Rep: OEB Doc: 13896 Rev: 0 ONTARIO ENERGY BOARD Volume: 7 17 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 Tuesday, 17 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 17 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: [19] CLOSING ARGUMENT BY MR. VEGH: [41] CLOSING ARGUMENT BY MR. LESLIE: [277] CLOSING ARGUMENT BY MS. BROADFOOT: [296] CLOSING ARGUMENT BY MR. CHINNECK: [316] CLOSING ARGUMENT BY MS. PAULUS: [634] 10 EXHIBITS 11 EXHIBIT NO. E.7.1: DOCUMENT ENTITLED "TSLA SUBMISSION, DATED AUGUST 17, 2004 [28] EXHIBIT NO. E.7.2: MATERIALS RELIED ON IN BOARD STAFF'S SUBMISSIONS [49] 12 UNDERTAKINGS 13 14 --- Upon commencing at 9:04 a.m. 15 MR. BETTS: Thank you, everybody. Please be seated. 16 Good morning, everybody. Today is day 7 of the hearing of application RP-2003-0253. This, we expect, will be the final day of hearing this application. 17 Yesterday we received the argument in chief from the applicant, and today we expect to receive arguments or submissions from intervenors, from Board Staff, and reply arguments from the applicant. 18 Before we begin, are there any preliminary matters to be deal with? Mr. Chinneck? 19 PRELIMINARY MATTERS: 20 MR. CHINNECK: Yes, sir. There are two filings I have made yesterday morning and again this morning that I am going to be referring to in my submissions today. I wonder if I might just bring them to your attention now, because I understand that Union Gas wishes to refer to one of those filings. 21 So the first filing is entitled "TSLA Submission," it's dated August 17, 2004, and the subtitle is "Additional paragraphs to be Added to Decision, Including Conditions of Approval." 22 And so I believe that I gave sufficient copies of that document to Board Counsel, and I trust that the Board has possession of that document? 23 MR. BETTS: We're about to get them. 24 MR. CHINNECK: That is a document that I believe my friend at Union Gas will be speaking to this morning at some point. 25 The second document is a three-page document which is essentially the gas isopach maps that were produced in the three separate reports by the applicants. And I believe that was delivered to the Board counsel this morning as well. And if we could just simply call that "Three Maps." 26 MR. BETTS: The TSLA submission, I feel at least, we should identify with an exhibit number, particularly if it will be referred to by Union. 27 MS. LITT: That will be Exhibit E.7.1. 28 EXHIBIT NO. E.7.1: DOCUMENT ENTITLED "TSLA SUBMISSION, DATED AUGUST 17, 2004 29 MR. BETTS: And the second document, is that filed anywhere else in the -- 30 MR. CHINNECK: Sir, the -- each of the maps in the second exhibit does find itself in the materials previously filed, but I thought for convenience, in referencing them in my submissions, that it would be best to have them all together in one little package. 31 MR. BETTS: Thank you very much. And that is helpful. We appreciate that. And perhaps when you introduce those or when you speak to those, you can give the reference number as well. 32 MR. CHINNECK: Oh, I'll try to do that, sir. 33 MR. BETTS: Okay. Thank you. 34 Any other preliminary matters? Then we will begin with submissions from counsel for Board Staff, and we will -- after that, I'm prepared to take advice from intervenors as to the order that they would prefer. If there has been discussion, I'd appreciate hearing from somebody; if not, I may just select somebody. 35 Mr. Chinneck, has there -- 36 MR. CHINNECK: Sir, I believe that there has been discussion. I understand that following Board Staff's submissions, that Union Gas will be next, and then I'm not clear -- I believe it's the Huron County Federation of Agriculture, then the TSLA, and then finally the Northern Cross representative. 37 MR. BETTS: Thank you very much. And I ask everybody in advance to keep in mind that we are going to conclude this today, and we're going conclude it, ideally, by 4 o'clock. And we want to allow the applicant some time for preparation. So everybody, keep that in mind as we're going into this. 38 Mr. Vegh, are you prepared to proceed with your submissions? 39 MR. VEGH: Yes, thank you. 40 MR. BETTS: Please proceed. 41 CLOSING ARGUMENT BY MR. VEGH: 42 MR. VEGH: Thank you, sir. 43 As indicated at the outset of these proceedings, Board Staff does not take a position on any of the issues in front of the Board, so my submission will really be confined to outlining what Board Staff sees as the key issues and the key evidence in relation to those issues. 44 Before going through the evidence, I think it would be helpful to provide some context by walking through the orders requested in this case and how they relate to the provisions of the Energy Board Act, and then go through how the evidence relates to those particular issues. 45 Now, to do this, or to provide assistance at doing this, I provided copies to all parties of a book of materials that I will use in my submissions and a copy is now being provided to the Panel. There's no new in evidence these materials. I don't think we would have to mark it as an exhibit unless you'd prefer to do so for identification purposes. 46 MR. BETTS: I think, Mr. Vegh, it would probably be helpful if we can just refer to a tab in an exhibit, and then it will make it more simple for the record. 47 So let's establish an exhibit number, please. 48 MS. LITT: E.7.2, materials relied on in Board Staff's submissions. 49 EXHIBIT NO. E.7.2: MATERIALS RELIED ON IN BOARD STAFF'S SUBMISSIONS 50 MR. BETTS: Thank you. 51 MR. VEGH: Thank you. 52 So the first two tabs of the materials are the ones that I was going to refer to straight off. 53 Tab 1 is a document that's called in the table of contents "Final Issues List." This document was incorporated or put together following the Board's ruling on the final issues list in this case. 54 The second tab are the provisions of the Ontario Energy Board Act as they relate to gas regulation. 55 So, what I'd like to do, then, is to walk through the relevant provisions of the Act and identify how they relate to the orders requested in this case. So I'm looking at tab 2 of the materials, and I would ask you to first turn to section 36.1 of the Ontario Energy Board Act, which is at page 31 of the excerpt. 56 So, 36.1 says simply that: 57 "The Board may by order, (a), designate an area as a gas storage area for the purposes of this Act..." 58 And so this is a section that the applicants rely upon for their request for an order approving the area described in schedule A to their original application as a gas storage area. 59 And the list of issues that relate to this section are set out in Part I of the issues list, and the key issues that have attracted attention in this proceeding are really two, I believe. The first issue is whether the applicant has demonstrated that the proposed area has the geological characteristics to effectively store gas, and the second issue is whether the proposed designated storage area should be extended to the concession road in the north as proposed by Mr. Manocha on behalf of the MNR. 60 Those are the key issues under 36.1. And if the Board does agree that the storage area should be designated, or that the area should be designated as a storage area, we go on to the next issue, which is the request for an order to inject, withdraw, and store gas. 61 That is addressed at section 38.1 of the OEB Act, and I'll read 38.1. It reads: 62 "The Board by order may authorize a person to inject gas into, store gas in and remove gas from a designated storage area, and to enter into and upon the land in the area and to use the land for that purpose." 