is all inside the unit operating agreement; is that how you see it? 370 MR. DUTOT: So are you looking at the zero boundary on that? 371 MR. VEGH: Yes. 372 MR. DUTOT: Okay. So -- 373 MR. VEGH: Is that how you read this as well? 374 MR. DUTOT: I'm looking at the outer perimeter, sir, that -- 375 MR. VEGH: Oh, you -- okay, so you're looking at the outer boundary? 376 MR. DUTOT: I am. 377 MR. VEGH: Okay. And the outer boundary between the two figures hasn't really changed; right? 378 MR. DUTOT: No. 379 MR. VEGH: At least not that I can tell. What has changed between the two figures is what we'll call the inner boundaries, that is, from line zero moving inwards to the center? 380 MR. DUTOT: Okay. 381 MR. VEGH: And as I understand the applicants' evidence, it is that the lines from zero moving inwards on this isopach is what sets the boundary for gas. 382 MR. DUTOT: Okay. 383 MR. VEGH: Is -- 384 MR. DUTOT: That is probably new news to me. 385 MR. VEGH: Okay. So could you explain, then -- well, you talked about the three options that were available to allocate the compensation among the landowners. Could you identify what those options for me -- what those options are for me by reference to these documents or by reference to what's the most effective way to identify those? 386 MR. DUTOT: Going back to the one issue where Mr. Brown was able to get leases by promising rewards, under those conditions, the pay-out would be across the DSA area, if he were made to keep his promises, the whole DSA area. 387 MR. VEGH: And is there anywhere in the evidence that marks out that -- sort of documents that commitment or that promise? 388 MR. DUTOT: Probably not. We have a letter from Mr. Brand that we filed indicating that that was what he was promised. 389 MR. VEGH: Okay. 390 MR. DUTOT: He was the only person that became part of the DSA under a new lease. 391 MR. VEGH: Okay. And then -- so you're saying if that option is taken, then you divide the compensation among everyone who was within the reef boundary? 392 MR. DUTOT: Everyone within the DSA boundary. 393 MR. VEGH: Everyone within the DSA boundary, and you wouldn't even look at where the reef boundary is? 394 MR. DUTOT: No. 395 MR. VEGH: Okay. 396 MR. DUTOT: Second scenario -- 397 MR. VEGH: And just before you get to that -- 398 MR. DUTOT: Okay. 399 MR. VEGH: -- is there any more detail on how you would calculate everybody's share? 400 MR. DUTOT: I guess you would just decide how many dollars' worth of residual gas had to be paid out, and you would divide it by the acreage. That would treat each acre equal. 401 MR. VEGH: Okay. So that was the first option, the Brown option? 402 MR. DUTOT: Well, that's what he obtained, leases, by making that promise, that's true. 403 MR. VEGH: And what are the other options then? 404 MR. DUTOT: The second option would be to pay it as it's been offered under the two old unit agreements. 405 MR. VEGH: Right. 406 MR. DUTOT: The third option was brought up by Mr. Vermue. He felt that the outer boundary of the 3-D test would indicate that there was a piece of property that became part of a production area. 407 MR. VEGH: Okay. So which boundary then would we be talking about? 408 MR. DUTOT: Well, using the original figure 10, could we look at that? 409 MR. VEGH: Yes. 410 MR. DUTOT: The zero boundary moves on to lot 39, concession 8. 411 MR. VEGH: Yes. 412 MR. DUTOT: And that was not in the old unit agreement. 413 MR. VEGH: Right. 414 MR. DUTOT: So I think there needs to be some discussion as to what the proper boundary would be or -- we are looking for some guidance on that, to be honest with you. We figured there would be some rules or regulations that would be laid out that you should have to follow. I am not sure if you know what 3-D testing does to farmers' lands, but they drill it full of holes in a close succession, and it is -- it can be very damaging to drainage systems which can cost probably $800, $900 an acre, and we really fail to see what this accomplished. Like they were telling us that the boundaries would be bigger and things would change, and not much changed. And we wonder why we were subjected to that damage, when it doesn't really mean anything, at least it doesn't to the farmers. 415 MR. VEGH: But just in terms of -- I understand your point, but just in terms to have compensation allocation issues, what I am -- my understanding from the applicants is that, regardless of which allocation method of the three that you have described, regardless of which one of those you use, the total pot of compensation remains the same; is that your understanding as well? 416 MR. DUTOT: Yes, it is. 417 MR. VEGH: And so, in a sense, they are indifferent to that? 418 MR. DUTOT: Pardon? 419 MR. VEGH: They are indifferent; they don't really care which one of those three options you choose? 420 MR. DUTOT: The company or the farmers? 421 MR. VEGH: The company. 422 MR. DUTOT: No, I believe we were -- Mr. Jordan and I discussed that, that they would put it in a pot and let us divvy it up, but we were looking for some direction on what would be the better -- and I think that could be worked out once -- you know, if I could go back and say, you know, here is what happened, I guess it has something to do with 3-D, that there has not been a lot of that done in storage areas, is that true? 423 Maybe I am not supposed to ask questions, but -- 424 MR. VEGH: Well, you are, but not from me, I am not the best to answer that. 425 MR. DUTOT: We were told that the latest technology should basically decide, you know, the latest payment, but if there is some other reason, we are willing to accept that. 426 MR. VEGH: Now, if it is really -- if, as Mr. Jordan says, the applicant will throw the money into the pot and leave it to the landowners to see if they want to change from the current method in the agreements -- I am not talking about the revised agreement, but the original one -- if they want to change from that, is it fair to say that while the landowners work that out, that that shouldn't be sort of a bottleneck to the rest of the application going forward? 427 MR. DUTOT: Well, I think that -- I feel that we can reach an agreement, you know, if like we suggested 60 days or greater, I believe we can do that. 428 MS. DUTOT: May I just add a little statement here? 429 MR. VEGH: Please. 430 MS. DUTOT: This has only been talk between Mr. Jordan and the leaders of our group. This has never been discussed other than we were told it was a unit agreement pay-out by the applicant. 431 That was their commitment on it, that it was unit agreement. 432 MR. VEGH: Right. 433 MS. DUTOT: That that's the way they were standing on the situation. Mr. Walsh, I believe, stated that earlier in his testimony. 434 MR. VEGH: Yes. And I believe he said that the basis for that was because that is what is in the current agreements, and if people want to renegotiate those agreements and change them, that's fine, but until they do that, it is going to follow the original arrangement; is that -- that's my understanding of his testimony. 435 MR. DUTOT: I agree. 436 MR. VEGH: So you are just saying you need some time to work this out and talk it through among the landowners? 437 MR. DUTOT: Like I said, we have been looking for some rules and regulations, and I think I had a phone call to Ms. Crnojacki on probably Friday before we came here on the Mandaumin case, and we really haven't had time to look at it or discuss it with anyone. 438 MR. VEGH: Okay. The other issue that I have in my list of your issues was the environmental -- basically the environmental clean bill of health with respect to what's being described as the spill. 439 Now, on that issue, my understanding is that what the concern is really is that, without a certificate from the Ministry of Environment, that the land value is depressed; is that the basic point? 440 MR. A. FEDDES: Yes, that's correct. 441 MR. VEGH: And I also understand that you and the applicants have different views on this issue, but what I wanted to make sure that I was clear on was you want the certificate whether or not the Board grants approval for this application? 442 MR. A. FEDDES: Yes, we do. 443 MR. VEGH: And so what I am not really clear on, and maybe your counsel can advise, is how does giving that certificate, what is the relevance of getting that certificate to whether or not the application should be approved? 444 MR. A. FEDDES: Any agriculture property now being sold needs a certificate for that. We cannot give it to the buyer unless we have a certificate. So if Tribute don't want to undertake this testing, we have to do it ourselves. So we will have to pay for it ourselves, which we don't think we should have to. You understand that? 445 MR. VEGH: Oh, I understand that. And I understand that you have a dispute with Tribute about that, and you know, who should pay for it and who should get the certificate. 446 What I am not really clear on, just to be honest with you, what I am not really clear on is what that has to do with the authorization -- you know, the designation of the area or the authorization to inject gas, and maybe you could help me on that issue. 447 MR. A. FEDDES: Well, there was a spill, and it was not reported on this particular spill. So now is the time to look into it while they are cleaning the property up, and now we should get a certificate, because we may want to sell it two years from now, the property, and then we have go through it. Who is going to do the certificate then? Us or Tribute? And -- 448 MR. VEGH: So -- 449 MR. A. FEDDES: I do agree with you, well -- 450 MR. DUTOT: Could I add something? 451 MR. VEGH: Sure. 452 MR. DUTOT: I think what he is trying to tell us is that when the battery site is cleaned up and Mr. Feddes does own the property, it needs to be zoned back to farmland and it becomes part of the whole farm. And like he said, when you sell a piece of property, you are asked about, are there any pollutants and all the rest of the stuff, and you are supposed to be signing that everything is free and clear. 453 Now, people know, those barrels have been there for 30 years, probably, and people know there was a spill at that battery site back in, I'm guessing, the early '80s. It was cleaned up; it was not this company's fault. But there seems to be no records as to how well it was cleaned up. 454 So there is always going to be doubt on that piece of property. 455 MR. VEGH: Right. 456 MR. DUTOT: And it does go back to the farmer, so I don't think this is a reasonable thing. Like I just don't understand that. 457 MR. CHINNECK: Mr. Vegh, perhaps I could assist with some of the rationale for this being a condition. 458 MR. VEGH: Yes. 459 MR. CHINNECK: The TSLA group believes that the applicant is essentially changing the use of the property from extraction to storage, that is what the request is, and as part of that changeover, there's going to be a decommissioning of the existing operations. And they feel that the proper process and the proper procedure should be that the existing operations are cleaned up fully before a designated storage use, which is a new use, is commenced. So that we all have a clean slate and we all know what we are dealing with, and that the activities and the behaviours of the applicant can be monitored clearly thereafter when it is properly designated as a storage facility. That's the rationale. 460 MR. A. FEDDES: Yes, I will agree with that. 461 MR. VEGH: Okay, well, thank you, that's very helpful. And just maybe to complete the record on this point or the information on this point, you may recall that one of the questions I asked was whether or not the applicant was prepared to comply with a number of standards, and one of those was the provincial operating standards under the Oil, Gas and Salt Resources Act of Ontario, and the applicants said that they would comply. 462 I'll just point to you -- and I apologize for not having copies for everyone. We can get copies if you would like, but I'll just read it into the record. Section 5.16 of those operating standards say that -- say as follows: 463 "Site rehabilitation shall be conducted in a manner that returns the site to near its original condition, or as near to its original condition as practical, no later than one year after the operations have been terminated. Rehabilitation shall include..." and then there is a number of things that rehabilitation shall include, and it ends with: 464 "(F) Provide for an examiner to visit the site and certify that rehabilitation of the site was completed in accordance with this standard." 465 So is that basically what you're looking for? 466 MR. A. FEDDES: Yes, sir. 467 MR. VEGH: Okay, thank you. I'm more clear on that, so thanks for clarifying that. 468 MR. A. FEDDES: Uhm-hmm. 469 MR. VEGH: One final issue that I wanted to ask you about was the exchange of -- you know, the discussion we had around the photographs. And I don't want to pull the photographs up again, I just wanted to get a clarification of some of the timing issues on the record, because it looks like this has become an issue. 470 And Mr. Feddes, I have the transcripts of your examination-in-chief yesterday -- I don't know if you have a copy of that. 471 MR. A. FEDDES: No. 472 MR. VEGH: Could you provide that? Ms. Litt will provide you with a copy. I'm looking at volume 4 of the transcripts, line 1423. 473 MR. A. FEDDES: Where would that be? Okay, I have it. 474 MR. VEGH: Okay. Could you read your answer there, really read down to line 1428, and Mr. Dutot, if you could read that as well, and then I want to ask you a question about it. So take your time and let me know when you have read it. 475 MR. BETTS: Mr. Vegh, while the witnesses are reading that, would you keep an eye on the clock and find an appropriate time for a break? 476 MR. VEGH: Thank you. 477 MR. DUTOT: Proceed. 478 MR. VEGH: Okay. I wanted to ask -- I just wanted to get a clarification around the timing issue. 479 First, this transcript, you know, accurately records what your answer was? 480 MR. A. FEDDES: Yes, I believe so. 481 MR. VEGH: So here is my question: You were asked about the timing of these photographs, because you'll recall that Ms. McConnell said that she took her pictures around the 23rd of July, just shortly after -- and she said she took her pictures on the 23rd of July, and that the clean-up that she is talking about, that's demonstrated in her pictures, took place a month before that. 482 And then you said: 483 "Recently, they took the tanks away from there. Ms. McConnell said it was done a month ago, the clean-up on this particular site, but it actually was done on August 4th." 484 So you say the clean-up was done on August 4th, not July 23rd. And you say: 485 "In the pouring rain, in the morning, they were there and cleaned it -- after the tank was done -- the tank was done a month ago, but the clean-up was done one -- Wednesday a week ago. In the rain, they cleaned up the debris that was laying around there, and they dumped a load of topsoil over top of it and levelled it. So it wasn't done a month ago on this particular site; it was only done on the 4th of August." 486 And then Mr. Chinneck asked you: 487 "And why do you think it would have been done on August 4th in the rain?" 488 And your answer was: 489 "Well, because Mr. Dutot filed these photos, I believe it was the 29th of July, and they" -- being the applicants -- "received them probably the 2nd of August, or whatever the date was, and so they quickly went out and did this." 490 And then Mr. Chinneck asked: 491 "Mr. Dutot, do you know what date those photos were filed?" That is, the photos that, Mr. Feddes, you described as being filed on the 29th? And Mr. Dutot said that he believed it to be July 20th. 492 So he believed the -- and I think that's accurate, the photos were filed July 20th. 493 MR. A. FEDDES: Yes, I agree with that. 494 MR. VEGH: Not July 29th. 495 MR. A. FEDDES: Yes. 496 MR. VEGH: But then Mr. Chinneck didn't go back to ask you whether or not that had any impact on your estimation of when these pictures would have been taken. 497 So I am asking you that question now. Given that the photos were provided July 20th instead of July 29th, does that have any effect on the date that you think the photos were taken? 498 MR. A. FEDDES: I think Ms. McConnell, she took the pictures from the battery site instead of well number -- Goderich 1A, which is further down into the field. And I believe Ms. McConnell took a picture from the battery site, which is further north in the property. That's the difference. 499 MR. VEGH: I'm asking you just specifically about the dates on which the pictures were taken. 500 MR. A. FEDDES: Okay. 501 MR. VEGH: And whether the fact that Mr. Dutot's pictures were filed on July 20th and not July 29th has any impact on your belief of the date on which Ms. McConnell's pictures may have been taken? 502 MR. A. FEDDES: I couldn't tell you for sure. 503 MR. VEGH: Okay. Thank you, panel. Those are my questions. 504 MR. BETTS: Thank you. 505 We'll take this as an opportunity to break. We'll break for approximately 20 minutes. Let's return here at 25 minutes past 11:00. 506 --- Recess taken at 11:05 a.m. 507 --- On resuming at 11:30 a.m. 508 MR. BETTS: Thank you, and Mr. Vegh, that concluded your cross-examination of this panel? 509 MR. VEGH: Yes, sir, thank you. 510 MR. BETTS: Thank you. Mr. Lewis, are you prepared to proceed? 511 MR. LEWIS: Yes, Mr. Chairman. 512 MR. BETTS: Please do. 513 CROSS-EXAMINATION BY MR. LEWIS: 514 MR. LEWIS: I would like to, on behalf of my client, thank the three of you for coming down and participating in this hearing, and I would also like to thank you for showing your support for this designation, and I understand from your evidence that you do have concerns; you still have concerns, and my client has tried to, in their evidence, address some of those concerns. And -- 515 MR. BETTS: Mr. Lewis, can I get you to move back a little just so you can point your voice at the mike as well as the witnesses. 516 MR. LEWIS: Certainly, I'm sorry. 517 MR. BETTS: Thank you. 518 MR. LEWIS: Did the reporter get all that? 519 I would like to just ask you a few questions regarding those concerns and see if, over the course of these proceedings, we may have answered some of them, if not totally to your satisfaction, at least in part. 520 Just before we begin, I understand from your evidence yesterday that all three of you are TSLA executive directors; is that -- or did I miss it? 521 MR. DUTOT: That's incorrect. 522 MR. A. FEDDES: Yes, that's correct. 523 MR. DUTOT: Mr. Feddes and myself are directors. The other director has 110 cows that he has to look after, so he was unavailable to come. My wife is a landowner and a member, but not a director. 524 MR. LEWIS: Okay. In terms of that association, is it correct to say that the TSLA has, as members, all of the landowners within the proposed DSA, with the exception of two? 525 MR. DUTOT: That would be correct, unless you are going to move the boundaries. 526 MR. LEWIS: And the two are Mr. Goff Brand and Mr. Adrian Brand, the two who are not members? 527 MR. DUTOT: That's correct. Mr. Adrian Brand was a member until we entertained legal counsel. 528 MR. LEWIS: Thank you. 529 MR. DUTOT: He has a problem with lawyers for some reason. I'm sorry, I had to do that. 530 MR. SOMMERVILLE: A good basis for disqualification. 531 MR. LEWIS: Okay. And so -- and again, I was a bit confused yesterday. I understand that you do not have authority to enter into a contract and bind the members and the association unless you go to them and have them ratify and agreed to the terms; is that fair to say? 532 MR. DUTOT: That would be fair. 533 MR. LEWIS: But you are here on behalf of the members giving evidence today and representing them? 534 MR. DUTOT: That's true. 535 MR. LEWIS: Just going back in history, we all know from the evidence that the lands were unitized into the north and south Tipperary pools back in 1977 and that production started in 1980. 536 And since 1980, as I understand it, you, Mr. Dutot and Mr. Feddes, did your son own his land in 1980? 537 MR. A. FEDDES: No, sir. 538 MR. LEWIS: No, that was in '92 that he bought the bigger block? 539 MR. A. FEDDES: Yes. 540 MR. LEWIS: In any event, I think, Mr. Dutot, you've been there throughout the whole -- 541 MR. DUTOT: I have. 542 MR. LEWIS: Right. And you have received royalties under the unit operation agreements? 543 MR. DUTOT: I did not. 544 MR. LEWIS: You have received no royalties? 545 MR. DUTOT: No. 546 MR. LEWIS: Were they tendered or paid to you? 547 MR. DUTOT: No, they weren't. 548 MR. LEWIS: And why didn't you receive royalties? 549 MR. DUTOT: That was a question that Mr. Brown and I discussed. He told me I should have received royalties as well. When you look at the unit agreement -- could I demonstrate on that plaque, sir? 550 MR. LEWIS: Please do. 551 MR. BETTS: You are going to have to speak very, very loud now. 552 MR. DUTOT: In the original unit agreement, we got a north and a south and it is two separate agreements. This property here belongs to us, Tipperary Farms Ltd., as well as the smaller parcel, and this section was always in the unit agreement but I never received royalties. And the explanation that we finally got -- like I have not owned this -- my father owned this farm long before the unit agreement was made, I just wanted to make that clear. 553 And I received no royalties and Mr. Brown thought I should have had royalties and whatever, but anyways, it ended up they say this was a non-participating area and I never really got a reason as to why a non-participating area was here. But that was the only non-participating area that seemed to be inside the box that did not receive royalties. 554 MR. LEWIS: So just so we are clear, and I know the unit agreements are in the materials, but the participating area of the unit agreements would be -- would delineate the then known pools in each block; is that fair to say? 555 MR. DUTOT: I think so, yes. 556 MR. LEWIS: And the participating areas would be two separate pools within each of the two units shown there? 557 MR. DUTOT: Inside the green line, sir? 558 MR. LEWIS: Yes. 559 MR. DUTOT: No, this property was deemed non-participating. 560 MR. LEWIS: Yes, but in the north Tipperary pool, could you outline with your finger for us what the participating area would roughly look like? 561 MR. DUTOT: I presume it is this, I guess. It would come over to here. 562 That is about -- that is just my assumption. As reading the agreement, I have a copy of the agreement that is filed with the title of the property and is broken down in percentages. And this seemed to be the only property in the old unit agreement that did not receive royalties. 563 MR. LEWIS: Okay. The other landowners, though, within the north Tipperary pool received royalties, though, did they not? 564 MR. DUTOT: I believe so. 565 MR. BETTS: As much as possible, if you could be seated for your answers, that would be helpful. If you have to go to the board, go ahead, but otherwise, please be seated. 566 MR. LEWIS: And the landowners within the south Tipperary pool who were in the participating section of the unit also received royalties for several years, didn't they? 567 MR. DUTOT: I believe they did, but I was not in the south pool and I do not have information on the south unit agreement. 568 MR. LEWIS: I am just wondering, just so we are clear on the record here, if we could have a look at the agreement for the north Tipperary pool. Perhaps this is the south pool. 569 It is at volume book 2, white tab 8, buff tab 5. 570 MR. DUTOT: I don't have that exact page, but I have a copy that shows the old unit agreements. 571 MR. LEWIS: Okay. And within each unit, there is a depiction of where the participating area is? 572 MR. DUTOT: I think so, yes. 573 MR. LEWIS: And it was the people whose lands touched on that participating area that received royalties? 574 MR. DUTOT: Within that boundary, is that what you are saying? 575 MR. LEWIS: Within the participating section. 576 MR. DUTOT: There is a little area where my home now, 4 acres, it did not participate either. 577 MR. LEWIS: Okay. Was it within the participating section? 578 MR. DUTOT: It is, it is right -- it is just below the McCulough property there. 579 MR. LEWIS: And it didn't participate either? 580 MR. DUTOT: No, it didn't. 581 MR. LEWIS: But some of your neighbours did participate? 