63 And there are a number of issues with respect to this section, most of which are in Part II of the issues list, but they are also addressed in other parts of the issues list. 64 And the first point, when I get to my submissions, that I'll be addressing under section 38.1 is to identify who is the person that is requesting this authorization under this section. You see 38.1 refers to the Board's order authorizing "a person." 65 Now, that's normally a fairly straightforward question, but in this case, it does raise some questions. The question is, is the person seeking the authorization Tribute Resources, is it Tipperary Gas Corp., or is it Huron Tipperary Limited Partnership? And there's some evidence around which of those persons is the person seeking authorization. 66 And this is relevant because there are consequences of authorizing the person to store gas, so it's important to know who this person is and whether that person is in a position to meet the obligations that accompany that authorization. 67 And most of the questions and the evidence on this issue, that is, who is the person, and is this person able to meet the obligations, are bound up in the issue of whether or not the applicants possess the financial capacity, or have access to the necessary expertise, to operate the pool. And those questions are found in issue V(c) of the issues list, but really, in my submission, fall within this question of who's the person who's authorized? And then, if there are conditions of an order, who are those conditions binding on? 68 So once we've identified the person under section 38.1, the second point under 38.1 is to identify the conditions to an order, if any, that allows the injection and withdrawal of gas. And I think there have been two key categories of conditions that have been addressed in this case. 69 The first set of conditions are with respect to the delta pressuring and the steps involved in the delta pressuring and the authorization to delta pressure. And the second key categories of conditions are what I would call environmental impact mitigation sorts of condition. And there are three areas that have attracted attention in the evidence, in the environmental impact category. And those are areas relating to water quality, the area relating to environmental certification respecting the decommissioning of the production operations, and then the third category of -- or the third piece of the environmental impact mitigation category has to do with the plugging of the abandoned well. So, again, we're still in section 38. The first issue conditions that may accompany an order? And then the third key point under section 38 is with respect to landowner compensation. 70 And, as the Board is aware, the applicants in their amended application have sought an order that the Board set landowner compensation. I think the best way to address the landowner compensation issue is to look at section 38.2 and .3, and you'll see how they hang together. So 38.2 reads: 71 "Subject to any agreement with respect thereto, the person authorized by an order under subsection 1(a) shall make to the owners of any gas or oil rights or of any right to store gas in the area just and equitable compensation in respect to the gas or oil rights or the right to store gas, and; (b) shall make to the owner of any land in the area just and equitable compensation for any damage necessarily resulting from the exercise of the authority given by the order," and; 3 reads: "No action or other proceeding lies in respect of compensation payable under this section, and failing agreement the amount shall be determined by the Board." 72 So there are two components here, really, in compensation under section 38.2 and .3. The first is the obligation on the person authorized to inject and withdraw to make an offer of reasonable compensation. And again, that's one of the reasons why it's important to clearly identify who this person is, but that's the person who's required to make the offer of compensation. And second -- so that's in 38.2. And then second, in 38.3, there is the obligation of the Board to set compensation where there has been a failure to make an agreement. 73 And as I understand the positions of the applicant and the landowners on this issue, it is as follows: The applicant argues that it has made an offer of reasonable compensation, under .2, and that there has been a failure to reach an agreement, under .3, so that the Board should set compensation now. The landowners argue that it is premature to draw conclusions on either of these points at this time, and that the landowners should be given additional time to negotiate a compensation arrangement or agreement. Of course, I'll let the parties speak for themselves. I'm just trying to set up the context here. 74 On a substantive basis with respect to compensation, there appear to be two outstanding issues between the landowners and the applicant. The first is the proper method of allocation of compensation for residual gas. And the second issue is the way in which compensation for these landowners is kept current with the compensation arrangement for the Lambton County landowners. And I'll, in the course of my submissions, I'll refer to the sections of the proposed agreement in the materials that address these two issues. 75 Going to the next order requested by the Board, that order relates to the drilling of wells. That's part III of the issues list, and is addressed in section 40 of the OEB Act. And section 40 reads that: "The Minister of Natural Resources shall refer to the Board every application for the granting of a licence relating to a well in a designated storage area and the Board shall report to the Minister of Natural Resources on it." 76 So, in this case, the applicants have filed an application to drill a well with the Ministry, and the Minister has referred that application to the Board. And the remedy sought in this case is a favourable report from the Board to the Minister. 77 The final order sought in this case is in relation to the rates for the storage of gas under section 36.2 of the OEB Act. And I'd like to turn to that. But really start with section 36.1. 36.1 sets up 36.2 and also ties back into the other orders requested here. "No gas transmitter, distributor or storage company shall sell gas or charge for the transmission, distribution or storage of gas except in accordance with an order of the Board, which is not bound by the terms of any contract." 78 So section 36.1 sets up two types of prohibitions on transmitters, distributors and storage companies. The first proscription is that none of those three entities shall sell gas. The second is that none of those three entities shall charge for transmission, distribution or storage, except in accordance with the order of the Board. And, of course, the Board can grant an order allowing them to sell gas, as well, but that order hasn't been requested here. 79 And then 36.2, of course, is the section that authorizes the Board to make orders approving just and reasonable rates for the sale of gas by transmitters, distributors, and storage companies, and for the transmission, distribution and storage of gas. And the issue under section 36.2 will be whether the applicant has met its burden of demonstrating that the rates requested are just and reasonable. And what that will -- what that boils down to is whether the C1 rate schedule which authorizes Union to sell services using excess storage assets should be made available to the applicant. 80 And then the one issue in the proceeding that does not fall neatly into the orders requested by the Board is with respect to Union's M16 rate. And the main issue is described here on the issues list as "whether it is appropriate for an embedded storage provider to hold firm service on a distribution system." And, as I understand the parties' position on this from the evidence, the pre-filed evidence, the intervenor Northern Cross is requesting that the Board defer its approval or determination of this application pending completion of the Board's review of Union's M16 contract. 81 I expect that this issue will be more fully developed by Northern Cross, Union, and the applicant, so I don't propose to spend a lot of time on it. 82 So, with that by way of background, I would like to now turn to the key evidence on these main issues. 83 So, following the outline I just provided, the first order requested and the first item on the issues list is the designation of the storage area. And as I indicated in the introduction, there appear to be two key issues: The first is whether the applicant has demonstrated that the proposed area has -- sorry, sir, yes? 84 MR. BETTS: Sorry, I didn't want to interrupt you, Mr. Vegh, but I would like to clear up when you would like us to ask questions, if we have questions about your submissions. Would you prefer that we hold them till the end or ask them as though arise? 85 MR. VEGH: I'd prefer that you ask them as they arise, and I'll try to answer them; and if it would be more effective to answer them later in the submissions, I'll let you know at that time. 86 MR. BETTS: Thank you very much. And sorry to interrupt. 87 MR. VEGH: So, looking at issue I, the identification of the storage area, the first issue, as I said, is, has the applicant demonstrated that the proposed area has the geological characteristics to effectively store gas? 88 And on this issue, the pre-filed evidence provides a summary narrative of the characteristics of the proposed storage area in a document at volume 1, colour tab 3, white tab 2. And this document is entitled: "Tipperary Reef Report." I won't take you to it, but in cross-examination, Dr. Walsh agreed with my simplified explanation of a storage area as a container that can hold gas; and that this container requires a horizontal seal to prevent the upward migration of gas, a lateral seal to prevent migration of gas outside of the storage area, and that the pool has porosity and permeability. And the evidence in that regard is at volume 1, lines 7 -- volume 1 of the transcripts, lines 795 to 874. 89 Dr. Walsh's conclusion in this area is as follows, and I'll read the quotation describing the area, he says: 90 "It has all the characteristics required of it to be a suitable gas storage facility." 91 And that's at volume 1, line 507. 92 Mr. Chinneck asked Mr. Walsh some very detailed and thorough questions on the integrity of the pool, particularly the caprock. Many of these questions arose in the context of delta pressuring, which will be addressed in part 2, because that has more to do with the authorization to inject and withdraw and the conditions of authorization. But there were several questions on the caprock put to Mr. Walsh, and I'll refer them to you at volume 3 of the transcript, lines 525 to 579. 93 So that was the one issue, the physical integrity of the pool. There is also the issue of the boundary of the pool. 94 The applicants propose that the boundary be that set out in schedule A to the application. And the evidence of the MNR is that the MNR is concerned that setting the boundary in that way will have the effect of dividing the spacing units. And Mr. Manocha, therefore, requested the Board to extend the boundary northward to the concession road. And the applicants opposed this request. 95 In effect, Dr. Walsh, on behalf of the applicants, testified that there was no geological reason to extend the boundary. And his evidence making that point is at volume 2, lines 1001 to 1002. 96 As I understand the MNR's main concern, it is that the proposed approach is inconsistent with the MNR's practice of using spacing units as boundaries. And in this regard, Mr. Manocha pointed to section 8(3) of the regulations under the Oil, Gas and Salt Resources Act. And I'd like to take you to that section, if I could. That's at tab 3 of the materials handed out this morning, Exhibit E.7.2. 97 And the reason I'd like to take you to it in my submissions is that it's really a matter of interpretation of the -- the correct interpretation under section 8(3) of those regulations. And the Board may find that it has to make an interpretation of that section to decide the issue in this case, so I think it's worth spending a little time on this section. 98 So, going to section 8 of the regulations, the first thing to note is that section 8(1) says that: 99 "This section applies to all oil or gas exploratory and development wells." 100 Those terms, "gas" -- sorry, "exploratory and development wells," are defined in section 1 of the regulation. A "development well" is defined in section 1 as: 101 "...a well that is drilled for the purpose of producing from or extending a pool of oil and gas into which another well has already been drilled." 102 And an "exploratory well" means: 103 "...a well that is drilled for the purpose of discovering a pool of oil or gas." 104 Now, I don't think it's an issue in this case that the applicants are not seeking to produce gas or to explore for gas, so it doesn't appear that section 8 applies to them directly. However, where section 8 comes in, as I read it, and -- well, as I read it, section 8(3) appears to apply to persons who are -- who may be outside the designated storage area so as to prevent them from drilling exploratory or development wells in the absence of pooling their interest with other owners of gas rights, and those other owners are inside of the designated storage area. 105 So the effect is the sterilization of the right to drill for gas for those persons who are outside of the designated storage area. And as I understand the MNR's concern, it is that those persons are getting -- are having a right of theirs sterilized but they're not receiving compensation for that sterilization. And the MNR's statement to that effect is at volume 5 of the evidence, paragraphs 1423 to 1424. 106 The applicant, and Mr. Lewis on behalf of the applicant, set out the applicants' position to this issue of extending the boundary in his submissions yesterday, so I don't think I have to repeat them for you. 107 MR. SOMMERVILLE: Mr. Vegh, the section that gives me pause is 8(2)(b), which -- and if we accept that the well on the McCulough property is a development well, which I think it was described as, and which definition it seems to follow, what is the meaning of 8(2)(b), then? If we're talking about a Silurian formation and the drilling of the development well, and it's this regulation that seems to suggest that that requires whole tracts, and I don't see any escape from the terms of this. 108 MR. VEGH: Sir, the best way, I think, to address this is to look at schedule A. It sets out the designated -- the proposed area. 109 MR. SOMMERVILLE: Right. 