582 MR. DUTOT: That's true. 583 MR. LEWIS: So I guess the issue of whether the division of royalties under those old unit agreements was fair or not is one that depends on the perspective of the person who you ask the question to; would you agree with me? 584 MR. DUTOT: I guess, yes. 585 MR. LEWIS: So for some of the people who were in the participating section, they would feel that the royalty payments and the method of dividing them up was fair? 586 MR. DUTOT: I didn't make that agreement, so I am unwilling to go there. 587 MR. LEWIS: Was it you or your father who signed the agreement? 588 MR. DUTOT: It was signed in like 1974, I believe. 589 MR. LEWIS: Was it -- 590 MR. DUTOT: And it was my family, yeah. Excuse me. 591 MR. LEWIS: So when you -- did you take over the farm after '74? I believe that -- 592 MR. DUTOT: I bought it in 1981 -- or '80 -- sorry, it might have been 1980. 593 MR. LEWIS: I believe the unit operation agreements are dated some time in 1977. 594 MR. DUTOT: '77. 595 MR. LEWIS: And so when you bought the farm from somebody in your family, you basically inherited the agreement; is that fair to say? 596 MR. DUTOT: Yes, it is. 597 MR. LEWIS: So in your view, the split, according to the unit agreements, was not fair? 598 MR. DUTOT: I am not here to argue about that. That's the way it was laid out. It was brought to my attention. Like, this field sat there and was literally almost non-productive for many years, and it wasn't an issue and it isn't an issue right now. But when Mr. Brown came around trying to get entry to the farms for the seismic testing, he brought it to my attention. He said, Well, you know, you're part of this thing and you've got a participating acreage there. And I said, Well, we don't get royalties. And that raised the issue, but it's not an issue for me. 599 MR. LEWIS: I'm just wondering, though, if we're going to explore what is a fair and just way to split up the residual gas payment and we're proposing, my client's proposing that that be split up on the same basis as the payments under the unit operation agreements, it becomes potentially an issue as to whether the original unit operation agreement was fair and reasonable. Would you agree with that? 600 MR. DUTOT: Yeah, I would. 601 MR. LEWIS: And the split on the original unit operation agreement payments would be fair and reasonable to some of the people who were receiving money under them? 602 MR. DUTOT: Yeah. 603 MR. LEWIS: And from the perspective of some other people, possibly yourself, it might not be fair and reasonable. 604 MR. DUTOT: I am not really here to argue that. 605 MR. LEWIS: Okay. When the unit was first put into production, was it PPC who was the company back then; can you recall? 606 MR. DUTOT: I can't recall, because there's -- if you search these titles back to 1953, if my recollection is right, there has been 19 different names involved. 607 MR. LEWIS: Right. But there's been a lot of people involved in these lands from an oil and gas perspective since the get-go, hasn't there? 608 MR. DUTOT: There certainly has. 609 MR. LEWIS: And in terms of the operators that you can recall since, say, 1977, was PPC Oil & Gas one of them? 610 MR. DUTOT: I believe it was, and there was another name that was almost the same initials. It was a different name, but it was not the same company, I don't believe. 611 MR. LEWIS: Palladon Petroleums? 612 MR. DUTOT: The name sounds familiar. 613 MR. LEWIS: The the most recent one prior to Tribute becoming involved in 1998 was Paragon Petroleums, was it not? 614 MR. DUTOT: I think so. 615 MR. LEWIS: And they were a company run out of Calgary? 616 MR. DUTOT: I don't know, sir. 617 MR. LEWIS: Is it fair to say that when Tribute first took over back in 1998, that the field was not in great shape? 618 MR. DUTOT: I would agree. 619 MR. LEWIS: And would you agree with me that since Tribute has taken over, they have taken some steps to improve the production operations? 620 MR. DUTOT: In very recent times, I would say that. 621 MR. LEWIS: Okay. Would you agree with me that the tank battery that we've been talking about, this two-acre strip that's part of Dwayne Feddes' lands now, that when Tribute first took over in '98, there were more tanks in there and it was in quite a state of disarray? 622 MR. A. FEDDES: If I may answer this, it was in quite a disarray up till about three months ago, so most of it has been cleaned up in the last three months. 623 MR. LEWIS: So you wouldn't agree with me if I suggested that some of those tanks were removed in '99 from that battery site? 624 MR. A. FEDDES: Could have been. Not that I recall. 625 MR. LEWIS: Okay. In any event, Tribute has plugged two wells in the field since they took over? 626 MR. A. FEDDES: I am aware they plugged one well in my farm. 627 MR. LEWIS: Okay. 628 MR. A. FEDDES: And the other one, I do not know. 629 MR. LEWIS: Okay. Are you aware whether they installed a compressor south of Clinton that sort of ties in with all their production up in that area to try and increase production? 630 MR. A. FEDDES: No, I don't. 631 MR. LEWIS: In any event, the pictures show they have undertaken some clean-up, and we can all agree on that? 632 MR. A. FEDDES: I must agree with you. It doesn't look any worse than four years ago. 633 MR. LEWIS: Does it look a little better than four years ago? 634 MR. A. FEDDES: In the last two months, yes. 635 MR. LEWIS: The McCulough property, this is the site that was chosen for the drilling of the new vertical well. I understand you were here and listened to it, from the geological evidence that was given, that that site was picked for the purpose of drilling that well so that it could access the two pools by way of horizontal legs; did you recall that evidence? 636 MR. DUTOT: I recall that evidence. Could I add to that answer? 637 MR. LEWIS: Sure. 638 MR. DUTOT: We were told when the entry was gained to that farm that they were drilling a production well, and if it was not a production well, then you would try and use it as a storage well. 639 So you're telling me that you chose the site for a storage site or a production site? 640 MR. LEWIS: I think the evidence that we've heard from Ms. McConnell was that it was -- and Dr. Walsh, I believe, that it was chosen based on geological and geophysical evidence as a vertical well initially, with a view to accessing the two reservoirs in the north and south portions of the field. You don't accept that? 641 MR. DUTOT: We can accept that, but I believe it was part of an entry to that property that was not up-front with the people. 642 MR. LEWIS: Okay. Prior to entering that site, did you have any meeting with Mr. Jordan? 643 MR. DUTOT: Yes, we did. We had a lot of discussion earlier as to where the roadway was going to be, because originally, we'd looked at five proposals for this thing before the final one was chosen; different wells here and there, lines, roads, whatever. 644 MR. LEWIS: I'm just talking prior to, I believe, March of this year. 645 MR. DUTOT: Okay. 646 MR. LEWIS: And you do recall having a meeting with Mr. Jordan where he was explaining the intentions of Tribute to go in and pick a well site on the McCulough property? 647 MR. DUTOT: Yes. 648 MR. LEWIS: Okay. And you discussed with him the proposed well site? 649 MR. DUTOT: We did. 650 MR. LEWIS: And you discussed with him the proposed access road? 651 MR. DUTOT: Yeah, it was a major point of discussion because originally you proposed that road 20 feet from my bedroom window. 652 MR. LEWIS: But you did have discussions and it was moved somewhere else? 653 MR. DUTOT: We did. 654 MR. LEWIS: And did you have any discussions prior to them entering on the land with the tenant farmer Mr. Middleton, I believe his name is? 655 MR. DUTOT: There was some discussion, but I'd like to elaborate on that. 656 We originally -- or finally got to the point where there was an agreement for two acres straight in off the road, and this was on in probably January before that got agreed to. 657 And the agreement we had with Mr. Jordan was, when your surveyors came and flagged that area, so -- 658 MR. LEWIS: They staked the proposed road, did they? 659 MR. DUTOT: Okay, we can call it staked. But there was a proposal that it would be surveyed and staked, and at that time we would have a meeting with Mr. Middleton, the tenant farmer, myself, and Mr. McCulough's niece and nephew, and we would discuss entry to the property. That meeting actually did not take place. 660 MR. LEWIS: But you were the spokesperson for Mr. Middleton, weren't you? 661 MR. DUTOT: I could speak for him, but there was no agreement really reached on -- other than saying they would pay some crop damage. And I think in some of that Stantec evidence that we spoke about earlier this morning, that stuff was all supposed to be done prior to entry to the farm. 662 MR. LEWIS: I'm just trying to understand the types of discussions you might have had with Mr. Jordan before any equipment was brought in, before any drilling rig was brought in. And as I -- correct me if I am wrong, and I don't want to put words in your mouth, but you did have discussions about the location of the well and the access road and there were discussions of or regarding Mr. Middleton, the tenant farmer, about potential crop damage; is that fair to say? 663 MR. DUTOT: Yeah, but very minor discussions. 664 MR. LEWIS: Okay. 665 MR. DUTOT: Like I said, we had an agreement that he was going to come when the -- after it got flagged. 666 Could I enter -- could I talk to you about a book that I keep, a daily diary? 667 MR. LEWIS: Well -- 668 MR. DUTOT: The point I am trying to make is we were actually notified by Merner's Construction on a secondary basis that they were going to start construction on the McCulough property, and I can relate to this book to the exact date, if you would like. 669 MR. LEWIS: Well, I am being told by my client that she wants me to move on to other areas, so maybe we should leave the McCulough access road alone. 670 Would you agree with me you have had a reasonably good relationship with Mr. Jordan as a land man? 671 MR. DUTOT: He has been much better to work with than Mr. Brown, I would agree. 672 MR. LEWIS: As I understand the compensation issue as it sits today, there are two outstanding points, and those are the residual gas split and the timing or methodology for changing compensation in the future; is that fair to say? 673 MR. DUTOT: Yes, it would. 674 MR. LEWIS: And there was a discussion or a reference, rather, to an agreement that had recently been prepared by your counsel and given to myself in regards to sort of a counter-proposal to the July 27th, I believe, amending agreement; do you recall those discussions? 675 MR. DUTOT: Yes. 676 MR. LEWIS: And perhaps we could enter as an exhibit or have you identify first this amending agreement, and I think, to keep the record straight, we should probably have that entered as an exhibit. 677 MS. LITT: Exhibit E.5.1. 678 MR. BETTS: We'll let the witnesses identify it first. 679 MR. DUTOT: Could I have that number again, please? 680 MS. LITT: E.5.1. 681 MR. DUTOT: Thank you. 682 MR. BETTS: And, Mr. Dutot, do you recognize this to be the agreement that Mr. Lewis was speaking of? 683 MR. DUTOT: I believe it is. 684 MR. BETTS: Thank you. And that is Exhibit 5.1. Thank you. 685 EXHIBIT NO. E.5.1: AMENDING AGREEMENT DATED AUGUST 10, 2004 686 MR. LEWIS: And this agreement, Exhibit E.5.1, is dated August 10th, 2004. Would that have been the date that it was given to me by your counsel? 687 MR. DUTOT: It was probably given a day later or so. I don't know. 688 MR. LEWIS: Maybe the 11th of August? 689 MR. DUTOT: Possibly. No. 690 MS. DUTOT: I'm sorry, but you were handed that Tuesday morning, but we are not really -- did the hearing not start on the 9th, was it? 691 MR. LEWIS: Correct. 692 MS. DUTOT: This is what we are confused with, which date was which. 693 MR. LEWIS: We started on Monday the 9th. 694 MS. DUTOT: So we gave it to you Tuesday morning, the 10th. 695 MR. LEWIS: The 10th, fair enough. 696 And as I understood your evidence in chief on the point of residual gas, there are these two ways of -- well, I guess three ways of calculating it that my friend, Mr. Vegh, took you through. 697 And if we can just, for the sake of discussion, leave out the Murray Brown way and look at the two that appear to have been put forward by the applicant and by yourself in connection with these amending agreements, Exhibit 5.1 being your version, which appears to be some form of split based on 3-D seismic, and our version, which -- and I believe the clause hasn't changed from the May offer to the July offer -- of doing it on the basis of unit agreements. Is that sort of fair to say that those are the two positions that have been bandied back and forth here? 698 MR. DUTOT: Yes. 699 MR. LEWIS: And I believe in your evidence you were indicating that you were looking for some regulation or help in deciding this point? 700 MR. DUTOT: That's true. 701 MR. LEWIS: Would you find any comfort in, if we can't come to any kind of an agreement on this point, would you find any comfort -- because it is -- will you grant me, it is a difficult issue when we have got two farmers in the unit who have already signed based on the unit agreement approach? Would you agree that it is going to be difficult now to depart from that? 702 MR. DUTOT: I'm not sure. You don't have a majority, I don't believe. 703 I think if we were given some direction, which we may even have now, when I get home, that we can agree upon this amongst the farmers, and if this Board will allow us at least 60 days to sort this out a bit, I believe we can come to you with the way it will be. 704 MR. LEWIS: Okay, and if anything short of unanimity between the farmers, are you content to let the Board arbitrate and decide this point as to how the residual gas will be split? 705 MR. DUTOT: We could, but I don't think that would be necessary. I think we will reach an agreement without that, but if we cannot, somebody is going to have to do it, I agree. 706 MR. LEWIS: And would you be -- would you be prepared to have that somebody be this Board? 707 MR. DUTOT: Is there anybody else? Sorry, but I believe the Board has the capacity, is that true, the Board has the capacity to make that call? 708 MR. LEWIS: I believe they legally do, but if we look back at your lease, your gas storage lease agreements -- and I don't know whether you had a chance to review these with your counsel, but if I suggest to you that there is a provision in that agreement that says if the applicant and you can't come to an arrangement on this point, that the Board could be the arbitrator of that disagreement? 709 MR. DUTOT: I would go that far. If we cannot reach an agreement amongst the farmers, we would take a forced decision. 710 MR. LEWIS: Thank you. Now, I understand that you have serious concerns about the water contamination -- 711 MR. BETTS: Mr. Lewis, just before you start off on another topic, just for my understanding, that the exhibit which has been entered as 5.1, it has the word "no" written in beside -- there are some -- well, the word "no" is the only one I guess. Who put that -- 712 MR. LEWIS: That is my writing. I only had one copy of this document, and I apologize for the edit, and thank you, that should be cleared up. 713 MR. BETTS: Thank you. 714 Please proceed. 715 MR. LEWIS: In regards to the water issue, we have heard evidence from Dr. Walsh that from a geological standpoint, the caprock and anhydrite that drapes over the top of this reservoir is something that, in his view, should protect the integrity of that reservoir; do you recall that evidence? 716 MR. DUTOT: I do. 717 MR. LEWIS: And subject to this 6-foot coring of the caprock being tested and verified as to its properties by the laboratory in Alberta, if that test comes back and says that this caprock is suitable, would you be prepared to accept that, at least from the standpoint of the natural reservoir, we have got something that is fairly tight and has some inherent protection from escaping gas up a fracture or some such thing? 718 MR. DUTOT: So what is your question? 719 MR. LEWIS: My question is, subject to the tests coming back of the caprock, are you satisfied from a geological standpoint that the reservoir is protected, there's integrity in the reservoir? 720 MR. DUTOT: Are you asking me to forego this water sampling and -- 721 MR. LEWIS: I'm just trying to understand -- it seems to me, and if you disagree with me, please say so, that if we can somehow understand or get some level of comfort from the integrity of the system, then trying to devise many plans that might deal with water pollution may not be completely necessary? 722 MR. DUTOT: No. It's a necessary thing. That will not satisfy our comfort. 723 MR. LEWIS: So at this point, based on the geology, you are not -- you don't accept Dr. Walsh's opinion that the reservoir, subject to the caprock analysis, has integrity and will form a natural protective barrier? 724 MR. DUTOT: Well, I don't believe anybody's been able to guarantee that, have they? 725 MR. LEWIS: We heard Mr. Walsh, or Dr. Walsh guarantee it. 726 MR. DUTOT: He did? Will Dr. Walsh raise, say, $20 million as a bond just in case? Like, if he's going to make the guarantee, then maybe he should raise the funds. 727 MR. LEWIS: I see. So you do not accept Dr. Walsh's opinion that the reservoir is safe and will form a safe barrier to escaping gas? 728 MR. DUTOT: I do not. 729 MR. LEWIS: We heard from Mr. Gorman on the issue of how much pressure should be applied to the reservoir, and as I recall his evidence, he basically said that the significant issue was how deep the reservoir was when it came to pressuring it up, not so much the relationship between the original pressure and what it was going to be pressured to. Do you recall that evidence? 730 MR. DUTOT: I do. 731 MR. LEWIS: And in his view, the proposed pressuring up was not anything that should cause anyone concerns based upon the depth of this reservoir. Do you remember him saying that? 732 MR. DUTOT: That's his opinion, yes. 733 MR. LEWIS: And you don't accept that opinion? 734 MR. DUTOT: I do not. 735 MR. LEWIS: And we heard from Ms. McConnell in regards to the construction of the new vertical well and the casing program having essentially four strings of casing down to the water table, three of which were cemented. Do you remember her saying that? 736 MR. DUTOT: I do, and I remember her also saying that they've had trouble with every cementing procedure, if I recall right. 737 MR. LEWIS: But she also, I believe, indicated that the standards require -- the CSA standards require, I believe, one cemented string of casing in the water zone and this well has three cemented strings in the water zone. Do you remember her saying that? 738 MR. DUTOT: I don't remember her saying that you're only required one. You're saying you'd build this three times stronger than what's required? 739 MR. LEWIS: Subject to checking the record, I believe that was her evidence, that this well exceeds the CSA standards in the water zone area in terms of the number of cemented strings of casing required. And I just put it to you that if that's the case and if I'm right and if that's her evidence, does that give you any level of comfort that this well will be properly -- is properly engineered and will form protection of your water zone? 740 MR. DUTOT: I think there's two problems here, not just one. There's a problem of overpressurization and there's a problem from drilling. 741 MR. LEWIS: And the overpressurization we've already talked about, and Mr. Gorman's explanation doesn't satisfy you? 742 MR. DUTOT: No. And in your own evidence from Mr. Fisher, he talks, in his latest pressure monitoring - I could pull it here, if you want me to - he indicates there can be a gas breakout through the caprock in that evidence in two places. So, you know, there are still doubts. 743 Can I ask you something? 744 MR. LEWIS: I'm supposed to ask you the questions, but -- 745 MR. DUTOT: Okay. 746 MR. LEWIS: I suppose if you have a concern, I'm certainly happy to -- 747 MR. DUTOT: Would you drive your car home from here tonight without any insurance on it? Do you know where I'm going? 748 MR. LEWIS: I know where you're going. I guess another way of looking at this, and this is what I'm trying to explore with you, and I was hoping that, after sitting in this proceeding since Monday and hearing this evidence, that you may not be completely satisfied as to the safety of this, but you are more satisfied and more -- your concerns were at least somewhat addressed than they were before you came in here on Monday. Would you agree with me on that? 749 MR. DUTOT: Probably not. 750 MR. LEWIS: Those are my questions. Thank you. 751 MR. BETTS: Thank you. 752 Mr. Chinneck, any -- and I believe that's all of the parties that wish to cross-examine? 753 Mr. Chinneck, any questions in re-direct? 754 MR. CHINNECK: Yes, sir. I have to find my place in my notes. 755 RE-EXAMINATION BY MR. CHINNECK: 756 MR. CHINNECK: Mr. Feddes, in your cross-examination earlier, you were asked by Board Counsel what you were looking for with respect to the spill on your son's property; do you recall him asking you questions about that? 757 MR. A. FEDDES: Yes. 758 MR. CHINNECK: And I think he asked you if you'd be satisfied to receive a certificate from an inspector operating under the Ministry of Natural Resources; do you recall that question? 759 MR. A. FEDDES: Yes. 760 MR. CHINNECK: And your answer? 761 MR. A. FEDDES: I said yes. 762 MR. CHINNECK: All right. And do you really know what you're looking for as far as documentation is concerned? 763 MR. A. FEDDES: I -- 764 MR. CHINNECK: What are you looking for? What do you want? 765 MR. A. FEDDES: A certificate of -- that it's a clean property, that it has been inspected by the MOE. 766 MR. CHINNECK: Right. What about any other authority? MOE stands for Ministry of Environment, does it not? 767 MR. A. FEDDES: Yeah. 768 MR. CHINNECK: Right. 769 MR. A. FEDDES: And an environmental certificate, I guess you'd call it. 770 MR. CHINNECK: Right. And would that be the same as a certificate issued under the MNR? 771 MR. A. FEDDES: I do not know. 772 MR. CHINNECK: All right. But you are looking for a certificate under the MOE, I think I just heard you say? 773 MR. A. FEDDES: Probably. 774 MR. CHINNECK: All right, thank you. 775 Now, if we could just -- 776 MR. SOMMERVILLE: Mr. Chinneck, when you make that suggestion of your witness, can you direct the Board to a provision of the Environmental Protection Act that would provide for that? 777 MR. CHINNECK: Well, sir, I don't believe that a certificate is actually issued by the Ministry of Environment. What I understand they do is they refer the inquiry to an independent third party that's qualified to give a certificate that would attest to the condition of the property. 778 MR. SOMMERVILLE: I guess what I'm getting at is, when you make that suggestion to the witness, it seemed to me that what you were suggesting was that the MOE was going to provide a certificate. And what I'm asking you, when you make that a suggestion, I need to know if there's a basis in statute or regulation for what you're suggesting the witness may want. 779 MR. CHINNECK: And I appreciate that, sir. I'm not suggesting that that's what is provided under the legislation, and perhaps I'm unclear about that. 780 I'm simply trying to make the point that this individual is looking for a piece of paper that will certify to third parties who are going to deal with the property that it's functional, and it may not be something that's issued under the MNR regulations. In fact, I think it's something that would be issued by a consultant that would be operating under the MOE rules, but not the Ministry of the Environment. 781 MR. SOMMERVILLE: That's your answer, and I'll accept it. I just want to be clear that if suggestions are made to witnesses, that there is some basis for it. 782 MR. CHINNECK: All right, thank you. 783 MR. BETTS: And Mr. Chinneck, in fact, the statement you have made, could you direct that to your witness and get a response from them so we can clarify exactly what they are looking for? 784 Considering the discussion that the two of you have just had, if you would pursue that a little further, I would appreciate it. 785 MR. CHINNECK: All right, I'll try my best. Mr. Feddes, do you know what type of document you are looking for? 786 MR. A. FEDDES: A compliance or a certificate. I am not even sure what it is called. But anyway, we want to go and sell this property, that it has been inspected and cleared of any contamination. 