110 MR. VEGH: So the development well that you're talking about is the McCulough -- on the McCulough land? 111 MR. SOMMERVILLE: I think that's the well we're talking about here. That's where permission is being sought, with respect to that well. 112 MR. VEGH: And so the McCulough property is completely contained within a tract of land. 113 MR. SOMMERVILLE: So the interpretation that's being placed on this is that, where that specific well goes down, that has to be within a whole tract, but in terms of the designated area and the pooling of interests, the pooling of gas rights to enable the project to go forward, that that is restricted -- that that's irrelevant; that we're not looking at whole tracts for that; that there is no obligation. Is that the interpretation? 114 MR. VEGH: That's how I would read 8(2)(b), that it doesn't refer to the pooling. It says that the -- it refers to the whole tract. And the McCulough property, the area where it's proposed to be drilled, relates to an entire tract. There's no splitting. 115 MR. SOMMERVILLE: I just want to be clear about this, because the Ministry of Natural Resources appeared and provided some fairly strong evidence on this, as to what the Ministry's point of view is. But -- so when I read 8(2): "Unless otherwise specified by the Minister, oil and gas well spacing units shall be comprised of whole tracts for wells drilled into or below a formation of Silurian age..." That the only tract I need to concern myself with is the tract, the specific tract, which holds that well, period. Is that right? 116 MR. VEGH: That's my reading of 8(2), yes. 117 MR. SOMMERVILLE: Thank you. 118 MR. VEGH: So if I could turn, then, from the approval of the area to the orders to inject and withdraw, that takes us -- to inject, store, and withdraw gas -- that takes us to section 38, and there are two orders requested in this section. The first is the order to inject, store and withdraw, and the second is the order to set compensation. 119 So if we could turn first, then, to the order to inject, store and withdraw. As indicated in my introduction, there is a preliminary issue of who is actually requesting and will be bound by this order? And that is, who is the person who will be authorized to inject and withdraw gas if the order is granted? And again, this is important because it is that person who will be responsible to comply with the conditions of approval, and also that person who is responsible under section 38.3 to make compensation payments. And frankly, the evidence in this area is a little unclear to me. 120 Mr. Lewis responded to Board staff's question on this point at volume 1, line 703 of the transcript, to say that: "Tipperary Gas Corp. is the person who is seeking authorization to inject and withdraw gas." 121 Ms. Lowrie also stated in the next line of the transcript that: "Both Tipperary Gas Corp. and Tribute will be bound by the order to inject and withdraw gas." 122 And the applicants have also filed the Huron Tipperary limited partnership Agreement. Under that agreement, Tipperary, as the general partner, is liable for the actions of the partnership, but the limited partners, including Tribute, are not. And the reference to the agreement, for your reference, is Board Staff Interrogatory No. 1, that's where the agreement is. But then on -- in Ms. Paulus's cross-examination, Ms. Lowrie stated in response to a question that: 123 "Tribute will be responsible as a partner who participates in the management of the limited partnership." 124 And that answer was given at volume 4, lines 697 to 698. 125 And that position was effectively adopted, I think, by Mr. Lewis in his submissions yesterday, that the limited partner, Tribute, will be responsible for the activities of the limited partnership. 126 And again, the reason why it's important to know who this person is, is that this person is going to be subject to ongoing obligations if the order is granted, and it's important for all the interested parties, including the Board and the landowners, to know exactly who is going to be responsible. 127 And I am not sure, quite frankly, that the present documentation in the evidence is clear enough for me, at least, to determine this. And it's therefore likely that the Board will have to make a determination on who is the responsible person, and the parties may want to address this in their submissions. 128 One approach to this issue is to specify in the conditions of approval that all three of the parties are responsible to meet the conditions of approval, and that each of those parties is jointly and severally liable for the failure of any one of them to meet a requirement. In other words, if each of Tribute, Tipperary and the limited partnership are authorized to inject gas, then each of them could be made jointly and severally liable to pay landowner compensation and to comply with the conditions of approval. And one of the benefits of joint and several liability is to allow a complaining party -- again, whether it's a Board or landowner -- to be able to choose which one of those three related parties should be responsible to meet the obligations, or to choose all of them as responsible to meet the obligations. 129 And to put it a bit crassly, but to make the point, it allows a complaining party to identify the deepest pocket of the three and to make the deepest pocket liable. Given that the three organizations are related, an approach which doesn't allow the choice among the applicants -- or among the complaining party to choose which of them is responsible -- could leave the three related companies in a position to effectively organize the affairs so that some of them are not rendered as capable to meet the obligations. 130 So, as I say, the evidence, to me, at least, was a bit unclear around that. But there are ways to address that issue, and I've suggested one; parties may have another; and the Board may come up with its own, as well. 131 Now, it's within this context of identifying the party who is responsible that I would like to address the evidence relating to the financial capacity and technical expertise. Even though that is a bit of a detour on the issues list, I think this is probably the appropriate place to consider that issue. And the evidence has largely focussed on the issue of financial capacity. And the applicants have filed the audited financial statements of Tipperary Resources, and unaudited statements from Tipperary Gas Corp. and the limited partnership. And that evidence was provided at Board Staff Interrogatory No. 1. And the evidence is that, as at December 31, 2003, Tribute had assets of $1 million with revenues of $450,000. Tipperary Gas Corp. had assets of $10. That's a hell of an applicant. And the limited partnership had assets of $2.5 million which were largely made up of the storage rights that have been discussed in this case. And there was no evidence of revenues for either of those companies. 132 And to provide some context as a way to address what is the relevance of these financial resources, the Board has had one previous occasion where it looked at the application to store gas by a non-traditional utility, that is, not Enbridge or Union, and that's the CanEnerco application, which was referred to in this application. And I've included a copy of the Board's decision in the CanEnerco case at tab 4 of the materials. 133 And if I can take you to paragraph 5.4.8, it's at page 36 of the decision, the Board addresses -- under the heading "Competence of the Gas Storage Operator", the Board addresses CanEnerco. And I'll read it for the benefit of the record: 134 "In assessing CanEnerco's application for storage rights, it is in the public interest for the Board to ensure that CanEnerco's management has the appropriate experience and competence as well as the financial ability to be undertake the proposed project and to ensure that such competence and ability be maintained. 135 "CanEnerco has been in existence since 1996. Its corporate experience has been in exploration and production of oil and gas. There is no company experienced in the gas storage operation. However, the company's management is qualified and experienced in the geological aspects of the gas business, including storage. The Board finds no evidence to suggest that these individuals are not capable of competently completing the company's storage plans. 136 "With respect to financial ability, CanEnerco's income before taxes, depreciation and depletion allowance was estimated at 3 million for 1997 and forecast to increase to 7 million for 1998, and above that level for 1999. CanEnerco's bank line of credit is $5.9 million. 137 "The total estimated expenditure for the proposed project, including the construction of the NPS-10 line, is 8 to $10 million. The Board notes that a portion of this expenditure has already been made. The Board also notes that the estimated annual cost of operating the pool is $.5 million. 138 "The Board is satisfied on the evidence that CanEnerco has the financial ability to undertake and complete the proposed project." 139 So that's by way of context and what the Board looked at in the CanEnerco application. 140 One approach to address the issue of financial and technical expertise is to look specifically at the financial and technical expectations for the applicant and address whether they can be met. 141 From a financial perspective, the evidence here is that the applicant has access to the resources of Mr. Crich, who is apparently prepared to invest in the project, but there is no guarantee from Mr. Crich or his companies; and the applicants agreed that if the investment was not economic, he would effectively stop supporting it. 142 And so then you may ask yourself -- or one way to approach this issue is to ask, Well, apart from the requirement to obtain capital for the investment, you step back and say, Well, what are the public interest responsibilities that the applicant has taken on responsibility for, and what happens if those public interest issues cannot be met? In other words, what public interests are threatened if the applicant fails as a business? As opposed to, What are the business issues for the applicant? 143 So if you look at the public interest issues that are -- that the applicant takes on financial responsibility for as a gas storage operator, my review of the evidence indicates that there are three major categories of public interest financial expectations. 144 The first is the ability to pay compensation to the landowners. The evidence in this case is that the approximate annual compensation is in the range of about $120,000. And that's at volume 3 of the transcripts, paragraph 258. 145 The second public interest financial responsibility is in the cost of rehabilitation, if I can call it that, of the storage area. And there's evidence on plugging the wells, and that's one thing that would have to be done to rehabilitate the storage area. And the MNR's evidence is that it requires the applicant to post a bond so that, if the applicant does not plug the well and the MNR has to plug the well, there are some funds available to pay for that. 146 The cost of the bond is apparently $6,000 per well, to a cap of $70,000 in total, while the cost of capping the well is somewhere in the range of 50,000 -- 15,000 to $50,000. The evidence on the well-capping costs are at volume 3, paragraphs -- volume 3 of the transcripts, paragraphs 268 to 275, and the Board Staff IR request to the MNR. 147 MR. BETTS: Mr. Vegh, if I could just ask you a question for clarity on the cost of the bond. You're talking to the value of the bond, are you not, not necessarily the annual cost of maintaining a bond. 148 MR. VEGH: Sorry, that's right. The value of the bond. 149 MR. BETTS: Okay. Thank you. 150 MR. VEGH: And then the third potential cost is the cost -- is a cost that may arise if there is damage to the site resulting from operations. And this is certainly the least certain and least clear of all the potential costs. And there is disagreement both in terms of the type of risk and the potential harm that may result. 151 The evidence on the disagreement in this area is found in the transcripts -- the applicants' position on this is found in the transcripts at volume 3, lines 292 and lines 818 to 830; also at volume -- sorry, that's the applicants' position. And the landowners' view on this is at volume 4, lines 1343 to 1386. 152 The applicants were requested by Board Staff to advise whether they are prepared to have a third party determine what would be an appropriate type and quantity of insurance to address this potential cost. The landowners agreed with this proposal, at least as a starting point on how to address this issue, and the landowners' position on this is at volume 5, lines 270 to 288. 153 The applicants disagreed with this approach and instead proposed that the applicants take out insurance that is comparable to other storage operators. And this comparability approach was suggested by Mr. Lewis in his submissions yesterday. 154 In considering whether comparability is appropriate here, some points for the Board to consider are the challenges of determining comparability with other gas storage operators in Ontario, of which there are just two, Union Gas and Enbridge Consumers Gas -- sorry, Enbridge Gas Distribution. 155 And, you know, specifically, it may be a challenge to have a comparison between Union and Enbridge on the one hand and the applicants on the other with respect to issues that may -- at least intuitively, without evidence, issues that may have a material impact on the level of insurance that these companies carry. Things such as the assets that the companies have available to either self-insure or to pay any sort of costs arising; the operating experience of the applicants versus Union Gas or Enbridge may have an impact on the level of insurance that they may take out. And there's no evidence on the record of whether the risks that each of them are exposed to are the same. 156 For example, Mr. Chair, you asked a question about the landowners in Union's territory and whether they are in the same situation as the landowners in this proposed territory here, in Huron County, and I don't know if there's anything on the record to indicate that the risk is the same or that the potential harm is the same. 157 So, in other words, there may not be comparability or there may not be evidence -- I don't believe there is evidence on comparability in this case, and so it may be a challenge to -- just to accept comparability. 158 Because one of the -- you know, reading between the lines, one of the issues here is that the applicant is not Union Gas or Enbridge Gas Distribution; and if it were, then perhaps insurance may not be as large an issue. 159 So I would like to turn now from financial -- 160 MS. NOWINA: Mr. Vegh, before you leave that area, I have one question. 