787 MR. CHINNECK: Okay, thank you. 788 Now, I wonder if I could just refer Mr. Dutot to the photographs that he took and that we visited yesterday. 789 MR. DUTOT: Now, are these mine or the comparison that was given? 790 MR. CHINNECK: Well, your photographs. 791 MR. DUTOT: Okay, thank you. That got confusing yesterday. 792 MR. CHINNECK: And I believe that is annexed to Exhibit B.3.2. And it might be helpful for you to have beside you the exhibit that was produced by my friend yesterday, and that is Exhibit E.4.2. 793 MR. DUTOT: I have them. 794 MR. CHINNECK: And just earlier this morning there were some questions about the dates that were put to Mr. Feddes on the photographs by Board counsel. Are the photographs that you took date-stamped, Mr. Dutot? 795 MR. DUTOT: They are. 796 MR. CHINNECK: All right. And there was some discussion about the photographs having been submitted to the Board I believe it was on the 19th of July; is that when those photographs were submitted to the Board? 797 MR. DUTOT: It is. 798 MR. CHINNECK: Right. And what is the date stamp on the photographs that you took that were submitted on the 19th of July? 799 MR. DUTOT: They vary, sir. 800 MR. CHINNECK: All right. But the one on the upper-left corner of the document page entitled -- may I just see that document? 801 MR. DUTOT: This one? 802 MR. CHINNECK: Right there. Is there a document page on that? 803 MR. DUTOT: TSLA 10, sorry, I had my thumb over it. 804 MR. CHINNECK: I'm sorry, may I please see that document? Yes, this is the document that is -- it's the photographic evidence attached to B.3.2, and it bears a number 10 in the middle of the right side of the page. 805 Thank you. What is the date on the photograph in the upper left-hand corner of that? 806 MR. DUTOT: June 1, 2000. 807 MR. CHINNECK: You better have a closer look at it. May I see that again, please? 808 Okay, all right, I am now referring -- I apologize for the confusion there -- to the photograph that -- a set of photographs that appears like this, is that number 13? 809 MR. DUTOT: Number 13. 810 MR. CHINNECK: It bears the number 13 in the lower right-hand of the photograph. If you look at the lower-left photograph, what is the date stamp on that document? Oh, it would help if I give it to you. 811 MR. DUTOT: You said the lower left, sir? 812 MR. CHINNECK: Yes. 813 MR. DUTOT: July 18th, '04. 814 MR. CHINNECK: Thank you, and is that the date that those photographs that you were referring to earlier were taken? 815 MR. DUTOT: It is. 816 MR. CHINNECK: All right. Thank you. 817 MR. LEWIS: Just if I can just interject, we are talking about TSLA number 13, is that the panel? 818 MR. DUTOT: It is the panel of three, yeah. 819 MR. LEWIS: And the lower-left photo on the one that was submitted with your covering letter of July 19th, my Exhibit B.3, it is the fairly dark looking photo and the date on mine is September 12th, 2000. 820 MR. DUTOT: You have to look down -- 821 MR. CHINNECK: Actually, there is some confusion here because Mr. Lewis' exhibit appears to be different, the array of photographs is different than the one in Mr. Dutot's hand. Which one is it? 822 MR. DUTOT: The photographs Mr. Lewis has are the ones that he submitted. 823 MR. LEWIS: No, they are not. 824 MS. DUTOT: Mr. Lewis, yours is on the -- the photograph we were talking about is the top-left one. 825 MR. DUTOT: Why are they mixed up? 826 MR. LEWIS: That's wherein I am confused, because this is the exhibit I received and this is a panel of three photos, and just so we are clear, the upper left photo on my panel is a photo of a driveway with a sign, and it looks like it is a July 16, '04 photo. 827 My bottom left photo is a very dark one with two drums on it and the date on that is September 12th, 2000. 828 MR. DUTOT: Somehow they are inverted to what I am looking at. 829 MR. LEWIS: That's the reason I raise it, because I am confused. Either I don't have the same exhibit -- 830 MR. CHINNECK: Perhaps I can assist. Mr. Dutot, which photograph in that array that you have are you looking at? It is the lower left in your array, correct? 831 MR. DUTOT: That's correct, the one with the well sign on the front of it. 832 MR. BETTS: Excuse me, gentlemen, let's describe the picture, not the position on the page, but the picture itself. 833 MR. CHINNECK: Okay. Mr. Dutot, are you looking at a photograph of a road and a field with a sign which bears the words "admittance restricted" on it. Is that the photograph you are looking at? 834 MR. DUTOT: Yes. 835 MR. LEWIS: Mr. Lewis, have you found that photograph? 836 MR. LEWIS: I have, thank you. 837 MR. CHINNECK: And the date on that photograph, Mr. Dutot, is what date? 838 MR. DUTOT: July 18th. 839 MR. CHINNECK: All right, thank you. 840 MR. LEWIS: 2004? 841 MR. DUTOT: Yes. 842 MR. LEWIS: Thank you. 843 MR. CHINNECK: Now, there was some questioning earlier by my friend Mr. Lewis about the McCulough property, and you had requested an opportunity to review a book that kept a record of your communications. Was there something that you wanted to provide to the court by way of information about that book and your communications with Mr. Jordan? 844 So first of all, what is that book about, Mr. Dutot? 845 MR. DUTOT: Since Tribute returned in September of 2003, I guess, I have kept a daily record as to my discussions with Mr. Jordan and anything else that took place. It contains 204 pages as we speak. 846 MR. CHINNECK: And do you feel it keeps -- that you have maintained an accurate record of your communications? 847 MR. DUTOT: Relatively accurate. 848 MR. CHINNECK: And were the entries in the book made contemporaneously or shortly after having made the communications? 849 MR. DUTOT: Either that day or the next. 850 MR. CHINNECK: All right, thank you. Those are my questions. 851 MR. BETTS: Thank you. Mr. Sommerville. 852 QUESTIONS FROM THE BOARD: 853 MR. SOMMERVILLE: Mr. Feddes, I would like to get some clarification with respect to the property that has been -- the zoning, the commercial zoning. 854 My understand of the evidence and your evidence and the evidence of others in this proceeding is that this is the property upon which the battery was situated; is that correct? 855 MR. A. FEDDES: That's correct, sir. 856 MR. SOMMERVILLE: And this is the same property that was conveyed to the municipality or to the township and then re-conveyed to your son; is that correct? 857 MR. A. FEDDES: That's correct, sir. 858 MR. SOMMERVILLE: And when did the designation as a commercial property -- when was that designation made? 859 MR. A. FEDDES: It was done probably in 1977. I do not know. We bought it in '92, so I couldn't tell you. 860 MR. SOMMERVILLE: All right. And you purchased it from the township in 1992? 861 MR. A. FEDDES: No. We purchased the farm in 1992, and a two-acre strip was not purchased until what -- when was it? I think it was three or four years ago. 862 MR. SOMMERVILLE: Okay. And when it was reconveyed or conveyed to you three or four years ago, it had the designation as commercial property? 863 MR. A. FEDDES: Yes, it did. 864 MR. SOMMERVILLE: Okay. I'd like to get some perspective with respect to the insurance question, which is an important issue for the Landowners' Association. You operate a hog operation with 2,000 hogs on it? 865 MR. A. FEDDES: Uhm-hmm. 866 MR. SOMMERVILLE: Do you maintain insurance with respect to that in terms of any impact that your operation may have on the water table? 867 MR. A. FEDDES: We definitely do. 868 MR. SOMMERVILLE: And in what amount do you hold insurance? 869 MR. A. FEDDES: I believe just for the hog operation alone, I think it is 2 million. 870 MR. SOMMERVILLE: $2 million? And do you also maintain other kinds of insurance with respect to your operation? 871 MR. A. FEDDES: Yes. We have an overall environmental insurance on the farms. 872 MR. SOMMERVILLE: And in that respect, that covers all of your operations; the poultry operation and the cattle operation? 873 MR. A. FEDDES: It does. 874 MR. SOMMERVILLE: And in that respect, could you give me some idea as to the quantum of insurance that you hold respecting your operations? 875 MR. A. FEDDES: My -- personally, my son owns the hog operation and another son owns the dairy operation and I own part of the poultry operation and most of the land. 876 MR. SOMMERVILLE: Uhm-hmm. 877 MR. A. FEDDES: But I have sold things off over the last few years. I personally have 2 million. 878 MR. SOMMERVILLE: Thank you, sir. 879 Those are my questions. 880 MS. NOWINA: Just for clarification, though, so the total of the poultry and the hogs and the cattle that you had described, you were talking about yourself and your two sons, so maybe the total of the insurance for the three of you would be an appropriate question. 881 MR. A. FEDDES: Each of us do have up to 2 million. 882 MS. NOWINA: So a total of 6, then. Thank you. 883 MR. A. FEDDES: Yes. 884 MR. BETTS: Thank you. 885 I wanted to -- I think this one would be directed at Mr. Dutot, too. 886 It's been requested that the Board delay a decision on virtually all of these questions for 60 days to allow for negotiations to continue. 887 Do you appreciate that the decision regarding the approval of this site as a storage area and the decision regarding appropriate compensation rates can be quite separate from one another? They don't necessarily have to be linked. 888 MR. DUTOT: I understand. 889 MR. BETTS: And that when the Board considers the question of setting rates, it sets them strictly on the basis of fairness and equity and it doesn't relate it to -- I think where I am coming from here is, you have asked us to delay the decision on this matter for 60 days so that you won't lose the -- what's the right word -- the leverage, I think is the word you used, in order to reach a decision. And that's not necessarily something that would be strong grounds for the Board to consider, to delay a decision to allow leverage to be applied on negotiations. 890 Can you respond to that at all? 891 MR. DUTOT: I guess my feeling is if you allow this to proceed with no -- with no time limit or no restrictions, you know, will these people come and negotiate at all? 892 MR. BETTS: And perhaps you can seek counsel on how that type of thing -- how landowners, in fact, deal with those questions. But there are mechanisms for the landowners to deal with those questions if they are not satisfied with the offers that are being made. But I just wanted to get your perspective on that. 893 MR. DUTOT: My understanding would be that we would have to launch another appeal or another application or something to do with landowner issues, which is costly. This is a very small group. And we have watched the Lambton County compensation issue over the last, I believe it took six years to get that solved and $1.5 million, which we could never entertain as a small group. 894 And I think we have offered two options here, have we not? One is that you do not make a decision until we are satisfied; a second option may have been that they could not inject into the ground until we are satisfied. I don't feel that the second one is detrimental to the forward movement of this application. 895 MR. BETTS: Thank you for that clarification. 896 Those are all of our questions. 897 Mr. Chinneck, do you feel you should ask any questions in re-direct to clarify ours? 898 MR. CHINNECK: No, sir. 899 MR. BETTS: Thank you very much. 900 MR. CHINNECK: I presume you're going to be breaking for lunch shortly? 901 MR. BETTS: Yes, that would be our intent. 902 MR. CHINNECK: I just had a question of clarification to my friend, Mr. Vegh, regarding the undertaking that was given by the panel earlier today. 903 It wasn't clear to me, Mr. Vegh, if you were speaking about the -- let me just find the undertaking here. 904 Okay. I believe the undertaking was to confirm whether the allocation of residual gas, as proposed in section 1 of the amending agreement, is the same as the allocation in the landowners' agreements as set out in the oil and gas leases. And I am just wondering if you are talking about the oil and gas leases or if you are talking about the storage leases or if you are talking about the unit agreements? If I can have that clarification, I could perhaps have an answer after lunch. 905 MR. VEGH: Thanks. So perhaps the most effective way to deal with this is we could deal with this off-line and I could identify the agreements I am asking you to compare it to, and then you can come back with the answer after lunch. 906 MR. CHINNECK: Okay, fine. Thank you. 907 MR. BETTS: And I think before I say we are going to break for lunch, I'm wondering, we do have a couple of witnesses to hear from today, and I am wondering if there's any that we might be able to deal with their evidence in chief within a half an hour, which would allow us to break at about 1:00. I believe the witnesses are from MNR and from Northern Cross. Any other witnesses expected to participate? 908 Yes, Ms. Paulus? 909 MS. PAULUS: Sir, we would be prepared to proceed. However, perhaps as an alternative suggestion, if it wouldn't be too inconvenient for anyone, if we went a little bit past the 1 o'clock break and hope to finish with the cross-examination as well of Northern Cross. And of course, if it didn't finish, it didn't finish. But I guess from our perspective, to just divide up the evidence in chief and evidence in the cross doesn't really achieve much. 910 MR. BETTS: And could I hear from MNR? I believe Mr. Manocha is here? How long do you anticipate for your evidence in chief? 911 MR. MANOCHA: I think that's a very dependent question. I mean, I'm prepared to go for about ten minutes in terms of what I have to present, and most of my information is pre-filed. However, it depends on the questions and it depends on how long the proceedings our friends may want. 912 [The Board confers] 913 MR. BETTS: Okay. I think it is probably impractical to try and accomplish much before 1 o'clock, so we'll break now and we'll only take an hour's lunch, so we will reconvene at 1:30. And if the two parties that intend to give evidence this afternoon can help me by determining who is going first, I would appreciate it. Thank you. 914 --- Luncheon recess taken at 12:30 p.m. 915 --- On resuming at 1:35 p.m. 916 MR. BETTS: We are about to resume with a new witness panel, and before we do that, are there any preliminary matters that arose during the break? 917 PRELIMINARY MATTERS: 918 MR. VEGH: Yes, sir. There has been discussions around the oral submissions and the timing of submissions in this case. Given that we are likely to complete the evidence this afternoon, counsel have agreed to an order of oral submissions for early next week, subject to your approval. 919 And let me make sure I have this right, and if I don't, someone please correct me. 920 The plan is for the applicant to make oral submissions Monday morning at 9:00 a.m.; the intervenors will give -- will make their submissions Tuesday starting at 9:00 a.m., and the applicants' reply will be completed hopefully by the end of Tuesday, so we can stay on the original schedule, recognizing that the applicant may require some time after intervenors' submissions to collect their thoughts before making their reply submissions. 921 MR. LEWIS: If I could just interject, my preference would be to start early afternoon rather than 9:00 since I would be the only one going on Monday, to give me a chance to come down Sunday night perhaps and work on this a bit more. If that is not a problem, since I would be the only one doing submissions on Monday. 922 MR. VEGH: Perhaps then we should take this back and talk about it some more because others who are coming in from out of town won't be in a position to read the transcripts under that circumstance, so it may not work that well. So I guess I didn't have the agreement I thought I had. 923 MR. LESLIE: How long would it take to produce a transcript? I am thinking if we started at 11:00, for example, on Monday morning, could we have a transcript by early afternoon? 924 MR. VEGH: I think the transcript is usually produced a couple of hours after it is complete. 925 MR. BETTS: I wonder if we could allow the court reporter to participate or someone from the group to help us with that, just how quickly a transcript could be produced. 926 [The Board confers] 927 MR. BETTS: Okay, we'll try and determine the answer to that question, and I have invited Ms. Litt to even see if it is possible to get something that would be a step down from a final version of the transcript, but at least capture the words that were expressed. 928 And, yeah, I think that's what we'll try and find out right now, and that will determine perhaps the latest starting time that we could work from. But that sounds -- okay, that sounds like a very good solution. We would all like to be able to package things up on Tuesday, which will allow the Board to get on with its decision-making and, therefore, allow for as prompt a decision as possible. 929 Yes, Ms. Paulus? 930 MS. PAULUS: If I may interject, in the interests of getting the whole matter wrapped up, which is what I understand the applicant would like, it would be most convenient if he could look at arguing earlier. The problem isn't only how long it takes to produce the transcript, but if we don't have the transcript before we get on a plane to come out, it would be little consolation that it was prepared early afternoon. 931 MR. BETTS: We can check on that, but I am quite confident it could be sent to you electronically as well, if that would be of any assistance. 932 MS. PAULUS: I would then be relying again to try and get it electronically on the plane. That's why I am suggesting that if he would stay with the schedule of presenting his argument earlier, then we would have greater confidence that we would have it as we went to travel. 933 MR. BETTS: Okay. Well, you let that work around in your mind for a minute, Mr. Lewis, and I'll just get the answer to how long it takes hopefully now. 934 [The Board confers] 935 MR. BETTS: I understand that as usual, our court reporters who are very efficient and we are proud of them, say that they can provide a version with errors, so as they have taken it, immediately following the hearing -- immediately as we close, it is virtually ready. 936 The corrected version could take anywhere from an hour and a half to three hours, depending on the clarity of the speakers and the many, many other things, and obviously how much was included. So does that help anybody, first of all? 937 Ms. Paulus, would you be prepared to go, for example, with the transcript with errors? Would you be here to hear it, by the way? 938 MS. PAULUS: Again, this all changes, so it is rather tentative, but my expectation would have been that I wouldn't be here on Monday, and that's why I would have hoped to have the transcript in the morning, and otherwise -- 939 MR. BETTS: How will you get the transcript? 940 MS. PAULUS: Electronically. We have been getting it electronically, so I had hoped that I would be getting it electronically before I leave Calgary, and have it in my hands and work on the plane. 941 MR. BETTS: So when you are talking about the flight, it is the Monday night flight to Toronto that you are talking about? I understand now. 942 MS. PAULUS: That's right. But we will of course do what we can to accommodate the schedule. 943 MR. BETTS: Okay. I am going to let everybody think about this for a bit, and I am sure, before we conclude today, someone is going to have the answer out there to this bit of a riddle. 944 But at the very worst, we may, Mr. Lewis, ask you to go back to a 9 o'clock start, if that's possible. 945 MR. LEWIS: Rather than waste any more time on it, I'll go at 9 o'clock so we can get this thing done. We are anxious to get a decision, and if it accommodates everyone, I'll get down here a little earlier on Sunday and work a little later and we'll get her done at 9:00. 946 MR. BETTS: I appreciate that position. That's very good of you, and I think it will help the whole proceedings. So thank you very much for that position. 947 Any other preliminary matters? Have we then set the schedule? Does everybody have it clear in their minds? So we will only hear from the applicant with arguments in chief on Monday morning at 9:00 a.m. We will start off with submissions from Board Staff, obviously taking no position, but submissions on the matter on Tuesday morning, followed by other intervenors' responses. 948 And then we will try to allow Mr. Lewis some time to think about what he has heard in order to be able to provide us with his reply arguments that afternoon. 949 Thank you all for that accommodation. Now, Ms. Paulus, would you like to introduce your witness first, or would you like your witness sworn in? 950 MS. PAULUS: Our preference would be to swear in our witness first, sir. 951 MR. BETTS: Thank you. Ms. Nowina will do that. 952 And Ms. Paulus, for some reason I am having trouble picking up your voice, so -- and I wasn't before, so I'm just asking to be a little sensitive. 953 NORTHERN CROSS ENERGY PANEL 1 - THOMPSON: 954 D.THOMSPON; Sworn. 955 MR. BETTS: Ms. Paulus, you may proceed when you are ready. 956 MS. PAULUS: Thank you, can you hear me now? 957 MR. BETTS: Yes, very well, thank you. 958 EXAMINATION BY MS. PAULUS: 959 MS. PAULUS: Mr. Thompson, for the benefit of those that don't know you, would you please introduce yourself and provide for the Panel a little bit of information about your credentials, as well as your position with Northern Cross Energy Limited? 960 MR. THOMSPON: Yes, my name is David Thompson, and I am president of Northern Cross Energy Limited. Northern Cross Energy Limited is a privately-owned company active in the natural gas exploration and production business in Huron County, as well as the development of electrical power generating facilities. 961 I am a registered professional engineer in the province of Alberta, and I have more than 25 years of experience in the natural gas industry. 962 I spent approximately 10 years as a director of the Small Explorers and Producers Association of Canada, and I have worked on natural gas development and utilization projects in Canada, in the U.S., Africa, Asia, South America and in New Zealand. 963 MS. PAULUS: Do you have particular experience with transmission systems or distribution systems? 964 MR. THOMPSON: I did spend some time as supervising engineer in charge of gas supply in the system planning department of Nova Corporation, and we also operate a small pipeline system in Ontario. 965 MS. PAULUS: Thank you. 966 Do you adopt the evidence of Northern Cross that has been provided in these proceedings, as well as all the responses to interrogatories that have been provided by Northern Cross in these proceedings? 967 MR. THOMPSON: I do. 968 MS. PAULUS: In your review of the evidence of Northern Cross, as well as the responses to interrogatories, have you identified any errors or omissions that you would like to correct for the record? 969 MR. THOMPSON: No. 970 MS. PAULUS: Thank you. 971 Can you explain for this Panel, please, why Northern Cross elected to intervene in these proceedings? 972 MR. THOMPSON: We are interested in ensuring that the Union Gas transportation facilities in the area are used and useful to the benefit of all its customers. And my feeling is that there are benefits that can flow to a gas transportation system from a properly developed gas storage project. 973 Those benefits can flow where there is a level of service and service conditions that realize the benefits of storage and the potential benefits to a gas pipeline system. 974 My concern is that the transportation on the Union system that's being used by this project, essentially, ties up all the remaining capacity that's on that system, both receipt capacity and delivery capacity. And we don't have a clear understanding as to how that capacity would be used and how much of it will be used and in what time frame. And we think that that's important to know so that the benefits of natural gas storage to the pipeline system can be realized. 975 It appears from the transportation service that's being applied here, that virtually any new consumer of gas on the system or producer who wishes to access capacity would trigger an expansion of the system; in other words, if all the remaining firm service capacity is tied up by a project, then there is nothing remaining, and it may actually accelerate the need for system expansions. 