161 You referred to the CanEnerco decision, paragraph 5.4.10, and in it, the Board decision talks about looking at the income forecast for the company. Am I right in believing that there is no evidence on the record regarding an income forecast for this application? 162 MR. VEGH: I believe so, yes. 163 MS. NOWINA: Thank you. 164 MR. VEGH: So, going from financial capability to technical expertise, it's helpful to look at -- or one way to look at this is technical expertise in the context of meeting the technical requirements of a gas storage developer and operator. 165 And the evidence of the applicant is that the design and development team for the project are Jim Fisher, Project Manager and Facility Engineering; Joe Gorman, Reservoir Engineering; Kathy McConnell, Well Operations; and Howard Jordan, Land Management. All of these individuals gave evidence in this proceeding. All of their CVs have been filed. 166 And, of course, the applicant has agreed to conduit setting -- that they will comply with all technical requirements for gas storage operators for drilling, for drilling wells. And that's the -- and in their evidence in chief, the expertise of these individuals was gone through in more detail. 167 So that's the issue around -- again, in the context of this application, we've looked at the applicants' financial and technical capacity, for the purposes of identifying who is the person, and what is this person expected to do. So, going from that issue now, the issue of who is the person applying for the right to inject and withdraw and now turning to the physical operations that are proposed to be carried out in storing, injecting and withdrawing gas, I'd like to turn to that evidence and what are the plans in that regard. 168 And so, what are the key areas where parties have identified conditions that should be addressed to -- as a condition to injecting, storing and withdrawing gas. And, as I've said in the introduction, there were two main categories of issues that have arisen. The first is with respect to delta pressuring, and the second is with respect to environmental impact mitigation issues. 169 On the issue of delta pressuring, the evidence is that the discovery pressure of the pool is 425 psia and the proposed operating pressure is 1096 psi a. The applicants' plan to delta pressure over two storage seasons. Delta pressuring is addressed in CSA Z341, which is attached to schedule 5 to Mr. Manocha's evidence on behalf of the MNR, and that's at Exhibit B.1. 170 The applicants have undertaken to comply with the provisions of the CSA respecting delta pressuring, and this CSA standard effectively involves testing the strength of the caprock. And that testing is currently being done. 171 The applicant has agreed that it will come to the Board with the results of that test, seeking leave to delta pressure. 172 MR. SOMMERVILLE: Mr. Vegh, I don't want to interrupt, but perhaps this is the right time for this question. Is there any impediment on the Board designating the storage area without first having the results of the cap analysis? What I'm getting at is do we have to make a finding that the designated storage area is a competent storage vessel before we make the designation, rather than making that a condition to follow? Is there any impediment there? 173 MR. VEGH: I tend to read the two sections of the Act and the two orders requested as standing independently. So that section 38 is the order to designate the area as capable of storing gas, but that says nothing about capable of injecting and withdrawing gas, necessarily. Because section 38 simply identifies an area that has operated as a storage area, and has the geological characteristics of an area that can store gas. 174 And the evidence that it has stored gas is, really, the evidence that's filed that there's gas stored in the area. I tend to see the order to inject and withdraw as somewhat independent from that. Theoretically, you could approve this section 38 request and not authorize -- sorry, section 36.1, I got the numbers wrong -- and not authorize the injection and withdrawal at all, even, but you would just have an area that's identified as capable of storing gas, but not capable of injecting and withdrawing gas. 175 MR. SOMMERVILLE: In effect; not making a finding that it's capable of storing gas to the 1096 psi pressure. 176 MR. VEGH: Yes. 177 MR. SOMMERVILLE: Thanks. 178 MR. VEGH: So we've been looking at the delta pressuring. And Mr. Manocha, on behalf of the MNR -- his pre-filed evidence initially expressed some concerns in this regard. But he did testify that he was satisfied with the approach proposed in the condition of approval, and his evidence on that is at volume 5, line 1399. 179 Mr. Dutot, on behalf of the TSLA, indicated that he was not satisfied with this approach and, in fact, that he was not satisfied with any of the applicants' evidence in this regard. And Mr. Dutot's evidence is at volume 5, line 727 to 742. 180 So that was delta pressuring, which I am calling the first issue under environmental impact mitigation. There are other issues -- sorry, that was delta pressuring. And then the next issue is the category of environmental impact issues. And, as I've said, I think they relate, really, to three issues. The first is water. The second is decommissioning the production site before it becomes a storage operation. And then the third is plugging the abandoned wells. 181 Now, first, with respect to water, there was evidence filed by Stantec Consulting in this case which consisted of an environmental assessment that it provided for the site, and that report is at Book 3, tab 6. 182 This evidence did not get a lot of attention at the hearing, I think, because none of the parties chose to examine the author of that report. All of chapter 6 of that report is an environmental management plan. And the applicants have agreed as a condition of approval to comply with that plan. Section 6.3.6 of that report specifically addresses hydrology, and effectively recommends that there be a program for water well monitoring. 183 The TSLA's evidence is that its members participated at the open houses organized by Stantec, and expressed their concerns with respect to the potential impact on water. In its oral testimony, the TSLA had no comment on the adequacy of the Stantec recommendation, and their evidence, their oral evidence, is recorded at volume 5, lines 192 to 232 and 258 to 259 of the transcript. 184 In this regard, the applicants have undertaken to share with all parties the risk assessment plan that is required by its insurer. And this undertaking is at volume 4 of the transcript, lines 49 to 50. This undertaking was provided in the context of the applicants' proposal to have an insurance policy similar to other storage operators, the comparability proposal. So I'm not sure if this applies, at least voluntarily, if the Board considers ordering a third party review of the appropriate insurance. The applicants may have a perspective on that in their reply. So that was the first -- the evidence on the first issue of the water. 185 The second issue under the heading of "Environmental Impacts" relates to decommissioning the site from a production operation before using it as a storage operation. And the one specific issue in this regard has to do with the appearance of oil on Mr. Feddes' property. There was a lot of discussion on this issue. And from the record it appears that the point of this is that the TSLA seeks a certification under section 5.16 of the operating standards under the Oil, Gas And Salt Resources Act, that the site has been rehabilitated in accordance with that standard. This is the point made by Mr. Chinneck and Mr. Feddes on behalf of the TSLA, at volume 5 of the transcript, lines 459 to 467. I'm not clear on the applicants' position with respect to that request, and both the applicant and Mr. Chinneck may have an elaboration on this during their submissions. 186 And then the final matter that I'd like to address in the context of environmental mitigation is with respect to the abandoned wells. The evidence is that two wells -- and the evidence here is at Staff IR56. The evidence is that two wells, Imperial 367 and 398, were abandoned in the 1950s. One of these wells had a brief gas show. The other did not. The wells are currently capped using lead plugs which may have met the standards at the time they were capped, but do not meet modern CSA standards. The parties apparently disagree with what should be done about those plugs. 187 Mr. Gorman, on behalf of the -- 188 MR. BETTS: Mr. Vegh, just for clarity, can I get your impression of the status of those plugs? Are you implying that they are out -- explain to me again, you said they don't comply with current standards and I'd like to understand that. Does that suggest that they must be replaced or...? 189 MR. VEGH: No, I wasn't trying to draw that inference. What I was saying -- I'm looking for the particular reference here, but what I was -- my point is that if those wells were capped -- were plugged today, they would have to meet the appropriate CSA standard, and that would require cementing, not just the lead plugs. 190 But those wells were plugged in 1953, and so the materials that were used to plug those wells may have been appropriate in '53; but if those wells were plugged today, those materials would not be appropriate. 191 There is a second question of whether or not that brings them into non-compliance with the CSA, and whether the CSA simply grandfathers the plugs -- or the conditions that are in place, you know, prior to the new CSA standards. And there is -- 192 MR. BETTS: Can you comment on that? 193 MR. VEGH: -- evidence around that. 194 MR. BETTS: Can you comment on that, whether, in fact, they are in non-compliance or whether they're grandfathered? 195 MR. VEGH: Sorry. 196 MR. BETTS: If you're not in a position to, that's fine. If you can, it would be helpful. 197 MR. VEGH: The parties were a lot closer to this document than I am. Mr. Gorman and Mr. Manocha take quite a different position on this. And, you know, I frankly haven't tried to read through the document clearly enough to say which of those positions I would side with. 198 So perhaps I'll go through the positions and identify their area of difference -- 199 MR. BETTS: Very well. Thank you. 200 MR. VEGH: -- and leave it at that. I'm sorry I can't be more helpful on that. 201 MR. BETTS: That's fine. 202 MR. VEGH: So, Mr. Gorman on behalf of the applicant, as I indicated, gave his view that the current arrangement is satisfactory. And I'll give you the reference to that in the transcripts. It's quite a detailed point he makes. At volume 3, lines 35 through 51, he walks through his analysis as to why it is he says that the current arrangement is satisfactory. 203 The TSLA's position is that the caps should be brought up to modern CSA standards without more, that is, without any further analysis. 204 Now, Mr. Manocha's evidence is that he believes that an engineering assessment should be carried out to determine the potential risk of the current layout and whether the caps should be brought into conformance. So Mr. Manocha's position is that the assessment be carried out. 205 I believe the record will indicate that he relies on section 7 of the CSA standard for that, and section 7 does require "a thorough evaluation of all subsurface activities and their potential impact on the integrity of the storage facility to be conducted, including an assessment of all existing and abandoned wells within 1 kilometre of the subsurface perimeter of the storage area." 206 So Mr. Manocha would say, the way to read this is to -- the way to read this section is that you do a risk analysis, and then you determine whether or not you should bring the plugs into compliance with modern standards. 207 MR. SOMMERVILLE: I think he's suggesting too, if I'm not mistaken, that that report or that assessment needed to be filed with the Ministry of Natural Resources, and also that that would be a public document. Is that consistent with... 208 MR. VEGH: That's my understanding. I believe that's right. In his -- as I say, his evidence in this area is at volume 5, lines 1383 to 1389. Those particular lines are, sort of, his end conclusion, but he does have an analysis that leads him to that conclusion which is earlier in the transcript. 209 MR. SOMMERVILLE: Thank you. 210 MR. VEGH: So the next -- so those are the environmental impact mitigation issues. And the next issue I would like to address is compensation, and this is listed in the issues list under issue III, and I'd like to address it now. 211 This issue, the compensation, arises because, under section 16 of the current gas storage leases, the applicant is to make reasonable compensation offers before injecting gas. And, as I understand the evidence, all landowners have gas storage leases right now, but two landowners have a portion of their lands that are not subject to a gas storage lease. The evidence in this regard is at volume 2, lines 917 to 923. So there are two parcels of land or portions of land that are not subject to compensation agreements, though all landowners have compensation agreements. 212 In addition, in May of this year, the applicants sent out a document to the landowners, entitled "Amending Agreement," that made a compensation offer in the same amount that was awarded by this Board to the Lambton County landowners, and that document is at Board Staff IR 108. 213 The landowners have agreed to the quantum of compensation set out in that proposal, but have some concerns -- but do have some concerns with the proposal, and these concerns were forwarded to the applicants at the end of May. The evidence on the timing of that is at volume 3 of the transcript, lines 1156 to 1161. And a revised amending agreement was provided to the landowners on July 28th, and that revised agreement is now Exhibit 2.1. 214 Two landowners, G.W. Brand and A.J. Brand, have signed the new agreement, and the other 19 landowners have not. The signed agreements are at 2.2 and 2.3. 215 As I indicated, differences remain between the remaining landowners and the applicant, and these differences, I do not believe, have an impact on the quantum of compensation, they are in respect of two clauses of the agreement, clause 7 and clause 1. And there is also a difference of view as to whether these issues are ripe for the Board to settle at this stage or whether there should be more negotiation. 