976 And we think that a properly designed transportation service designed around the unique attributes of storage could better enhance the capacity of the system and provide benefits, perhaps delaying the need for expansions rather than accelerating them. 977 MS. PAULUS: In your view, could a storage project proceed that wasn't supported by the type of service that is proposed under the M16 contract? 978 MR. THOMPSON: I think that there are opportunities to explore other types of service that are uniquely designed around storage requirements that would provide the level of service that are needed by storage operators, but also recognize and realize the benefits that can be derived from a gas storage project. We feel like there are benefits that have been identified by the Board previously, and in other jurisdictions, that additional storage, you know, can be a useful benefit to a province and to the operation of a pipeline system. 979 We just think that the class of service and perhaps service conditions attached to that class of service need to be further examined so that the benefits can be realized and that the -- as I said, what we are really after is to have a transportation system that is used and useful to the benefit of all the users of the system. 980 MS. PAULUS: Have you brought this matter to the attention of the Ontario Energy Board in the past; and if so, what was their response? 981 MR. THOMPSON: We did participate in the Union Gas 2003 rate application and presented some evidence and, you know, identified our concerns this way. And those -- that evidence, you know, was heard, and it was a matter of response in the Board decisions on that. 982 MS. PAULUS: Can you elaborate a little bit on how the Board responded to your concerns? 983 MR. THOMPSON: Basically, the Board accepted at least portions of our argument with respect to the benefits -- you know, recognizing the benefits that can flow to a pipeline system from the operation of storage on that system, and the fact that perhaps a different class of service -- the whole issue of service, class of service, those sorts of things, should be examined, and directed Union Gas to do so. I am paraphrasing that decision, but... 984 MS. PAULUS: I think that's fine. 985 Perhaps you can explain for the Panel some of the unique characteristics of the portion of the Union system that we're dealing with here, that is the portion in Huron County that is, I think, referred to as the Stratford-Goderich line. 986 And if it would assist you in doing so, you may ask that the Panel refer to the map that you have provided in your evidence under tab 2, schedule C, which is at page 11, though I am afraid the pages are not numbered. 987 MR. THOMPSON: I think it would be useful to refer to that map. I can perhaps hold it up so people can see the map that I am referring to. It is labelled as "map number 1". 988 MR. BETTS: Thank you. 989 MR. THOMPSON: Under tab 2, and I believe it's page 11. 990 MR. BETTS: Thank you. Go ahead. 991 MR. THOMPSON: Perhaps this will just add a little clarity to the specific line we are talking about here right now. But it's a line running roughly southeast to northwest from Stratford up to Goderich, and you can see where it terminates at Goderich. 992 And also shown on that map are small red circles that identify other pools that are in the area. There may be others, but it shows some of the pools that could potentially be developed for storage. 993 But it's designed to show that there are other potential storage pools in the area, and I also show where the main transportation system for gas is in that area. 994 So that line shown in green runs from Stratford up to Goderich. It's an 8-inch line, what I would consider an intermediate pressure line. And what makes it somewhat unique is -- well, I wouldn't say unique, but worthy of note is, it can only flow one direction; in other words, there is -- it takes gas off a main transmission system, goes through a regulating station at Stratford, and basically is designed to supply that area through that pipeline. It can receive gas, but at the current time, it flows in one direction; in other words, you are not able to flow upstream through the regulator station. 995 So the capacity of that system to receive gas is constrained that way, but nevertheless, it's a relatively small pipeline. And our feeling is, given the additional storage potential that exists in this area, that ultimately we are going to need -- or we would certainly be interested in a new pipeline system; that there is some capacity available in the area, but that ultimately I think it would be in the interests of people in the gas storage business or people wanting to develop gas storage that there would be new pipeline facilities ultimately built for this area, given the limitations of the system that is there now. 996 MS. PAULUS: Earlier in this proceeding there was some discussion over whether this portion of the Union system, and by "this portion", I mean the Trafalgar-Stratford line, was actually a transmission or distribution line. Does anything turn on this difference in characterization? 997 MR. THOMSPON: I don't think so. I mean, I try to describe the line as an 8-inch line that I think was put in place to serve the needs of gas consumers in that area, and, you know, I think accurately describes what it is used for. It is also used for gas production too, though. Our company produces gas into that system, and as do others. 998 MS. PAULUS: For those of us that are less familiar with these kinds of operations, can you elaborate upon how the benefits of storage, in your view, are diminished when they are associated with the type of service that is provided under the M16 contract? Just briefly. 999 MR. THOMSPON: Well, I guess the concern, in a nutshell, is that if you use up all the remaining firm service capacity in the system, that system, you know, cannot be used by others without requiring an expansion. In other words, if the firm service capacity that is available is gone, then it restricts or severely reduces the amount that is available for other purposes. 1000 But I do think that what is worthy of examination is perhaps other classes of service that are uniquely designed for storage pools, with a class of service, and as I mentioned, perhaps service restrictions, that could realize some benefits to this system, both in this circumstance and perhaps other circumstances elsewhere in the province. 1001 MS. PAULUS: When you are using the phrase "benefits to the system", what, in particular, do you mean? What is the benefit to the system? 1002 MR. THOMSPON: Well, I am thinking having increased reliability; in other words, having gas in storage can back-stop the supply to a system. In other words, you know, if withdrawals of gas from storage occur when there are demands on the system for service, then it can increase not only the reliability but also the capacity of the system that is available in that area by providing additional supply. 1003 Similarly, if injections in the storage occur in periods of slack demand, you know, then those injections can occur without restricting the amount of gas available for distribution customers. 1004 MS. PAULUS: But does that occur if the system is back -- if the storage facility is back-stopped by an M16 type of service in this particular circumstance? 1005 MR. THOMSPON: Well, I think that looking at the level of service that is provided by an M16, I think that there are -- it does restrict your -- you know, severely reduce the benefits that may accrue from storage being on the system. 1006 MS. PAULUS: Do you have any information about other projects that may desire additional capacity on the Stratford-Goderich leg? 1007 MR. THOMSPON: Well, with respect to the use of gas, I mentioned that we are involved in developing gas-fired electric power generating facilities, and we do foresee ourselves or perhaps others having use for gas service on this system; in other words, supply on the system. And there may be other people that expect to be able to use this system in the future and would require additional gas service, and we think that a properly structured service contract with, you know, as I mentioned, something that needs to be reviewed and developed that is specific to a storage type of operation, you know, could benefit those new consumers and perhaps allow capacity to be available in the system for them. 1008 MS. PAULUS: Are there also production or exploration activities, and by "production and exploration", I mean gas production or exploration activities in the area that may have use of the capacity on this system? 1009 MR. THOMSPON: I mentioned that our company is active in the exploration area for natural gas in this area, and we think that there is good potential for additional gas discoveries in this area. And to the extent that those are realized, then the logical place to deliver that gas would be into this system. So certainly capacity on that system would be of interest for those -- for that production. 1010 MS. PAULUS: And if this application was to proceed and the Union system to be used under the M16 for the applicants' project, would you anticipate that having an impact on your exploration and production activities or any other activities? 1011 MR. THOMSPON: Well, certainly knowing that there is no firm service capacity remaining on the system affects your decisions on things. But when I say "no capacity", you know, as far as I know, the bulk of capacity on the system is being tied up or being allocated to this project. There may be small amounts of capacity, but my understanding is that there would be little or none. 1012 I should mention that, you know, we are active in the exploration business, but so are other people, and we have projects that are potentially consumers of gas on the system, and I am sure we are not the only ones either -- I am not an expert on demand for gas in the system, but you know, our feeling is that distribution customers, you know, will also need access to the system. 1013 MS. PAULUS: And do you have any interest in storage projects in this area and gas storage? 1014 MR. THOMSPON: Northern Cross Energy operate four pools on Huron County, and our feeling is that three of them are suitable candidates for storage and they are shown on this map 1. There are other pools operated by others that are also shown on that map, so you know, my feeling is that there is relatively significant additional storage development potential in this area operated by ourselves and others. 1015 And there is a constrained system there now. We are certainly interested in storage developments proceeding. You know, we are in favour of the development of storage development. We think that, you know, a properly developed storage project can be of benefit to the people of Ontario, and we think it can be a valuable asset. 1016 There is significant additional potential for that to be developed, and we think that it is worth looking at the transportation system and the classes of service that are available such that the benefits of having that -- such that that storage can be developed and that the benefits of that storage development can be fully realized. 1017 MS. PAULUS: And when you say that a properly developed storage project would have benefits and you would be in favour of it, do you put the applicants' project as now presented in the category of properly developed? 1018 MR. THOMSPON: My feeling is that, you know, there have been some concerns raised by others with respect to the project. I don't think I am going to comment on those. I think they have been put before the Board by others. 1019 Our primary reason for being here is the transportation issue, and just our feeling is that the class of service and the way in which capacity is utilized, and I guess, in general, the idea that a system is used and useful to its maximum benefit, is important to us. And we think that it is worthy of examination before that capacity is all gone. 1020 MS. PAULUS: And in your view, this project, if it was to proceed with M16 transportation or service associated with it, would that be a project that you believe supports the system as a whole and provides benefits and should be approved? 1021 MR. THOMPSON: Well, I think the class of service that is being used here and is shown in the transportation agreement does not provide the level of benefits or the efficiency of utilization of transportation capacity that we would like to see. 1022 And we think that, given the Board's decision, that it's worth having a look at the applicability of that type of service to this type of project, and a review of -- or perhaps what some of the other options are available and the various costs and benefits associated with the options available. 1023 MS. PAULUS: And when you say "have a look," do you mean prior to a decision being made on this application? 1024 MR. THOMPSON: Yes, I think that it would be important, before the available transportation is used in this manner, to examine the service that's being employed and the -- I guess, the capacity offered and the way in which that transportation is used; in other words, the way it should be used, and sort of useful to all of the -- I guess, to provide a benefit, a back-stop to the system. 1025 And our feeling is that that type of review is something that has already been directed by the OEB, and we would like to see that occur and we think that it could occur in a time frame that would not unduly delay the applicant. 1026 We think that, in the course of these proceedings, we have seen other issues that perhaps need to be addressed, and this is an issue that also could be addressed, and that we feel like it could be addressed and reviewed without unduly delaying the project, in light of, perhaps, other issues that may come forward or have come forward. 1027 MS. PAULUS: Thank you. That completes my direct examination, and the witness is available for cross-examination. 1028 MR. BETTS: Thank you. 1029 Can I have an indication of those who would like to cross-examine Mr. Thompson? 1030 Very well. Any others? 1031 Please proceed with your questions. 1032 MR. VEGH: Just to follow the normal order of proceedings, I do have some questions of clarification. 1033 MR. BETTS: Thank you. Sorry that I overlooked you again, Mr. Vegh. I apologize. Why don't you proceed. 1034 MR. VEGH: I'll try to make it worth your while. 1035 CROSS-EXAMINATION BY MR. VEGH: 1036 MR. VEGH: Mr. Thompson, thank you for that evidence. Just a couple of questions of clarification. 1037 You have talked about the review of the M16 rate that will be carried out, and I take it from your evidence that you believe that that review could allow a more thorough review of the realization of system benefits that can come from storage; is that right? 1038 MR. THOMPSON: Yes. 1039 MR. VEGH: And hopefully from that review, in your perspective, there could be a rate design that more appropriately allows the capturing of those system benefits than the M16 rate allows. 1040 MR. THOMPSON: Yes. 1041 MR. VEGH: And in your evidence on a couple of occasions, and I'll just give you the references, on page 2, at line 17, and then again at page 3, line 24, you indicate that if the Board allows this project to go ahead, it would entrench the M16 contract terms. You use the term "entrench"? 1042 MR. THOMPSON: Well, we think with respect to this system, if the project goes ahead with this class of service, it would be difficult to say, Okay, here is your class of service, and then withdraw that after they have already gone ahead with the project. 1043 So -- but, you know, certainly the Board has the power to change rates. But, you know, once operators have made a commitment to proceed with a project and, you know, you are injecting gas and going ahead, then it's, you know, certainly more onerous to suggest that those terms of service would be changed. 1044 MR. VEGH: So that's what you mean by "entrench"? You create a status quo that then becomes more difficult to unwind? 1045 MR. THOMPSON: I think so, yeah. I think that while we're at a time when we're looking at additional storage development, it's a good time to have a look at it, and, you know, some people have a pretty good understanding of what class of service is appropriate. 1046 MR. VEGH: But I believe you recognize as well that the result of this case will not formally preclude a review of the M16 rate to be carried out in accordance with the schedule that's contemplated? 1047 MR. THOMPSON: Uhm-hmm. No, our only concern is that on this particular lateral, it's got limited capacity, and by removing the remaining available firm service capacity, then it has an impact on producers, potentially, on the system who wish to produce in the system or consumers on the system who wish to acquire additional supply. 1048 MR. VEGH: So that's the second issue I was going to ask you about -- 1049 MR. THOMPSON: Okay. 1050 MR. VEGH: -- is this capacity issue. The first was around the structure of the M16 rate and what you meant by entrenching that structure, and the second is the limited capacity, and I guess that capacity is filled if this -- or effectively filled if this project is approved. 1051 But, Mr. Thompson, isn't that always the case when there is limited capacity on a system and a new load comes onto the system to use that capacity? 1052 MR. THOMPSON: Uhm-hmm. No, I don't disagree that where a customer seeking firm service supply, that it uses a portion of the capacity that's in that system. 1053 I think there are some very unique aspects of a storage project in that you both withdraw gas from the system and you put gas back into the system, and that makes it different from, you know, somebody who's running a furnace or consuming gas every day but don't put that gas back in. 1054 And we think that, you know, storage has some unique aspects associated with it that way and therefore merit a different type of totalling methodology and perhaps a different class of service. 1055 MR. VEGH: I understand the point about the different methodology, but in terms of using up limited capacity, a storage operator resembles a load in that sense, doesn't it, in that it may require firm capacity? 1056 MR. THOMPSON: Well, it represents a load, but it also represents a supply and -- 1057 MR. VEGH: And to the extent that it's a load and it requires firm capacity, is it really that much different than any other load on the system? 1058 MR. THOMPSON: Well, it's just that you're not going to be withdrawing and injecting gas at the same time, and so it's something where you can have what I would consider benefits to the system by injecting gas into the system when there's a requirement for gas, which normally market forces would suggest that anyway; that if prices are higher and there's a demand for gas, that you would be producing gas and delivering gas; and if there is a period of slack demand, that you would be injecting gas. 1059 There could be other considerations involved, but that's the sort of broad-brush look at storage. 1060 MR. VEGH: Okay. And then the final area I just wanted to ask you about, in terms of, again, the firm service requirement in this case, I understand that the applicants want to be able to offer firm service to their customers and, therefore, in their view, they require firm service available from Union to back that up. 1061 Do you have any comments on that position? 1062 MR. THOMSPON: Well, certainly there are advantages to having firm service available, that, you know, firm service is nice to have and nice to make available. 1063 But we don't think it is an absolute requirement. We notice in the applicants' evidence that they were proposing a contract for I believe it was offering in an open season that offered interruptible service. 1064 So it is something that, you know, can certainly be considered. I think that rather than look at firm service and interruptible service, the pros and cons of those, you weigh it; I think it is something that needs to come out of an examination of the rate, which is sort of what has been suggested already, and that we would like to participate in. 1065 MR. VEGH: Okay, thank you, those are my questions. 1066 MR. THOMSPON: Did I answer your question all right there? 1067 MR. VEGH: You know, I am not really sure you did, but -- 1068 MR. THOMSPON: Okay. Well, I am -- 1069 MR. VEGH: But I think you made the point you wanted to make. 1070 MR. THOMSPON: Well, that is not the purpose. I do want to answer your question, so -- 1071 MR. VEGH: My question was: You said the demand in the marketplace may not be necessarily just for firm service, but I am saying the applicants' position is they want to offer firm service, and my question for you is if you want to offer firm service, does it make sense that you have to have that backed up by firm service as well? 1072 MR. THOMSPON: Well, I think that firm service of the type that is offered under the M16 is not an absolute requirement, and you know, to bring a storage forward, you know, we have seen that in that there are offerings of storage using an interruptible service. 1073 I think that what we are looking at here, in my view, is a relatively short-term look at the available transportation capacity in this area, because I think that ultimately what we need is a larger pipeline system. We need to develop -- I think there is sufficient potential in the area, but it needs to be brought forward to a level of maturity that a larger pipeline system in the area can be justified. 1074 And you know, with a larger pipeline system, you know, depending on the design of that system, there is going to be firm service available that is not going to unduly impact other users of the existing system and other people could use a new pipeline system. 1075 So I think we certainly have a longer term view of this. You know, we think that there is a significant storage potential in this area. We think that its value can be realized, and in order to do that, new facilities will be required. And when those new facilities are essentially brought forward and offered, you know, then a lot of these capacity constraints that we are talking about here now may no longer be a big issue. 1076 Nevertheless, you still have to look at the type of service that is offered. I mean, storage will, even with a new pipeline system, continue to be a unique type of operation where you are both a supply and a demand on the system, and given those unique characteristics, I think it warrants a unique approach to rate design, totalling, class of service. 1077 Have I answered your question now? 1078 MR. VEGH: I think I got it. Thank you. 1079 MR. THOMSPON: Thank you. 1080 MR. VEGH: Those are my questions, thank you. 1081 MR. BETTS: Thank you, Mr. Leslie did indicate that he had questions, and I didn't see any other parties that were -- 1082 MR. LEWIS: I wouldn't mind hearing Mr. Leslie's questions before I decide whether I am going to ask any. 1083 MR. BETTS: Thank you. Mr. Leslie, please proceed. 1084 MR. LESLIE: That's fine, thanks very much. 1085 CROSS-EXAMINATION BY MR. LESLIE: 1086 MR. LESLIE: Mr. Thompson, my name is Glen Leslie, and I represent Union Gas. 1087 I really just wanted to put your intervention in a bit of context, I think. You mentioned that you had some production facilities in Huron County. You have a proposed gas storage development in Huron County as well, do you not, sir? 1088 MR. THOMSPON: Yes. 1089 MR. LESLIE: And that storage pool or that proposed storage pool is called the Ashfield pool? 1090 MR. THOMSPON: Yes. 1091 MR. LESLIE: And that's just north of the pool that Tribute proposes to develop near Goderich? 1092 MR. THOMSPON: Yes, it's shown on that map 1 we were looking at. 1093 MR. LESLIE: My copy of that map is almost illegible. 1094 MR. THOMSPON: Oh, I see, you are correct, it is north of that pool and north of Goderich. 1095 MR. LESLIE: And Northern Cross made an application to the Board to develop the Ashfield pool in May of 2003? 1096 MR. THOMSPON: I believe that's the correct date, yes. 1097 MR. LESLIE: So about a little less than a year and a half. Were you involved in that application? 1098 MR. THOMSPON: Yes. 1099 MR. LESLIE: Did you read the evidence that was prepared in support of that application? 1100 MR. THOMSPON: Yes. 1101 MR. LESLIE: And I take it you agreed with it? 1102 MR. THOMSPON: The evidence that was presented by Northern Cross or myself? 1103 MR. LESLIE: Yourself, yes. 1104 MR. THOMSPON: Yes. 1105 MR. LESLIE: And that application was premised on Northern Cross, if the project went forward, on Northern Cross having access to transportation capacity on the Union-Stratford-Goderich system, was it not? 1106 MR. THOMSPON: We did not have a transportation service available to us at that time; in other words, we didn't receive -- 1107 MR. LESLIE: No, but your application was premised on using Union-Stratford or Stratford-to-Goderich line, the 8-inch line you mentioned. 1108 MR. THOMSPON: Yes. 1109 MR. LESLIE: That is how you would get the gas to your storage, would it not? 1110 MR. THOMSPON: It wouldn't be the only source, but it would be a source, yes. 1111 MR. LESLIE: The other source would be your own production? 1112 MR. THOMSPON: Yes. 1113 MR. LESLIE: And in fact, your application contemplated that you would use all the capacity that was remaining in that line, did it not? 1114 MR. THOMSPON: Our feeling was that a storage project of that size would need that amount of capacity to be cost-effective. 1115 MR. LESLIE: Well, your application expressly said: It will be important to have the full amount of that capacity, that's the capacity in Union's facilities, available to this project, and have a plan in place to increment the capacity in stages to accommodate not only the expansion of this project but other reservoirs Northern Cross plans to develop in the future. 1116 So your application contemplated, if it went forward, that you would have all of the capacity that then existed and what you were putting forward, and you put it forward again today, is that additional facilities would be required in order to accommodate further development? 1117 MR. THOMSPON: Yes. 1118 MR. LESLIE: Is that right? 1119 MR. THOMSPON: Yes. 1120 MR. LESLIE: Now, your application, Northern Cross's application, was coming on for hearing earlier this year and it was stayed, but it wasn't stayed because of rate concerns or things of that kind. It was stayed for technical reasons? 1121 MR. THOMSPON: Yes. 1122 MR. LESLIE: You were anticipating dealing with the rate issues in your case? 1123 MR. THOMSPON: Yeah, we did want to have rate issues discussed, yeah, at that time we had not signed a transportation contract and we -- 1124 MR. LESLIE: In other words, that was my next question, you hadn't signed a contract with Union. 1125 MR. THOMSPON: No. 1126 MR. LESLIE: Because you had objections to the M16 contract? 1127 MR. THOMSPON: Yeah, we had spent some time negotiating the terms of service, the class of service, the costs of service, those sorts of things, and had not come to an agreement on that. 1128 MR. LESLIE: But whatever your objection to the M16 contract was, it wasn't that it provided firm service, because you were assuming that you would get firm service on Union's facilities to serve your project, were you not? 1129 MR. THOMSPON: Well, the service that was offered was a firm service, and we did look at the costs that were associated with that service and the impact of those costs on our project. And our feeling was that the -- we suggested that a storage project used capacity on the system but it also could provide benefits to the system and that perhaps the benefits to the system could also be weighed in the calculation of the tariff. But I think our feedback was that there were no benefits or there were no measurable benefits, and it made us consider that, you know, perhaps a different class of service would be warranted that would realize some of those benefits. 1130 MR. LESLIE: But your intervention -- you intervened in Union's rate case -- 1131 MR. THOMPSON: Yes. 1132 MR. LESLIE: -- and you made many of the points that you have made today regarding the inappropriateness of the M16 rate. And as a result of that intervention, the Board made the direction that it did. But your intervention in the rate case was directed at the cost of service? 1133 MR. THOMPSON: Well, I think we were also interested in the class of service, the type of service that's being -- 1134 MR. LESLIE: Well, I've read your evidence, sir, and would you agree with me that the primary thrust was that Union wanted to charge you more than you thought you should pay? 1135 MR. THOMPSON: I -- you know, certainly the cost of that service was an issue, but -- 1136 MR. LESLIE: Well, in fact, you were advocating in the rate case that the service be changed to some form of C1 service with a different delivery point so that the charges would be reduced, were you not? 1137 MR. THOMPSON: Well, certainly a reduction in the cost of the service was also an issue. 1138 MR. LESLIE: I mean, that was the main thrust of the intervention? Sorry. 1139 MR. THOMPSON: I think we have to examine, yeah, what are the costs. There was the suggestion that the costs of providing that service be reviewed. 1140 MR. LESLIE: Now, I'm advised that Tribute signed an M16 contract with Union in October of 2003 or -- 2003, yes. Are you aware of that? 1141 MR. THOMPSON: Yes. 1142 MR. LESLIE: And I'm advised that your firm, not you personally, I don't think, but Mr. Farquhar, is it, was advised by Union that that had happened, that Tribute had signed an M16 contract some time in early November -- 1143 MR. THOMPSON: We -- 1144 MR. LESLIE: -- just after it happened? 1145 MR. THOMPSON: We were informed of that, yes. 1146 MR. LESLIE: Right. And as I understand your current position before the Board, you want the Board to postpone dealing with the Tribute application until they have given consideration to the directive that was made in the rate case as a result of your application? 1147 MR. THOMPSON: We think that that examination should take place, yes. 1148 MR. LESLIE: But you will agree with me you didn't, in the rate case, take the position that nothing should happen with respect to storage development until that examination had occurred? 1149 MR. THOMPSON: I don't believe we raised that, no. I don't know off the top of my head. 1150 MS. PAULUS: Would you like the -- 1151 MR. LESLIE: I'm sorry? 1152 MS. PAULUS: Would you like some further clarification? 1153 MR. LESLIE: Would I like which? I can't hear you, I'm sorry. 1154 MS. PAULUS: Would you like any clarification from counsel? I don't think the witness recollects at this time the nature of the -- 1155 MR. LESLIE: Well, I can't cross-examine you, Jane. Is it a matter of reading the submission itself? 1156 MS. PAULUS: It would be a matter of reviewing it with him. 1157 MR. LESLIE: Do you have any objection to the Board in this case looking at the submission that was made in the Union Gas case, the Northern Cross submission, so that we could see that -- 1158 MS. PAULUS: No, it was a written submission so that would be -- 1159 MR. LESLIE: Right. And I have read it, and do you have any objection to the Board reading it in this case? That will probably do. We can all argue about what it says, I suppose, if we need to. 1160 I'll undertake to provide this Panel with a copy of the Northern Cross submission in the Union Gas rate case. 1161 MR. BETTS: I don't think that -- 1162 MS. PAULUS: Mr. Leslie -- -- 1163 MR. LESLIE: Oh, I'm sorry, it's part of your evidence. 1164 MS. PAULUS: That's right. 1165 MR. LESLIE: I'm sorry, I was missing one of my synapsis. Well, it's all there. 1166 MS. PAULUS: It's all there. And I would suggest if you want us to find it, we would. 1167 MR. LESLIE: That's fine. 1168 Is there anything else you wanted to add, Mr. Thompson? 1169 MR. THOMPSON: No. 1170 MR. LESLIE: Just one other area. Capacity. You have had some experience running a pipeline, the Nova system, I gather? 1171 MR. THOMPSON: I wouldn't say I ran the whole system, but I was -- 1172 MR. LESLIE: Helping. 1173 MR. THOMPSON: Yes. 1174 MR. LESLIE: My understanding is if you want to increase capacity on an existing transmission/distribution system, you've really got -- you've got a facilities option where you can add pipe or compression, or you've got a service option which, in my understanding, is interruptible service? 1175 MR. THOMPSON: Uhm-hmm. 1176 MR. LESLIE: Is there anything else? 1177 MR. THOMPSON: I think that there can be different levels of service between interruptible and firm service. You know, there are an array of service options that are generally available -- 1178 MR. LESLIE: Like overrun? 1179 MR. THOMPSON: Yes. 1180 MR. LESLIE: Authorized or unauthorized overrun. 1181 MR. THOMPSON: But there are priorities of interruptible service, IT-1, IT-2, that sort of thing. There are often an array of service levels that are available, in other words, different priorities of interruptible. 1182 MR. LESLIE: But it's some variant of interruptible service? 1183 MR. THOMPSON: Yes. 1184 MR. LESLIE: Is there anything else? 1185 MR. THOMPSON: I believe there can be service conditions, and with respect to the use of firm service, there can be, you know, other conditions of service applied. 1186 MR. LESLIE: But essentially you have got firm service with various terms and conditions associated with it, or interruptible service. But if you want to increase capacity on a line, it's really a matter of either increasing the amount of interruptible on the line or building facilities, isn't it? 1187 MR. THOMPSON: Generally, to increase the capacity of the system, you know, a system expansion, you know, is the logical way to proceed. 1188 MR. LESLIE: Okay, thank you. Those are my questions. 1189 MR. BETTS: Thank you. 1190 And, Mr. Lewis, what is your position? Do you need to ask any questions in cross? 1191 MR. LEWIS: Just a couple. 1192 MR. BETTS: Please proceed. 1193 CROSS-EXAMINATION BY MR. LEWIS: 1194 MR. LEWIS: Mr. Thompson, do I understand your position in regards to this application is that it just simply be adjourned; is that fair to say? 1195 MR. THOMPSON: I think that there is an opportunity to explore the impact of the service that's being offered on potentially other users of the system. 1196 MR. LEWIS: No, I understand that. But your position in your pre-filed evidence, as I understood it, was that our application that's before the Board just simply be adjourned. I know your reasons for it are to await the M16 study and so forth, but the thrust of your position in regards to this application is that it be adjourned; is that fair to say? 1197 MR. THOMPSON: I'm actually not sure of the legal implications of an adjournment. I'm feeling that there is a -- you know, perhaps a time frame available. There are some other issues that also need to be examined here, you know, other issues that have been raised in this proceeding. 1198 MR. LEWIS: So am I hearing you say that there's more to this than -- I mean, if we remove from our application and what was discussed in this application the M16 issue -- 1199 MR. THOMPSON: Uhm-hmm. 1200 MR. LEWIS: -- and I completely understand that you take exception with that issue as it affects our project and generally. 1201 MR. THOMPSON: Yes. 1202 MR. LEWIS: Is that fair to say? 1203 MR. THOMPSON: I'm sorry, what was the question? 1204 MR. LEWIS: If you remove -- you agree with me that if you remove the M16 issue from our application, is there anything else about our application that you take exception with? 1205 MR. THOMPSON: We haven't raised any other opposition to it. We've heard other people who have issues with respect to it, but those were not raised by us. 1206 MR. LEWIS: And you're not adopting the other people's positions on that. You're content to maintain the position you have maintained in your pre-filed evidence; is that fair to say? 1207 MS. PAULUS: If I may. 1208 MR. LEWIS: I would actually like the witness to answer the question. 1209 MS. PAULUS: I appreciate you would like the witness to answer the question. But I don't think this proceeding has concluded, so at this point, to ask them what their final position will be, it seems inappropriate. 1210 MR. BETTS: What is your reply to that? 1211 MR. LEWIS: Well, my reply is that I think we are entitled to know your position in these proceedings at this late stage; and if it's changed from what it was in your pre-filed evidence or as you have described it today, I think we are entitled to know that before we proceed to argument. 1212 MR. THOMPSON: We don't wish to present any other evidence. You know, we have presented our evidence, we are discussing it here now, and it's not -- we're not here to make a decision on other people's evidence. 1213 MR. LEWIS: And again, I'm not trying to be difficult. It's not a question of presenting evidence, it's a question of the position you're taking with respect to this application. And if we can agree that, M16 issue aside, on all the other issues and all the other aspects of this application, you are not taking any position; is that fair to say? 1214 MR. THOMSPON: I think that, if I could maybe summarize my thoughts on that, that I think that a properly developed storage project is of benefit to people. There is this project. There are other projects. We think that many projects can be developed in Ontario. We think that there have been some concerns brought forward, and in my view, you know, some of them are legitimate concerns, and that the accommodation of some of those concerns is a part of a properly developed project. 1215 MR. LEWIS: So in your evidence, your pre-filed evidence where you say: 1216 "NCE is requesting that the Board not make a determination that the applicants' project is in the public interest until it has received the cost allocation and rate design review for embedded storage pools" -- it looks like there is a typo -- "but if ordered Union to undertake and the Board has made a decision with respect to the appropriateness of the M16 rate and contract terms for embedded storage providers." 1217 That is still your position in connection with the outcome or what you wish to see the outcome of these proceedings be; is that fair to say? 1218 MR. THOMSPON: I think so. I think we are all interested in projects that benefit -- I am not here to present evidence or make decisions on other aspects of -- 1219 MR. LEWIS: Thank you, those are my questions. 1220 MR. BETTS: Thank you. Any re-direct, Ms. Paulus? 1221 MS. PAULUS: Yes, sir. 1222 RE-EXAMINATION BY MS. PAULUS: 1223 MS. PAULUS: You were asked, Mr. Thompson, about whether a project that wished to provide a firm level of service to storage users would require that they themselves had firm service on the transportation system. Are there other arrangements such as balancing arrangements or trades that could also be used to support a storage facility? 1224 MR. THOMSPON: Well, certainly there are balancing arrangements and trading arrangements that, you know, can be part and parcel of storage operations and gas trading in general. And they are routinely used. 1225 MS. PAULUS: Mr. Thompson, when you intervened in the rate proceeding of Union Gas, did you understand that that was a rate proceeding and not a proceeding for other purposes? 1226 MR. THOMSPON: I did understand it was a rate proceeding, yes. 1227 MS. PAULUS: And what are typically discussed at rate proceedings? 1228 MR. THOMSPON: Rates, tolls, services. 1229 MS. PAULUS: Thank you. And have you also been participating in a gas forum? 1230 MR. THOMSPON: Yes. We do see the gas forum, which we are participating in, as being a useful tool for developing policy and receiving input from various parties. We have been participating in that. We have -- and we do see it as a useful forum. And you know, we expect, you know, positive things to come out of that over time. We don't know exactly what that time frame is, but it is a useful tool and we have been and expect to be participating. 1231 MS. PAULUS: Mr. Thompson, at the end of the day, when you were considering a storage project and you considered that you would be using capacity, did you conceptualize the capacity that you would be using as a firm type of service or at that point were you looking at alternative arrangements so that other loads on this system of a higher priority would be able to continue and to expand? 1232 MR. THOMSPON: We did consider an interruptible service as well. 1233 MS. PAULUS: And just a last question, Mr. Thompson. Are you familiar with a recent decision that has been made in Alberta with respect to the Nova system and its consideration of what type of service would be appropriate for storage projects? 1234 MR. THOMSPON: I'm not sure if it was suggested as a decision, but there has been some recent examination of the storage service tolls on the Nova system, yes. 1235 MS. PAULUS: Thank you. No further re-direct. 1236 MR. BETTS: Thank you. 1237 [The Board confers] 1238 QUESTIONS FROM THE BOARD: 1239 MR. SOMMERVILLE: Mr. Thompson, prior to your arrival at the hearing, Mr. Leslie provided the undertaking commitment of Union Gas to file material related to the directive that you referred to in your evidence by year's end. Are you aware of that? 1240 MR. THOMSPON: Yes. 1241 MR. SOMMERVILLE: And it seems to me that the core of your concern as expressed to Mr. Vegh was the idea that, if this application were to be granted as applied for, that the M16 rate in connection with this line would become so entrenched that it would be difficult or impossible to change that going forward, no matter what the outcome of the directive, the consideration of the M16 pursuant to the directive might be; is that correct? 1242 MR. THOMSPON: No, I think I would want to temper that with respect to knowing that these rates can always change and that the Board has power to change rates and has, you know, a great deal of power in that regard. So I would not suggest that things cannot be changed, no. 1243 But I do think, though, that decisions have to be made with respect to marketing services, you know, plans for using storage offerings, to make them available to other people, that once you have signed those contracts and made those commitments, then you are going to be relying on the class of service that you have. 1244 MR. SOMMERVILLE: In -- and this again happened before your attendance at the hearing, I think. Mr. Lewis, in speaking for his client, indicated that his client or the investors related to this project were prepared to accept the vicissitudes of changes in the M16 rate. Has that changed your position? 1245 MR. THOMSPON: You know, certainly that is a useful thing to have, yes, that you know, if people are willing to say, you know, this is the way it is now, there are changes afoot, you know, things could change over time, you know, people need to recognize that that can happen, but certainly it is something that, you know, changes occur regularly, but you have to be a bit cautious that these changes don't upset the normal course of business and, you know, situations that people have relied on that, you know, perhaps those changes have to occur over a period of time or with some notice or that sort of thing. 1246 MR. SOMMERVILLE: Thank you, Mr. Thompson. Those are my questions. 1247 MR. BETTS: Mr. Thompson, I was wondering, certainly, you and your company have a stake in the capacity of that line that you brought to our attention. Have you had discussions with Union about the possibility of expanding or otherwise increasing the capacity on that line? 1248 MR. THOMSPON: We have, you know, certainly let it be known that there is a need for additional capacity in the area, and we haven't sat down and had detailed discussions about, you know, the cost or routing of that. But certainly with respect to the need for additional pipeline capacity, we have spoken to Union, and you know, our feeling is that there needs to be some expansion, and we have had some discussions about how that expansion might occur on this particular lateral. 1249 But we have also suggested in the course of the Natural Gas Forum that there is a need for additional pipeline capacity for servicing storage in this area. 1250 Now, I must say that that's in our longer term interests, and we do take a longer term view of this. We feel like there is a relatively modest capacity available in the area right now. It will not support anywhere close to the storage capacity that we see as being either already identified or additional potential that perhaps hasn't been identified yet. 1251 And so I must say there are longer term interests and we do take a longer term view towards new pipeline infrastructure or expanded pipeline infrastructure. 1252 MR. BETTS: The contact that you've made with Union, do I sense that it was rather informal, or did you have a formalized meeting with them? 1253 MR. THOMPSON: We've met with Union on a number of occasions and talked about pipeline capacity. We've looked at the capacity of this system with them, you know, seasonally and, you know, what can be available, what's available at different times of the year, you know, depending on the loads that are already existing on the system, and the amount of capacity that, you know, in an ideal world, would be available from a storage system, which -- you know, some of these pools - our pool, other people's pools - have much more capacity than we identified as being available, you know, in conjunction with that review with Union of the existing capacity. 1254 And we did look at with them, you know, some changes to their existing system that could be made to add compression, to make changes to the system to increase capacity, so yes, we've have those kinds of discussions. 1255 But our feeling is that, you know, we have to look at a bigger project and I think, you know, we would be at a very preliminary stage of looking at that bigger project. 1256 MR. BETTS: Can you tell me if you received any response or reply from Union regarding the possibility of expansion? Did it lead to that at all? 1257 MR. THOMPSON: I'm thinking back to discussions we had with them. You know, certainly the issue of needing additional capacity came up. We haven't seen any designs. I don't believe we've asked for a pipeline design from them to accommodate our gas. We think that it's a review that needs to take place in conjunction with all the storage potential that's available in the area, not just ourselves, and so it's probably a joint meeting that would have to occur with potentially all the stakeholders in this. 1258 So I can't say that that type of meeting has occurred, but we would certainly participate in that kind of discussion. 1259 MR. BETTS: Thank you very much. 1260 Ms. Paulus, did that generate the need for any re-direct? 1261 MS. PAULUS: No, sir. 1262 MR. BETTS: Thank you. Thank you very much, Mr. Thompson. 1263 And I did fail to thank our previous witness panel, and I do want to thank the Dutots and Mr. Feddes for their contribution to our hearing as well. So forgive me for not thanking you at the time, but we were rushing into a break, so thank you. And thanks once again. 1264 I believe that will allow us to introduce the final submission from intervenors in this case, and that will be from Mr. Manocha. But perhaps, while he's moving from one seat to the other, we'll just take a short break, if we can. Let's try to be back in about seven or eight minutes. That means stay on this floor and just stretch your legs. We'll be back at five minutes to 3:00. 1265 --- Recess taken at 2:50 p.m. 1266 --- On resuming at 3:00 p.m. 1267 MR. BETTS: I can't imagine in that very short break that preliminary matters arose, but did they? 1268 PRELIMINARY MATTERS: 1269 MR. VEGH: Sorry to have to say this, but earlier in my cross-examination -- or my examination of the TSLA, I referred to a document that I indicated I would identify for the record, and I would like to do that now. 1270 The document I read from were the Provincial Operating Standards under the Oil, Gas and Salt Resources of Ontario Act, I think, and I read from section 5.16 of that document. 1271 So I have prepared copies and put them on the back shelf of a document entitled "Oil and Gas Salt Resources of Ontario", and an excerpt of all of section 5 of that document. So I would like to mark that as an exhibit, and I think the number is 5.2 or 5.3? 1272 MR. BETTS: 5.2. 1273 MR. VEGH: 5.2, that's right. 1274 EXHIBIT NO. E.5.2: SECTION 5 OF OIL AND GAS SALT RESOURCES OF ONTARIO DOCUMENT 1275 MR. BETTS: Thank you, anything else? And I understand -- or actually the Board has asked Mr. Vegh to introduce the witness in this case. The witness is coming to us without the support of counsel himself, so Mr. Vegh will help him introduce himself and his evidence. And I think we'll proceed from there. 1276 So Mr. Vegh, would you please do that for the Board? 1277 MR. VEGH: Thank you, sir. For the benefit of all parties and for the record, Mr. Manocha is here to give evidence on behalf of the Ministry of Natural Resources. As the Chair indicated, he is not represented by counsel, and to facilitate the introduction of this evidence, I am going to introduce Mr. Manocha and ask him, first, to be sworn. 1278 MINISTRY OF NATURAL RESOURCES PANEL 1 - MANOCHA: 1279 J.MANOCHA; Sworn. 1280 MR. BETTS: Thank you, and the witness has been sworn in. 1281 MR. VEGH: Thank you. Mr. Manocha, I understand that you are here to give evidence today with respect to your pre-filed evidence which has been filed in this proceeding and has been marked on the exhibit list as Exhibit B.1? 1282 MR. MANOCHA: Yes. 1283 MR. VEGH: And I'll ask you to adopt that evidence, and then I understand that you want to provide a summary of that evidence? 1284 MR. MANOCHA: Yes, I would like to adopt that evidence, and I can proceed with the summary, if you like. 1285 MR. VEGH: Thank you, and when you are finished with the summary, you could just let us know that you are available for questions. 1286 MR. MANOCHA: Thank you. 1287 MR. BETTS: Please proceed. 1288 EXAMINATION BY MR. MANOCHA: 1289 MR. MANOCHA: First of all, good afternoon, and thank you for having me here at 3:00 on Friday afternoon. 1290 I guess just a little bit of background about myself. I am a professional engineer registered in the province of Ontario. I have been with the Ministry of Natural Resources for about 14 years. I have been involved with the Canadian Standards Association Z341 standard, that is the storage of hydrocarbons in underground formations for the last 15 years. 1291 My evidence is going to deal primarily with the Z341 standard and a little bit with the Ministry of Natural Resources as well. 1292 Just as a bit of a background, the Z341 is a national standard. It has been adopted in Ontario. It has been developed with the input from the regulatory agencies, the operators that actually store natural gas and consultants. The whole basis of the standards is for public safety, environmental protection and resource management. It adopts the concept that we want to make sure that there is a long-term viability in the natural gas storage in the sense of it's done safely. 1293 These standards have been developed, you know, in conjunction with the industry and the regulators so that storage can be done in a reasonably safe manner. The issues are addressed. The philosophy is a little bit different than the oil and gas industry in the sense of you have a much longer life designed for these facilities, and quite often you will subject these facilities to continually higher pressures as opposed to the oil and gas industries where the pressures quite often will reduce. The standard covers the design, construction, operation, maintenance and safety, that includes equipment like wells, well heads, monitoring, integrity testing, but I think the basis is that it should -- we should not be talking about those technical issues in front of legal people. These are people that actually have to operate the facilities and people can talk the technical language, so it is developed among technical peers from that point of view. 1294 We want to make sure when people make the operations procedures, the people that are operating the facilities are qualified to operate the facilities, and we want to make sure that the wells in the storage facilities, surrounding the storage facilities have been adequately designed and any kind of concerns addressed. 1295 The standard also goes as far as the abandonment in terms of this is the life cycle of the facilities and here is the types of things you have to do. 1296 So our expectation is that anybody who is operating in the storage industry, unless, of course, and that is a question we will quite often ask ourselves: What is it that we do, and what was it that we want our neighbour to do? If we want to protect the storage for the longer term and, you know, what is it that we expect the people next door to do to us so that it can be kept in a safe manner as well. I think everybody has a vested interest to make sure it is done in a safe manner. 1297 So I guess my role here today is primarily to talk about what are the regulatory requirements in reference to the Z341 and a little bit with the Oil, Gas and Salt Resources Act. 1298 In my pre-filed evidence, I have laid out some of the issues and it is tough to tackle some of these issues because it is still very much at a proposal stage, you know, so things that may have been kind of, you know, you can't really see the facilities yet, so it is sort of tough. But what we have said is that, let me go through the key areas that we talked about in the pre-filed evidence. One is the well design. We want to make sure that the well is designed in accordance with the Z341 requirements. We want to make sure that the adjacent wells have been addressed, the risk assessment has been conducted. We have addressed the delta pressuring issue as well. It is our opinion that -- our recommendation that we restrict the pressure to discovery pressure until it can be demonstrated that it can be done safely to an increased level. 1299 We also recommend that things like operating procedures, maintenance procedures, emergency procedures be in place prior to commissioning of the facility. We have made a recommendations as well in putting out a Ministry of Natural Resources Act to basically address an issue that has come up with the location of the storage facility boundary. The boundary itself splits the -- what we call the tracks. We recommend that those tracks not be split because it sterilizes the land and it creates a whole bunch of other problems as well, which I can probably address a little later on. But the way I would like to approach this, perhaps, is let's look at the Z341 issues first and then we can talk about the proposal boundary. 1300 MR. VEGH: So is that your summary? Would you like us to ask you questions on your evidence now or do you have more? 1301 MR. MANOCHA: I am okay with whatever way you want to proceed. 1302 MR. BETTS: Is there anything else you want to say in terms of providing your direct evidence, first of all? 1303 MR. MANOCHA: I think everything is in the standards. You know, my thing is that we are sort of saying, Okay, guys, these are the standards. Let's adopt it. I mean, that's the whole concept. And I think it should make things a lot easier for the Board as well. 1304 MR. BETTS: And in that introduction of your evidence, you did indicate all of the conditions that you feel should be considered with this application? Were there any others that -- 1305 MR. MANOCHA: No, I think that our main condition was that the operation is done in -- you know, I am not sure if you really need a condition because it is a requirement for the province of Ontario that storage is done in accordance with the Z341, but I think it makes people feel a little more comfortable when they see it as a condition from here as well. 1306 MR. BETTS: Thank you. 1307 Then perhaps let me invite first any questions from Board Staff and we'll then see if there are any questions in cross-examination from other parties. 1308 MR. VEGH: Thank you. 1309 CROSS-EXAMINATION BY MR. VEGH: 1310 MR. VEGH: Thank you, Mr. Manocha. I did want to have some -- I did have some questions for you on your pre-filed evidence, and in particular, the concerns addressed in your pre-filed evidence and whether -- or what is the current state of those concerns. 1311 I'm looking in particular at page 2. In response to question 11, you indicate that the MNR has some specific concerns regarding the pool boundary, well design, delta pressuring, and maintenance, operating, and emergency procedures. You go on to say: 1312 "It is our understanding that the applicant may have more information at the time of the hearing and some of these issues may be resolved." 1313 But I would just like to go through the issues that you identified in the next paragraph, as you start to elaborate on these concerns, and get your current view. And I will pass over pool boundary for now and we'll come back to that at the end, if that's all right. 1314 So in answer 12 is where you address your concerns, and I would like to start with (b), well design. 1315 You referred to two types of wells there, first the abandoned wells that you say must be -- well, first the operating wells, the wells used for storage must meet the requirements, and then the wells that are no longer in use must be plugged. 1316 I would like to ask you a question about both categories of wells, if I could; first the operating wells and then the abandoned wells. 1317 In terms of the operating wells, could you go, please, to Exhibit E.2.9, which is the proposed conditions of approval to the authorization to inject and withdraw. 1318 MR. MANOCHA: Yes. 1319 MR. VEGH: Do you have that? 1320 MR. MANOCHA: Yes. 1321 MR. VEGH: Exhibit E.2.9. 1322 MR. MANOCHA: Yes. 1323 MR. VEGH: And I am looking in particular at clause 1.2 which addresses construction, operation and maintenance, and abandonment of the wells. Reading that condition -- well, I'll give you a moment to read the condition and you can tell me when you've done that. 1324 MR. MANOCHA: Okay. Go ahead. 1325 MR. VEGH: And as you -- as I think you're aware, the applicant has agreed to comply with this condition. And given that, can you comment on whether you believe that this condition is adequate and whether it meets the concerns that you addressed in your pre-filed evidence? 1326 MR. MANOCHA: I think the condition is adequate. With reference to the other concerns -- 1327 MR. VEGH: Just the concern with respect to well design, actually. 1328 MR. MANOCHA: Okay. Yeah, with respect to well design, the well is currently owned by Clearwood Resources Incorporated. I understand the plans are to have all the casings cemented in accordance with Z341, so it would meet that once the well has been cemented. 1329 In terms of all the other wells, and I think we could probably refer to that drawing -- I guess it's figure 1.4, I think, beige tab 1. Can everybody hear me? 1330 MR. VEGH: Yes. And perhaps just allow me to identify the document so that the record is clear as to what document you're referring to. So you're referring to Exhibit E.1.4, and the chart which we have been describing is a cross-section of A to A prime. 1331 MR. MANOCHA: Z341 requires that you assess all the wells that penetrate the storage zone and that are adjacent to the storage zone. I can quote the specific sections, if you want. But they require an assessment. 1332 What that assessment does is look at: This is a well; this penetrates the storage zone; can it provide a potential pathway? And this is what the designer, the reservoir engineer, would look at: What are the pathways in terms of can something come through the well and come up; can something come around it; how well have the wells been plugged? And that's an assessment that's done by the designer and reservoir engineers. 1333 I have not seen that assessment. I have seen some historical comment that said other people didn't have to do it. But I think, you know, we are looking for the applicant -- we are looking for the operator to basically provide an assessment that addresses the concerns, whether or not there are any mechanical integrity concerns. And I think that's where we need the experts, and I think they have the expertise to deal with it. But we're looking for the assessment that would say: These are the wells; we have assessed each well individually; whether they provide a conduit or pathway; what the impact of the pathway might be; is there any safety concerns? I think that's the kind of stuff that I would certainly like to see in a risk assessment as per section 5.8.1 of the CSA standard. 1334 MR. VEGH: I'm sorry, what was the section again? 1335 MR. MANOCHA: 5.8.1. 1336 MR. VEGH: So then it is your recommendation that the condition of approval be specifically amended to require the applicant to provide a risk assessment in accordance with 5.8.1 of the CSA? 1337 MR. MANOCHA: Well, you know, that's a general requirement, okay? Basically, let me just read 5.8.1 for you, and there's two other sections that apply with this. 1338 "...re completion designs for converting non-storage wells for use in operation of storage operations shall ensure that all the requirements set out in the standard are met." 1339 But then if you go to 5.8.7: 1340 "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 operation, the well shall be properly plugged and abandoned in accordance with clause 13 prior to commencing storage operations." 1341 Now, there's a couple of other sections in the standard that basically go through this. There's section 7.1 that requires a thorough evaluation of all subsurface activities, specifically 7.1(a): 1342 "...of existing or abandoned wells within 1 kilometre of the subsurface parameter of the storage zone, including activities within these wells, such as fracture treatments." 1343 And there's also another section in the standard, I'm sorry to keep ongoing with this, but there is a few references in here, wells penetrating the storage zone. Section 8.1 talks about wellbore integrity. Basically section 8.1 states: 1344 "Wells penetrating the storage zone or adjacent wells that do not have mechanical integrity shall be recompleted in accordance with clause 5.8.3 or abandoned in accordance with clause 13." 1345 What it's asking you to do here is actually conduct a risk assessment. Let's look at these wells, let's look at the way they're plugged, let's look at the potential of how -- is there any potential of gas migrating around these -- the plugs or the cement or on these old wells, the old operations? 1346 I think there's a couple of wells that I would recommend that we conduct a risk assessment on, especially the two formerly plugged wells. They may or may not require to be replugged. I'm not sure, but I'm certainly looking for a risk assessment that basically states: Here is our analysis; here is our reservoir engineer's professional opinion whether or not there can be any kind of leakage that can migrate up the different formations, that can migrate into the fresh-water aquifer or up to the surface. 1347 MR. VEGH: Now, is it your opinion that a risk assessment of the nature you've described is required to be in compliance with CSA Z341? 1348 MR. MANOCHA: That's what I have asked for, so I think that's what's required. 1349 MR. BETTS: Mr. Vegh, let me interrupt for a minute, because I have to understand for my mind, as I am listening to this, what it's all about and what we're being asked to do here. 1350 And I'm looking to you, Mr. Manocha, at this point. Are you looking to the Board to require this to be done? Is it not my understanding that the applicants are forced to comply with Z341? 1351 MR. MANOCHA: That's correct, I think that's -- that would be our expectation, if people asked our opinion, that's what we would tell them as well. I think that's a given, that people would be required to comply. The question will come back, you know, to what degree do you conduct the risk assessment, what are the specific parameters, and those type of things? And I think those are the type of things that you can perhaps better settle out in a technical discussion than in front of the Board. 1352 MR. BETTS: Well, this is where I am going. I am just wondering what role you want the Board to play, if we are going to go through these things, specification by specification, if you are looking for some form of ruling or support, or is that within your ability and the applicants' ability to determine? 1353 MR. MANOCHA: I think in this particular case, you know, the issue of these other formerly plugged wells was raised by the landowner association, and it is a requirement to conduct a risk assessment to find out if these wells are going to pose any risks. And I haven't seen a risk assessment that quantifies, that says: These are the potential risks; here is how these risks are mitigated or evaluated. Like, you know, is it possible? I would say, yes, it is possible. Is it likely? You know, what can we do to mitigate it, and what can we do to deal with it should the risk turn out to be real, you know. 1354 MR. BETTS: So your purpose in going through these is really to add to the record particularly with those things that have appeared as issues in the course of the proceeding. 1355 MR. MANOCHA: Yes. 1356 MR. BETTS: Thank you for that clarification. Please proceed. 1357 MR. SOMMERVILLE: Mr. Chair, if I could ask a point of clarification at this point too. 1358 Mr. Manocha, how is compliance with this standard actually demonstrated? Is it the idea that they would file with your office some kind of certification that they are in compliance; would they file detail with respect to the various aspects of the standard? What would they do? 1359 MR. MANOCHA: I think that that depends. There are certain things that they do have to discuss with us. There is certain things that we require the operators to have. I mean, the onus is on the operator to comply. These are the requirements. 1360 I mean, we have our enforcement tools, we have our compliance tools that we can use, but generally we like to operate on more of a professional basis and we do count on an operator to conduct these type of studies and to have this kind of information available. If we say, you know, we need this procedure or we want to see what your integrity testing results are, there are certain requirements that they do have to file, okay, they have to file the annual examinations. There are certain things that they do have to file with us, but a lot of this stuff is meant that the operators, you know, who have got the biggest vested interest in the facility, do actually conduct these studies and have the information available. They will quite often come and review it with our technical staff as well. 1361 MR. SOMMERVILLE: Is there any condition or suggestion that you have in that regard that we may be able to consider in considering this application? Is there some condition of approval that would facilitate that process in your mind? 1362 MR. MANOCHA: I think that the condition is already there. I mean, the condition is already there, and it basically requires the applicant to comply, and I think the other part of the condition is that it is already a requirement in the province to comply with the standard, you know, so the question is, to what degree or, you know, what happens if -- I think that's the same as any rules or requirement, that we do have our compliance and enforcement people that can quite often get involved in these issues. Or quite often we like to keep it at a technical basis where you actually discuss the merits of the application. 1363 MR. SOMMERVILLE: Thank you. Sorry about that interruption. 1364 MR. VEGH: So where were we then, Mr. Manocha, and perhaps -- well, we are then at this: There is a condition of approval that Board Staff has proposed and that the applicant has agreed to, which is to comply with CSA Z341 that is set out in 1.2 of Exhibit 2.9. 1365 And let me tell you how I understand this will work. The Board, of course, does not enforce the CSA standard. It doesn't have the sort of enforcement and compliance tools that you have talked about, but the relevance here I guess is not just an extra level of comfort but that this is a condition to the Board's approval to authorize this activity under the Energy Board Act, so that if there is non-compliance, you know, you will have your own, as you mentioned, enforcement and compliance tools, but one of the additional consequences of non-compliance will be that the conditions of approval to inject and withdraw gas from the Energy Board will also not have been met? 1366 MR. MANOCHA: I think that is correct, and I think under your legislation you can also revoke the permit to store on the site as well, so I think it certainly helps us to have this condition. 1367 MR. VEGH: And so in terms of what it is you believe is necessary to meet the concerns that you have identified in your pre-filed evidence, my question for you is: Is there something that you consider to be deficient in section 1.2 of the conditions, or if these conditions are complied with, are you satisfied with them? 1368 MR. MANOCHA: Yes. 1369 MR. VEGH: Now, in terms of the two wells that you spoke about in particular, the two abandoned wells, 368 and 397, there was specific evidence on those wells, and I just wanted to get you to comment on that. 1370 The applicant was fair in acknowledging that these were the wells that were abandoned in 1953 or something around that time, and there were lead plugs for those wells. And those lead plugs wouldn't meet modern CSA standards. And the applicant was asked whether or not they would be prepared to bring those wells up to modern CSA standards, and they provided an answer to that on the record, and I would like to take you to it, please. It is in volume 3 of the transcripts. 1371 MR. MANOCHA: I'm sorry, I don't have the transcripts. 1372 MR. VEGH: Ms. Litt advised me that she gave you the transcripts. You should have them there. 1373 MR. MANOCHA: Is this it? 1374 MR. VEGH: That's right. 1375 MR. MANOCHA: Okay. 1376 MR. VEGH: So how our transcripts work is the paragraphs are numbered inside, so I am looking at paragraph 35. 1377 MR. MANOCHA: Okay. 1378 MR. VEGH: Do you see that? And that's where the record is of the response to the -- or the oral answer to the undertaking which is described as 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. And the answer is basically no, and the answer is given from lines 35 to 51. 1379 But I would like to take you in particular to paragraphs 46 and 47, where, in a sense, a conclusion is given, and I would like you to read those paragraphs, please. 1380 MR. MANOCHA: I believe the standard is very clear on this, that it does require you to address all the wells within one kilometre of the reservoir and anything within the reservoir zone itself. 1381 MR. VEGH: So you would disagree with this statement? 1382 MR. MANOCHA: Yes, I would. And that's based on the requirements in section 7.1(a), 8.1, and 5.8.7 of the CSA Z341 standard. 1383 MR. VEGH: And, so, in your view, would it be appropriate to request the applicants to -- as a condition of approval -- to actually bring the current abandoned wells that are plugged with lead up to current CSA standards as set out in section 13.3.1? 1384 MR. MANOCHA: I think the approach that I would recommend would be to carry out an engineering assessment that evaluates the adequacy of the plugging and the isolation provided. It's not the way that it would be done today; it was accepted at that point in time. I would certainly ask whoever is the designer or the reservoir engineer to consider the fact that you're proposing to pressure this pool up to a much higher pressure than you have seen before. I would ask them to look at the potential pathways and how adequate the isolation is without cement. 1385 I think, based on the assessment, that I could potentially give you a better answer, but right now I have not seen an assessment. The only thing I heard in the evidence yesterday was, that's how the other people do it. And this standard does not apply retroactively, but it does apply to any new installations. And I would say that's what the requirement is today, that you do conduct a full assessment. If, in that assessment, there is a potential risk, that whole risk has to be addressed and designed so that there's no risk to the public safety, or it's mitigated. 1386 MR. VEGH: Okay. So would it be your view, then, as a way of crafting a condition - and I'm not trying to put you on the spot to wordsmith it - but is one way around this to require that the caps be brought up to modern standard unless it can be demonstrated through a risk assessment that there is -- that the current plugs are adequate? 1387 MR. MANOCHA: Yeah, I think there should be a reservoir engineer and a drilling engineer, who's qualified to look at this, conduct a full risk assessment that addresses the isolation, the potential pathways; it looks at the geology and the formations; it looks at the potential risk, especially with increased pressures; and given the nature of the geology in the area, is there any potential pathway; and what could be the risks involved in gas leaking around these wells. 1388 MR. VEGH: Okay. And in terms of the expertise required to carry out that assessment, are you satisfied, in your view, that the applicant has that expertise? 1389 MR. MANOCHA: I'm not sure. I mean, it depends on if somebody can apply their expertise to this. I think risk assessment is -- there's different ways to do risk assessments, and, you know, there's recommended standards that you can follow for risk assessments. But I think the expertise is there or is available to the applicant to, you know, apply to that kind of stringent condition, yes. 1390 MR. VEGH: Okay. The next area that you indicated some concern in your evidence is with respect to delta pressuring. That's item (c). 1391 MR. MANOCHA: Yes, that's correct. I think, once again, you know, we do not want to reinvent anything, but the standard clearly states that you use the reservoir pressure for your storage pressure until you've got studies completed and an approach towards increasing to higher pressures. I think you want to make sure it's done in a safe manner and that you've got the procedures and safeguards in place to do it safely. 1392 MR. VEGH: Right. So you recommend in sub (c) that the pressure be restricted to discovery pressure until caprock and reservoir engineering analysis confirms a higher pressure can be attained. 1393 MR. MANOCHA: That is correct. 1394 MR. VEGH: And again, if you look at condition 1.5 of the authorization to inject, store and remove gas. 1395 MR. MANOCHA: Yes, sir. Okay. 1396 MR. VEGH: I'm looking at section 1.5. Could you read that, please, and tell me whether that condition adequately addresses that concern? 1397 MR. MANOCHA: It's a little bit long-winded for me, but I think the second part is a little bit confusing for me. I'm not sure what you mean by "without the leave of the Board." 1398 MR. VEGH: It basically means they would have to come back to the Board and get specific permission to do that. 1399 MR. MANOCHA: I think that's adequate. 1400 MR. VEGH: Okay, thank you. 1401 And the next two areas you referred to in your report are sub (d) and (e), O&M, operating and maintenance procedures, and emergency procedures. And you say that for both of these procedures, you recommend that they be developed in accordance with the requirements of Z341, and staff are trained prior to the commencement of storage operations. 1402 First of all, both of these requirements you are talking about, operating and maintenance procedures and emergency procedures, they are both required as part of Z341? 1403 MR. MANOCHA: Yes, that's correct. Yeah. 1404 MR. VEGH: So the general compliance with Z341 captures those? 1405 MR. MANOCHA: Yeah. I think we're just trying to highlight that basically we'd like to see this in place before storage operations actually start. I think it's a prudent thing to do, but, you know, I think a prudent operator would do this anyway. But I think we wanted to make sure that people that are operating the facility and the procedures are there, the emergency plan is in place. Sometimes, you know, people may get anxious to get things going and sometimes the paperwork isn't necessarily in place, and we're just trying to make sure of that. 1406 MR. VEGH: That it gets done before the commencement of -- 1407 MR. MANOCHA: Right. 1408 MR. VEGH: -- of procedures. And that's why I'd like to take you to, also in volume 3 of the transcript, at line 86, or paragraph 86, there's an undertaking provided by the applicant to complete and file with the Board operating and maintenance guidelines and an emergency response plan before the commencement of injection; do you see that? 1409 MR. MANOCHA: Yes, I do. 1410 MR. VEGH: So that addresses that concern as well? 1411 MR. MANOCHA: Yes, it does. 1412 MR. VEGH: Okay. 1413 Then the final area that I want to ask you about is with respect to your -- the first area, that is, the first area addressed in your evidence, and that's the pool boundary. 1414 You state in your evidence that the existing boundary cuts across tracts, and that the storage area boundary be amended to conform with the tract boundaries in the lot. You will recall, I think you were here when we had some discussion with the applicants around that point. 1415 Let me see if I understand the nature of the concern you are raising, or the reason why you raised the concern. 1416 I understand that the effect right now of the boundary, if left as it is, the effect is that there is a sterilization of the land outside of the boundary to the extent that it extends to the border of the tract -- 1417 MR. MANOCHA: Yes. Let me just back up a little bit. 1418 MR. VEGH: Sure. 1419 MR. MANOCHA: Basically, in terms of regulating the oil and gas industry, we try to follow a tract -- or we do follow a tract system so that you do not sterilize lands, you allow early development, and you do not end up bringing your neighbour's property -- you do not have too many wells drilled into the same formation. So in order to allow orderly development, we basically have tracts, what we call spacing units, and we do not allow people to split the spacing units. 1420 And in the rest of this application, the spacing unit boundaries are respected. We refer to the map. If you looked at a lot, these are 80-acre lots and they are split up into three tracks, so the proposed boundary actually follows the lot boundaries and the tract boundaries, except when it comes up to the north portion of it. We are recommending that in order to respect people's rights and not sterilize lands, that the boundary be made in conformity to our requirements in terms of following either tract boundaries or lot boundaries. That would effectively move this up to here, because right now these six -- I think there is six tracts in here that are now split. If somebody came to us with an application and said, This is our proposed boundary, we would not allow that. 1421 It is an older unit agreement that has been in place for a long time, but we would not allow these tracts to be split on this basis. It is a requirement in our regulations as well. 1422 MR. VEGH: It is a requirement of your regulations, but I understand that you are not saying it is a requirement -- you are not saying it is a requirement that the Board follow that in setting the border of the storage area? 1423 MR. MANOCHA: I am recommending that this is the way that we would do it to protect people's interests, so you do not end up sterilizing some lands. 1424 The Minister has a right to do that, has a right to refer it to the commissioner as well, but I think generally people come to us on a consultation basis, and when people come to us on a consultation basis for pool boundaries or when we impose pool boundaries, we follow the tracts. When people come to us for a drilling application, we follow the tracts. So that is how we do business. And what we are recommending to the Board is to respect the tracts, so that we do not end up sterilizing some lands in that area. 1425 MR. VEGH: And when you say people normally come to you, have the applicants come to you and had a conversation about this issue? 1426 MR. MANOCHA: They have not come to me. They may have come to someone else in the organization, but I know our policy is that we do not allow people to split the tracts when it comes to the unit agreements, or split our spacing units. 1427 MR. VEGH: And when we asked the applicants about that in cross-examination, whether the applicants were prepared to expand the boundary, their response is at volume 2 of the transcripts, starting at line 1001. This is Dr. Walsh answering and he says: 1428 "We are not prepared to adjust the proposed designated storage area at this time. We have no evidence -- I mean, the proposed designated storage area is based on a number of criteria. First and foremost for us is the geological and engineering evaluation in determining the appropriate amount of acreage that is required in order to safely undertake storage operations without the risk of having gas injected into a reservoir that might extend beyond the proposed designated storage area." 1429 What is your reaction to that argument, that there is no geological reason to extend the boundary to the northern concession? 1430 MR. MANOCHA: I think I'll get back to what our requirements are, and I can only state what our requirements are, that, you know, oil and gas well spacing units shall be comprised of whole tracts for wells drilled into or below -- 1431 MR. VEGH: I'm sorry, what are you reading from in terms of your requirements? 1432 MR. MANOCHA: I'm sorry, I am going to read from our requirements. 1433 MR. VEGH: Where are your requirements? 1434 MR. MANOCHA: This is -- 1435 MR. VEGH: Sorry, Mr. Manocha, where are your requirements? What are you reading from? 1436 MR. MANOCHA: I am reading from the Oil, Gas, Salt Resources Act, Ontario regulation 245.97. 1437 MR. VEGH: We actually have a copy of that we might distribute so that others could see that as well. These are regulations. I don't think we need to mark them as an exhibit. 1438 So what was the section, sorry? 1439 MR. MANOCHA: There is a section 8 that deals with spacing requirements for oil and gas wells. Section 8 states: 1440 "This section applies to all oil and gas exploratory and development wells." 1441 And section 2(b): "Unless otherwise specified by the Minister, oil and gas well spacing units shall be comprised of all tracts for wells drilled into or below a formation of Silurian age." 1442 And section 8 goes further: "No person shall drill a well in a spacing unit that has not been pooled, produce oil or gas from a spacing unit that has not been pooled, or produce oil or gas for more than one well in a spacing unit." 1443 I think that speaks to -- I am not the legal expert, but basically this is how we function. There is a lot more details in the regulations that kind of show, you know, more details about the tracts and how these spacing units are set up. But we do not like the tracts to be split. I think that's the point I want to make. 1444 MR. VEGH: And could I just ask you, is the point you are making around the sections that you have just read in 8.1 and 8.2 and the restrictions that those sections impose, are those restrictions that result in the effect of sterilization of the lands that are outside the storage area? Or are those sections -- 1445 MR. MANOCHA: They could potentially do that. 1446 MR. VEGH: So are you making that point, that these sections result in the sterilization of those lands as opposed to making the point that these sections require the Board to expand the designated storage area to the concession boundary? 1447 MR. MANOCHA: I think the Board has an option of expanding it upwards or downwards. I mean, I am just asking for the boundaries of the tracts to be respected. You know, that is our recommendation, and to respect the tracts in terms of land development, in terms of oil and gas extraction. 1448 MR. VEGH: Okay. And I have one more area I wanted to ask you a question about, and this is pretty shameless, and I apologize for it, but I did want to take advantage of having someone with some expertise on interpreting the provincial operating standards for the Oil, Gas and Salt Resources of Ontario, because there has been some discussion around the -- around what is contemplated by a certification for site rehabilitation. 1449 So there is a document 5.2 which is an excerpt from the provincial operating standards, and I believe you were provided a copy of that. 1450 MR. MANOCHA: Right. 1451 MR. VEGH: And I am looking in particular at section 5.16, which should be in that excerpt, and there is a description about what's required as part of the rehabilitation. And then 5.16(f) says: 1452 "A rehabilitation shall provide for an examiner to visit the site and certify that rehabilitation of the site was completed in accordance with this standard." 1453 Do you have any background or assistance you can provide the Board in appreciating what 5.16(f) may require in this case? 1454 MR. MANOCHA: Okay, first of all, examiners are people that are certified, and that typically have done a lot of the certification. But they are certified under the Ministry of Natural Resources on the Oil, Gas and Salt Resources Act, to basically provide examinations on certain things. There are different classes of examiners. There is a class 1 that does a drilling; class 2 does production sites; class 4 does the storage sites; class 5 does the pipelines. 1455 So basically what the Ministry recognizes is that the industry has the expertise and people go through some kind of a training, take some kind of an oath to basically have certify -- to be able to certify the fact that some work was done. 1456 After they do an examination, they are required to submit the examination to the Ministry within 10 days, and in this particular case, there is actually two different sections. It is covered here fairly well in 5.16. There is also a section under plugging under section 11, that after you plug a well, you go back and -- within a period of time, to make sure the site has been rehabilitated as well. 1457 But what it requires is that someone goes -- that someone inspects the well site or examines the well site to make sure the work has been done. If this was farm land, you'd want to look to make sure the vegetation is coming back and that type of thing; you know, if they've had to remove some soil, or if they've all the tanks, those types of things. 1458 So it counts on an examiner to go back after they've done the work to make sure everything is the way it's supposed to be. 1459 MR. VEGH: Okay. And then when the examiner -- and the examiner certifies that, I guess, by just filing a report with the MNR; is that right? 1460 MR. MANOCHA: Yes, the examiner files a report both with the operator and with the Ministry of Natural Resources. 1461 MR. VEGH: Okay, thank you very much. 1462 Those are my questions. 1463 MR. BETTS: Thank you. 1464 And who would like to -- who else would like to cross-examine Mr. Manocha? Mr. Chinneck? And others? Mr. Lewis as well. 1465 Mr. Chinneck, would you please proceed? 1466 MR. CHINNECK: Yes, sir. 1467 CROSS-EXAMINATION BY MR. CHINNECK: 1468 MR. CHINNECK: Just a couple of questions for you, Mr. Manocha. Just following along the line of the questioning that my friend just finished with, are there any other standards that clean-ups of spills would be required to comply with? 1469 MR. MANOCHA: Under our legislation, or are you talking about as a government? 1470 MR. CHINNECK: I'm speaking generally. 1471 MR. MANOCHA: I think the obvious one is the Environmental Protection Act, under the Ministry of Environment, but I'm not an expert in that area. 1472 MR. CHINNECK: I understand. But did you hear the testimony earlier involving Mr. Feddes and the spill on his son's property and what he was requesting by way of documentation? 1473 MR. MANOCHA: For the major part, yes. 1474 MR. CHINNECK: And what do you think that he would likely be looking for in the way of documentation? 1475 MR. MANOCHA: I'm not really a hundred percent sure. I understood that he wanted some kind of certificate to deal with the environment clean-up. You know, I mean, basically the normal, that I'm familiar with, is like a phase-1 or phase-2 environmental, but I'm not sure exactly what he's looking for in terms of a report, you know. There should be something done by an examiner that -- I can talk about what we normally do. But I think what the -- the Ministry of the Environment may be in a better position to state those things. 1476 MR. CHINNECK: All right, thank you. 1477 If a certificate was produced and filed, as you just mentioned, by one of the inspectors under the MOE -- I'm sorry, the MNR regulations, how accessible would that information be to a landowner? 1478 MR. MANOCHA: I'm not a hundred percent sure. I think it's -- let me think about this. Normally, forms that are submitted to the Ministry of Natural Resources that are required to be submitted are not subject to the -- are basically public information. I stand to be corrected on that, but I think it is public information, as far as I know. 1479 MR. CHINNECK: But in light of the new privacy legislation, would it be possible for a landowner, then, to obtain a copy of those certificates? 1480 MR. MANOCHA: I would think so. I mean, I can't be an expert on the FOIP, but -- but, you know, subject to that. But basically, I think my understanding is that it would be a public piece of information. But, once again, I'm not a hundred percent sure, you know, on that. I have not been -- nobody has requested that before, of me anyways. 1481 MR. CHINNECK: Thank you. That's fine. 1482 Can you just assist me a little bit with the decommissioning costs of a site. If there were to be a decommissioning of a site and, for some reason or other, the operator was unable to pay the costs of that decommissioning, who would ultimately be responsible for that cost? 1483 MR. MANOCHA: Well, "decommissioning" is a big word in the sense that I don't know what you really mean. Are you talking about the wells themselves, the facilities? You need to get a little more specific about what you mean by an operator not being able to fulfill the obligations. There could be a number of different reasons for that. 1484 MR. CHINNECK: If, for example, the operator was insolvent or bankrupt. 1485 MR. MANOCHA: Right. Yeah, it would depend on the facilities, if there's value in the facilities. There's a whole number of different things that could come into play. We do have a bonding system where an operator is required to post a $6,000 -- in this particular case, and it changes by depth, but in this particular case it would be $6,000 per well, to a maximum ceiling of $70,000 for the operator. That could be accessed as security; could be accessed to plug wells. 1486 The definition of an operator, if that's what you're getting to, that includes -- I guess I've included that in my pre-filed evidence, but let me just refer to that. 1487 Under the Oil, Gas and Salt Resources Act, the definition of an operator means, in respect of a work: 1488 "(A) a person who has a right as lessee, sublessee, assignee, owner or holder of a licence or permit to operate the work; 1489 (B) a person who has control or management of the operation of the work; 1490 Or, if there is no person described in clause (A) or (B), the owner of the land on which the work is situated." 1491 So I think in your question, it depends on why has a person gone insolvent? Is there value in the asset? There may be somebody else interested in looking at the assets. There has to be something more than that. But, in essence, there is a fund -- or there is some security that could be applied towards the plugging of the well. 1492 MR. CHINNECK: If we assume, though, that there are no assets valued in the operator or the person who has control or management of the operation of the work, is it possible that the owner of the land would be liable to pay for the clean-up costs or the decommissioning costs of that particular well? 1493 MR. MANOCHA: I think it depends. But I think if you look at the strict definition of the operator, that might be a way to interpret that. I think normally, you look for the operator, who is typically the oil and gas company or the company that's in charge of it, to do that decommissioning. I mean, we try to anticipate the things in terms of, you know, from a compliance and enforcement viewpoint. We will certainly go after the operator, but according to the current definition of the operator, the assets and the liabilities could revert to the landowner. 1494 MR. CHINNECK: All right. So I think the answer to the question, then, is yes, that the landowner could be liable under certain circumstances; is that a fair summary? 1495 MR. MANOCHA: I think it's a conditional yes, the way I described it. 1496 MR. CHINNECK: All right, thank you. 1497 Now, you did mention that the bonding for the wells in this particular area are $6,000 each? 1498 MR. MANOCHA: Correct. 1499 MR. CHINNECK: And you heard the testimony, I believe, that there were five wells altogether for this project? 1500 MR. MANOCHA: I'm not sure which five you're referring to. 1501 MR. CHINNECK: All right. Well, I believe that there was testimony to the effect that there were five wells on the -- 1502 MR. MANOCHA: Are you looking at the lateral wells as well? 1503 MR. CHINNECK: No, sir. 1504 MR. MANOCHA: Okay. Which -- I'm sorry, which wells are you looking at? 1505 MR. CHINNECK: The wells that are on the surface. 1506 MR. MANOCHA: I think we are looking at two -- well, in the proposal screen, from what I understand, there's going to be two observation wells; one injection/withdrawal well with a number of laterals going off it. That's my understanding. 1507 MR. CHINNECK: All right. But on this particular site, there's going to be bonding, is there not, for the wells that are currently on the property? 1508 MR. MANOCHA: That would be the three wells; right? Is that what you're referring to? I'm not sure -- 1509 MR. CHINNECK: I'm just trying to establish how much money you expect to be held in trust by Mr. Lewis for this property. 1510 MR. MANOCHA: I think in this case here, it's under Clearwood Resources, and I think they're probably at the maximum bond limit in terms of, you know, the $70,000 required under our requirement. 1511 MR. CHINNECK: So that's a different company than the applicants, though, that owns this -- the wells? 1512 MR. MANOCHA: I think that's what we've heard. I mean, from what my understanding is, that the storage facility will be turned over to Tribute or to Tipperary once the approvals have been given. Currently, the well is owned by Clearwood Resources and is bonded as such. 1513 MR. CHINNECK: All right. And when the transfer of title to those wells takes place, are you then expecting that there will be a deposit of trust monies pursuant to the MNR legislation? 1514 MR. MANOCHA: Yeah, I think the transfers of the well is something that our Minister has to consent to, and typically we would ensure that the requirements are met before the transfer takes place. 1515 MR. CHINNECK: All right. And would you have any idea how much money that would be? 1516 MR. MANOCHA: It depends on the number of wells, you know, and what other things Tribute has, but -- 1517 MR. CHINNECK: Well, the point I am trying to get at is simply is the amount of money in trust per well, is it adequate to cover the costs of decommissioning a well if the operator is unable to pay those expenses? 1518 MR. MANOCHA: I think what we say is the operator is the company, and if the company has assets, we would certainly go after the company first. 1519 MR. CHINNECK: Right. Well, what is the estimated cost to decommission a well? 1520 MR. MANOCHA: Once again, that depends quite a bit in terms of the age of the well, the depth of the well, the condition of the well. It could range, you know, quite significantly. If they are easily accessible, I think I have put a number in there in the pre-filed evidence anywhere from $15,000 to $50,000, probably not an unreasonable number in that area. 1521 MR. CHINNECK: Would you agree with me, though, that that number per well is significantly more than the monies that are held in trust on account of those wells? 1522 MR. MANOCHA: All I can tell you is what our requirements are. 1523 MR. CHINNECK: All right. Thank you very much, those are my questions. 1524 MR. BETTS: Thank you, Mr. Lewis? 1525 CROSS-EXAMINATION BY MR. LEWIS: 1526 MR. LEWIS: As I understood your evidence on this point of possibly having the standards apply to a risk assessment study for the two old plugged wells, you indicated that an engineering report submitted to the Ministry would suffice if the report was submitted and verified that these wells were plugged properly; is that what I understood? 1527 MR. MANOCHA: I think, Mr. Lewis, what I would expect would be that someone would look at the condition of the wells, they would look at the plugs, they would look at the potential pathways, they would look at the geology, and they would conduct what the likely scenario is of the gas migrating around of the plugs. Could it possibly go into other formations? Could it possibly undermine the integrity of the pool? What if it does? What are the consequences, and to be mitigated. 1528 And then basically, the reservoir or the engineer who would conduct this study would come back with a recommendation saying, based on our analysis, here is what we have analyzed and here is our solution. The solution may to go back and plug the wells; it may be to do nothing. I mean, I don't know yet. 1529 MR. LEWIS: So -- 1530 MR. MANOCHA: What I am looking for is a technical engineering study that looks at the potential pathways, that conducts an evaluation of the risks and then I think we can turn around. But failing to do that, I mean, I would be tempted to say, Yeah, go ahead and cement and plug, replug it. But I think that is not what is required in the standard. The standard says you conduct a risk assessment of all the wells that penetrate the zone, that are adjacent to the zone, and you have got to be satisfied that there is no way from a public safety point of view, and I would look for a professional engineer to sign off that there is no way that this gas is going to migrate around this thing. 1531 MR. LEWIS: Okay. The other issue that you raised was one of the extension of the northern boundary, and as I understood your evidence, you walked us through a couple of the sub-sections of section 8 of the regulations under the Oil, Gas and Salt Resources Act. 1532 And particularly, as I understood it, you referred us to section -- and maybe you can get it in front of you -- 8(2) of the regulations. That was the section requiring the spacing units to be of a certain size for a well of a certain depth; is that fair to say? 1533 MR. MANOCHA: Right. 1534 MR. LEWIS: And I am wondering if you could have a look at section 8(4) of the regulations -- 1535 MR. MANOCHA: Yeah. 1536 MR. LEWIS: -- and I believe that refers to the removal of spacing units in the case of a unitized area; do you see that? 1537 MR. MANOCHA: Yeah, and it also says the Minister agrees with the unitization. 1538 MR. LEWIS: This unitization has been in place since 1977. Do you have any reason to believe that the Ministry doesn't agree with it? 1539 MR. MANOCHA: I think this was a voluntary unit agreement not approved by the Ministry. It was done, and that is the way things were done back in 1977. It is not the way things are done today. So basically we would respect the tract boundaries. 1540 MR. LEWIS: Oh, sure, but you would agree with me that this piece of legislation is an evolving piece of legislation. And in fact, back in 1977 there wasn't an Oil, Gas and Salt Resources Act, there was a -- that had different sections that dealt with spacing and unitization; is that fair to say? 1541 MR. MANOCHA: It is fair to say, but it is not fair to say that that's how things are done today. 1542 MR. LEWIS: Oh, agreed. I'm just trying to put to you the fact that things change, and you would agree with me that the unitization that has been in place since 1977 here is one that your Ministry certainly hasn't raised any concerns or complaints about; is that fair to say? 1543 MR. MANOCHA: The Minister may raise concerns. It has the option. It is not the way we would endorse any kind of unit agreement today. It is one that exists and we sort of have other priorities to deal with. 1544 MR. LEWIS: Mr. Manocha, my question was: Are you aware of any complaints that the MNR has raised with respect to this unitization, the Tipperary north and Tipperary south pools that has been in existence since 1977? 1545 MR. MANOCHA: Well, Mr. Lewis, there is a few things you have to consider. 1546 Number one, the unit has not been producing the whole time. In terms of have we had any specific complaints, I am not aware of any complaints. 1547 MR. LEWIS: Thank you. 1548 MR. MANOCHA: But I do want to re-emphasize, we do respect the tract boundaries and that's how we do things today. 1549 MR. LEWIS: Okay. Are you aware of section 7.1 of the Oil, Gas and Salt Resources Act? I don't know whether you have that in front of you, and I do not have extra copies but I can certainly -- 1550 MR. MANOCHA: I've got it here. 1551 MR. LEWIS: Okay. 1552 MR. MANOCHA: Just one second. 1553 MR. LEWIS: Can you read that into the record, section 7.1.1, sub (a) through (c). Maybe I can read it into the record, 7.1.1, (a) through (c) reads as follows: 1554 "The Minister may, by order: A, establish a spacing unit by designating a surface area and the subsurface beneath the surface area as a spacing unit; B, revoke or amend a designation of a spacing unit, and; C, specify where wells may be located within a spacing unit." 1555 And my question for you is based upon that. Is it within the Ministry's power to amend the spacing units in and around the north boundary to enable the DSA to follow the configuration in the north that it has followed for many years since 1977? 1556 MR. MANOCHA: This is what the Ministry would do today. 1557 MR. LEWIS: Amend the spacing? 1558 MR. MANOCHA: It would put the spacing in such a way that you wouldn't have these tracts that are split. 1559 MR. LEWIS: Right, so but the Minister has -- 1560 MR. MANOCHA: Has power to do that. 1561 MR. LEWIS: Has power to amend the spacing. 1562 MR. MANOCHA: And we would do it if required. Basically we are recommending that this be done voluntarily. In this kind of a hearing, it is a good opportunity to clean it up right now. 1563 MR. LEWIS: But what about Mrs. Guindon, because we have heard testimony that she doesn't want to be included in the north boundary, and we have also heard testimony that there is only, I believe, a storage lease on part of her lands. Would the Ministry not respect her wishes in not wanting to be included in the north boundary? 1564 MR. VEGH: I don't want to interrupt, but I believe that the evidence from Ms. Guindon, and you can correct me if I am wrong, was that she was basically non-responsive to communications. I don't know if there is evidence that she specifically stated she didn't want to be a part of the north boundary. 1565 MR. LEWIS: It may be that I believe Mr. Jordan indicated that she would not sign a consent to be included. I think that was the way it was entered. 1566 So if I have mischaracterized it, I apologize. I think that was the way -- the other land owners did sign consents I believe to be included within the designated area when approached by Mr. Jordan and I believe his evidence was that Ms. Guindon would not sign a consent. 1567 But in any event -- 1568 MR. MANOCHA: I think there is a couple of ways to go. One is we can always take this in front of the commissioner to get the compulsory spacing unitization done. It is not the way we prefer to see things. I think if it can be done voluntarily, we certainly want to respect the tracts, and that is the only message. That is our recommendation. 1569 MR. LEWIS: But Mr. Manocha, don't agree with me if this is not correct, but isn't the process of going before the commissioner, the Mining and Lands Commissioner on a unitization a completely different process than the one we're going through here, which is a designation for a storage area. And what I mean by that is that you would take the step to unitize and change the unit boundaries if you intended to continue to produce this formation as opposed to changing it to storage. Aren't they two different things? 1570 MR. MANOCHA: Mr. Lewis, what I would suggest to you is that, yeah, we're here for a designated storage area hearing and we're making a recommendation to the Board that we respect the boundaries that are set out by the tracts. That's our recommendation. And how we accomplish that, I think we're certainly open to discuss that. 1571 MR. LEWIS: But as I'm hearing your evidence and the suggestion in your evidence, you're making that recommendation that the boundary be moved to the north and you're asking the Board in this proceeding to actually do that. And I guess the reason I'm asking these questions is I'm trying to completely understand the options that we might have here and the complete rationale for this request. 1572 MR. MANOCHA: I think Mr. Jordan had an option as well. Like, there's a number of different ways to accomplish this. I mean -- 1573 MR. LEWIS: To accomplish what? 1574 MR. MANOCHA: To accomplish the boundary concern. I mean, we could move the boundary downwards. You could -- we could have people within participating units, outside of participating units. There's a number of ways to do it, but I think what I'm asking the Board to consider is to have consistency, not to sterilize lands, and to follow the tract boundary. 1575 MR. LEWIS: But I put to you that another option, rather than going through -- rather than having the Board consider all these things, is for the Minister, through his power under section 7.1 of the Act, to simply change the spacing units in and around this to accommodate what has been proposed as the north boundary; is that not another option? 1576 MR. MANOCHA: Mr. Lewis, I hate to sort of prolong the point, but if you're interested, I could potentially follow it up with our Ministry to find out if they want to schedule a commissioner's hearing on this. I don't know. I'm trying to be accommodating here -- 1577 MR. BETTS: Mr. Lewis, I don't think you're going to get the answer that you're looking for, and I think Mr. Manocha has answered that question several times, so please move on. 1578 MR. LEWIS: I'll just ask one more question relating to the boundary. 1579 Do you recall that when the -- and I don't know, maybe you haven't researched the files, but I believe it's the applicants' position that -- or I'll suggest to you that when the area was unitized back in 1977, it did conform with spacing units then, and they had since -- they have since changed since 1977, thus creating the problem. 1580 Would you accept that? 1581 MR. MANOCHA: I think that's certainly possible. I'm not sure on that, but that's certainly possible. 1582 MR. LEWIS: In regards to oil and gas wells, and this is in connection with sort of a follow-up question that I have on a point Mr. Chinneck raised with you relating to well clean-ups, who has jurisdiction over oil and gas wells? Is it the MNR or the MOE? 1583 MR. MANOCHA: I think it's both. We do refer to the EPA and quite a bit of section 5 of our standard. We require things to be cleaned up in an environmentally sound manner, and I think that goes back to the Environmental Protection Act as well. 1584 In terms of the primary agency that regulates the activity, it is the MNR through the Petroleum Resources Centre, and we regulate the wells, associated facilities. However, I think, you know, people have to be respectful in terms of how do you handle the materials and that type of thing. 1585 MR. LEWIS: And in regards to this well security issue, if the horizontal well -- if there are several legs drilled off it, is it true that you have to get a drilling permit for each leg? 1586 MR. MANOCHA: Yes. 1587 MR. LEWIS: And you have to post the $6,000 bonding security for each leg as well? 1588 MR. MANOCHA: It is my understanding that you do not at this point in time. Yeah, I was surprised at that one too, but you basically -- I think the rationale goes something like this: That you do not normally plug the horizontal leg, you just plug the vertical portion of the well, and that's what the security is intended to do. And that was the rationale for not having extra security. 1589 MR. LEWIS: Thank you very much. Those are my questions. 1590 MR. BETTS: Thank you. 1591 Mr. Manocha, there is no counsel representing you. Are there any general comments you want to make in reply to any of the questions that you've been asked here? 1592 MR. MANOCHA: No. I think certainly one thing I do appreciate is the process. I know it's frustrating and, you know, I think all of us would rather be some other place on a Friday afternoon. But I certainly respect the process and I do certainly appreciate the fact that some of the landowners have come out and they have become very aware of the issues, and they have certainly expressed the issues very well. And I certainly appreciate all the counsel for being rather kind in the cross as well. So I am happy to help the Panel in any way that I can. 1593 MR. BETTS: And we may have some questions for you as well, and I will poll my fellow Panel Members. 1594 Mr. Sommerville. 1595 QUESTIONS FROM THE BOARD: 1596 MR. SOMMERVILLE: The remediation certification that arises from the Resources Act where there was an examiner that makes that certification, is there any particular class of examiner that can make that, or are all classes of examiner entitled to make that certification? 1597 MR. MANOCHA: In a storage facility, it would be class 4 -- 1598 MR. SOMMERVILLE: Class 4? 1599 MR. MANOCHA: -- that would do that. In an oil and gas production facility, it would be a class 2. 1600 MR. SOMMERVILLE: Thank you. 1601 MR. MANOCHA: And you know, they would look after -- and I think this is an important point, is we regulate the wells and the works, if you will, and we call the works all the facilities. So we say, Look, remove all the works and facilities. If there's any liquids and that, clean it up in accordance with the Environmental Protection Act. If there's any spills, clean it up in accordance with the Environmental Protection Act as well. 1602 MR. SOMMERVILLE: That was my next question. Would you anticipate that the examiner, in making that certification, would have regard to all of the applicable standards that may apply to the property in question? 1603 MR. MANOCHA: I would hope so, but I don't know for sure, because I think you get into the different, I guess, qualifications for different people. If someone is doing an environmental assessment of a site, it's a lot different than oil and gas site rehabilitation, if you will. 1604 What we're concerned with is removal of the facilities, plugging of the wells. You plug the wells, you clean up the site, you know, and you remove -- or you either isolate the lines, remove all the tankage, all the cement, all the debris, that type of thing, you replace any visible signs of contaminated soil that might happen. 1605 I think the good thing - the good thing or the bad thing, I guess - is the oil itself is quite often biodegradable. It's the other things that you're quite often more concerned with. And I think if you are doing an environmental assessment, you would go to an environmental person who is a specialist in that area; but if you're just -- you know, if the question is, what do you normally require for the oil and gas sites, I would say, a class 2 examiner certifying that everything has been done is adequate for us. 1606 MR. SOMMERVILLE: You indicated, and I just wanted to be clear about this, the costs of decommissioning a well. You have a bonding program that provides, effectively, for $6,000 per well as a bond to accomplish the plugging of the well. 1607 Did I understand you to say that that represents less than half of the actual costs you anticipate for that? 1608 MR. MANOCHA: I think that's probably a correct assessment. We're looking at -- you know, typically we're looking for people to have assets; right? And if you have a storage well, there's an asset there in terms of the storage facility, in terms of access to the storage facility. 1609 We're hoping that, I mean, we anticipate that the operators will be professionally responsible in carrying out their operations, you know, in a professional manner, plug the wells in a professional manner and operate the facilities in a professional manner. Not all operators are equal -- you know, are equally professional, if you will. 1610 So I think that the whole point is that it generally works for most people that, you know, if you order them to plug wells, or generally they'll voluntarily plug wells on their own when they're no longer required. 1611 In terms of the security, it's there to be applied. It may not be adequate, but hopefully we would pick up those type of things beforehand. And the Minister actually has an option to actually increase the well security as well, in cases of, you know -- for example, if somebody is trying to transfer the liabilities from one company to another, we may not consent to the transfer. We may ask for a much bigger bond or a much bigger security as well. 1612 MR. SOMMERVILLE: Thank you. 1613 MR. BETTS: Ms. Nowina. 1614 MR. VEGH: And not the interrupt, but just to provide some reference, there is an interrogatory response from the MNR which addresses this question of the cost of decommissioning. I'll just -- that's 3(c) -- 3.1. 1615 MR. SOMMERVILLE: And it provides a range up to $50,000, I think, is what that answer provides. 1616 MR. MANOCHA: I think, Mr. Sommerville, in fairness, if there is environmental concerns that is a different issue. All I was looking at is just costs of plugging the well. 1617 MR. BETTS: Ms. Nowina. 1618 MS. NOWINA: Mr. Manocha, it is with great reluctance that I return to the northern boundary issue, but I am not quite clear and I would like a little more clarity. 1619 Is it true that under the Oil, Gas and Salt Resources Act, the regulation that you referred to, that wells to be used for injection and withdrawal have to meet these requirements unless they have leave from the Minister, which is section 8, subsection 4? 1620 MR. MANOCHA: I think we require that of all the wells, and it makes it a lot better from a planning point of view. Like, we don't know what is happening 20 years from now, 30 years from now. You know, and I think what you don't want to do is you do not want to sterilize areas. You do want to protect the other people's right as well, because they cannot drill into that area. So once you have taken that right away, it is -- I guess you don't want to sterilize the area and you don't want to have too many wells going into the same area either, so that's why we try to make sure that everybody conforms to the tracts. 1621 MS. NOWINA: I understand the rationale. I just want to understand the requirement. So when section 8 applies to oil and gas exploratory and development wells, that also means wells that are intended for injection and withdrawal, the wells that we're discussing in this case? 1622 MR. MANOCHA: I don't know, that could be argued. I am not the expert. I can't make a judgment on that, if you will. If it is a petroleum well, I would say everything. Well, oil and gas, we use that as a general term for all the wells, but it doesn't specifically say storage wells or solution mining wells, so I'm not sure what the legal interpretation would be. 1623 MS. NOWINA: All right, thank you. 1624 MR. BETTS: As Ms. Nowina pointed out, I am still kind of stuck on the boundary question as well, and I can understand the desire to bring everything up to current standards, but we know that doesn't always happen. The building code doesn't require new building -- or old buildings to be brought up to new standards as they change and things like that, but I would be very interested, and Ms. Nowina, I think, got some of your response on this. I want to understand the practical question here. I don't want to hear that, This is the way we do it now. I have heard that. It is not that I don't want to hear it. I have heard it and I have received that. 1625 What is the practical implication of not moving the boundary? 1626 MR. MANOCHA: I guess a couple of things. If the practical question is in terms of compensation for the landowners -- 1627 MR. BETTS: That could be one. I would be happy to hear that, yes. 1628 MR. MANOCHA: I am really not the expert on that, and maybe Mr. Lewis and Mr. Jordan could probably better answer that one. 1629 I guess, from our perspective, I'll reiterate I guess, sterilizing, orderly development, we cannot drain from certain areas. I guess there is a couple of things to leave this, I guess. I am trying to come up with a reasonable approach that we can take as well. 1630 And normally, our job as engineers in trying to deal with this issue, but people come to us with these boundaries and when they come to us, we say, Okay, you have to meet these -- there is not even a negotiable part of that. 1631 So I guess my recommendation to the Board is this is something new, this is not something old. This is a new proposed boundary. We are shifting boundaries to the east and to the west to conform with the tracts. I think we need to consider doing the same thing for the north side as well. 1632 MR. BETTS: Okay, thank you. And one question I think I maybe should know this, but if there are existing wells that already have a deposit on them, is there a further deposit required? Or maybe I could be more direct in my question. Are there any of the wells on this site that already have deposits on them? 1633 MR. MANOCHA: I think there are. The wells that belong to Clearwood. 1634 MR. BETTS: Sorry? 1635 MR. MANOCHA: The Clearwood Resources Incorporated is the operator that owns the wells and they have security on the wells. 1636 MR. BETTS: And if there is a deposit on them now, if they were transferred, is there a further deposit required? I think you said there could be, but -- 1637 MR. MANOCHA: Yeah, I think the Minister has a right to set those limits, but the limits that we talked about, $6,000 for a well, are the normal limits that we impose. 1638 MR. BETTS: But typically -- without any other concerns arising, they might just be left with a deposit that is already placed on them? Is that a fair statement or -- 1639 MR. MANOCHA: I am not sure what you mean by that, but basically if a new company wants to transfer the wells to their name, they have to apply for a consent to transfer from our Ministry, and when they apply for the consent to transfer, the first thing we ask for is where is the security trust for the new company. And then we look at the company's track record and we look at those type of things. 1640 MR. BETTS: I think I am clearer then. So this new company will have to deal with the issue of deposits regardless of what has happened in the past? 1641 MR. MANOCHA: Right. 1642 PROCEDURAL MATTERS: 1643 MR. BETTS: Okay, thank you. I understand now. 1644 And that is all of the Panel's questions. Thank you very much for your contribution. That's cleared up many issues for us, so we appreciate that very much indeed. 1645 And I believe that concludes the evidentiary portion of this hearing, and I thank you all for what I think was an effort to accelerate things and I hope everybody got into the process what they needed to. 1646 We still do have the submissions or argument phase, and we have had your support in establishing I think a reasonable schedule for that. 1647 For any of you that aren't going to be with us on Monday or Tuesday, I am going to take the opportunity to thank you on behalf of Ms. Nowina and Mr. Sommerville and the Board in general for your efforts so far. If you are here, I'll thank you again after final submissions. 1648 But it has been a very interesting application. Undoubtedly, I think many people who perhaps would have read the application would have thought that it was less complicated than it has turned out to be, and I realize that all of you recognize the complications as well and you have helped us work through it with your opinions and evidence as well. 1649 So, Mr. Lewis, did I see a hand? 1650 MR. LEWIS: Yes, Mr. Chairman. I know we are all anxious to leave, but I just did want to raise one last thing. I believe when we discussed, I think it was Tuesday, the issue of the amendment to the application and how that set the second phase of this proceeding would be dealt with, I believe at that time I asked that any submissions on the point be held until the evidence was complete. 1651 And at this stage, my position is that unless somebody feels that there is more evidence needed on that point, and I would submit we've got a full and complete record on this issue of compensation, that we just simply deal with that in submissions, if that suits the Panel and any other interested parties. 1652 MR. BETTS: We'll just confer for a moment. 1653 [The Board confers] 1654 MR. BETTS: Mr. Lewis, the Board's position on that is that the decision we made certainly stands, but what we would be prepared to hear from all parties is submissions from the parties as to whether the conditions that were established in that decision have been met, conditions being sufficient notice and a reasonable process of negotiation. 1655 We would be prepared to hear submissions on those particular points, which may -- and then perhaps the remedy that would fall out of those positions, and we would consider submissions based on that. 1656 MR. LEWIS: Very good. Thank you. 1657 MR. BETTS: Are there any other points for clarification before we conclude for today? 1658 Then I say thank you for staying a little late on a Friday and, Mr. Manocha, you were thinking of other places you would rather be. Momentarily, it will be traffic, along with the rest of us. A safe trip home, everybody. We'll see you on Monday morning. 1659 --- Whereupon the hearing adjourned at 4:31 p.m.