216 The applicant requests that the Board set compensation based on -- set compensation that incorporates the signed agreements at 2.2 and 2.3 for those landowners who have not agreed to those agreements with a proposed amendment to section 7 of that agreement, and that amendment provides, and I'm just quoting here from what the applicants said yesterday: 217 "For the years after 2008, the landowners within the Tipperary storage pool DSA to which this order applies shall be entitled to just and reasonable compensation as agreed upon by such landowners with Tipperary Gas Corp. or, failing which, as determined by the Board pursuant to the Act." 218 So in other words, as I understand it, the applicant is asking the Board to address the section 7 issue by setting compensation to the end of 2008. 219 The landowners' evidence on this issue is that they have not had the opportunity to completely review and discuss among themselves the July 28 offer, and asks the Board for more time to consider it. And their final position will, I assume, be addressed by their counsel on this. 220 As I said, there's an outstanding issue with respect to section 7 and section 1. And I'd like to refer to section 1 and I'm reading from Exhibit E.2.1, which is the amending agreement offered to the Dutots and section 1 addresses the residual gas compensation, and I'd like to read it. It reads: 221 "The payment for residual gas in the Tipperary unit area down to a reservoir pressure of 50 psia bottom hole shall be calculated as follows: 12.5 percent multiplied by Union participation percentage times GIP, Mcf, wellhead price. And the purchase price for residual natural gas shall include any applicable goods and service tax, and is payable within 30 days of the date of the initial injection into the Tipperary pool." 222 Now, this clause uses the terms "unit participation percentage", "GIP," "wellhead price," and Mr. Lewis stated yesterday in his submissions and it's been the applicants' position throughout, that this provision is the same as the unit operating agreements in place with the landowners, and should, therefore, be the method in place for compensation in the absence of unanimous agreement to the contrary. And at the risk of being the only person in this room who does not obviously see the similarity between this section, this formula, and the formula that's already in place in the unit operating agreements, I haven't seen that point clearly spelled out in the evidence. I've seen the old operating agreement. It seems there they use a formula that is -- perhaps the formula is as simple, but certainly the language is more complicated. And I haven't seen, really, an opinion saying that the two are identical. 223 And this, I think, becomes important because the applicants' main case or main argument in this regard is that there has been unanimous agreement among all the landowners, and that should only be set aside with unanimous agreement, again, to set that aside. And Mr. Lewis may, in his reply argument, identify quite clearly how there is unanimous agreement on this section 1 in an unambiguous and unequivocal way; but, as I've said, I at least haven't been able to carry out an analysis that led to that clear and concise a conclusion. And, again, I say that at the risk of being the only in this room who may not see it, but I wanted to put that on the record. 224 MR. SOMMERVILLE: Mr. Vegh, just as you get into the next part of this, I read section 38.3, which is our, the Board's jurisdiction to set compensation. And what it says is that we can determine the amount. But with respect to methodology of establishing that, or this adjustment clause, which is subject to either party can resile from that adjustment clause as it currently stands you know, the adjustment clause is subject to either party saying: Well, we want to go another way. It seems to me that that's not establishing an amount of compensation, and sort of falls outside the scope of what we need to do. Do you have any comment about that? 225 MR. VEGH: Well, you make the points that go to section -- both section 1 and section 7. On section 1, when you look at the language of 38.3, as you indicated, 38.3 says that: "Failing an agreement, the Board shall determine an amount..." and it doesn't say the Board shall determine the allocation of that amount among landowners. And I think that it's assumed that the landowners, if there are more than one, will agree to that amongst themselves. 226 So I tend to have the same reading: That the Board sets an amount -- that the Board sets an amount, so that what the Board would have to be satisfied with is that the amount paid by the applicants under section 1 is just and reasonable. And I think that that amount has to be determined by the Board. 227 In terms of the amount sort of inter partes, arguably -- well, then, the question is: Is there an equity issue that the Board should be considering on the amount inter partes? And I'd be interested to hear parties' argument in that regard. I would think that, if parties agreed contractually to a method of allocation among themselves, that the Board would not necessarily be in a position to set that aside on the basis that it would be a more fair method of allocation among the parties. 228 So if you're looking at the Board's ultimate authority, I think I share the reading of section 38.3 that you suggested. So that's with respect to section 1. 229 And so what that would come down to is that if, in fact, there has been an agreement among the landowners that section 1 of this revised agreement sets out the appropriate method of compensation, I don't know if the Board would be in a position to override that at the request of some landowners instead -- while any change is opposed by other landowners. So I'm just not sure whether or not this section 1 does reflect the unanimous agreement of the landowners, or whether there's an outstanding issue among the landowners left on this issue. I think it was put to the landowners in cross-examination: Would they voluntarily agree to the Board as an arbitrator if there is no agreement on this? I don't recall the Board making that offer to act as an arbitrator. And again, I'm not sure what their original agreements say with respect to an arbitrator. But that may be -- if they all agreed to an arbitrator to set a compensation allocation amongst themselves, that arbitrator doesn't have to necessarily be the Energy Board, it could be an arbitrator agreed to by the landowners. 230 So the evidence, as I recall from the TSLA, was that, given time, they were confident that they could overcome this issue -- that they just had to ensure that they had a good conversation around it amongst themselves. On section 7, the question would be whether this actually does set an amount. And you suggested in your question that it may not set an amount. I think it's arguable. I can see that point. It's arguable, also, that perhaps it does set an amount, by a formula. Because it identifies what the -- it identifies compensation being paid from the applicant to the landowner, so it's an amount. It's just an amount that may change, based on events that could occur in the future. So I'm not sure if it has to be a fixed, unchanging amount, or whether a formula would suffice -- 231 MR. SOMMERVILLE: The thing that concerned me about it was, simply, that it's subject to either the lessor or lessee's bringing an application before the competent regulatory authority to amend the compensation arrangements. So that it's -- either party can resile from this. And therefore we really have no -- there's no certainty that this is really a formula. It says we're going to adopt the -- delegate that decision, in effect -- to the Lambton County arrangement, but it also says that the parties can resile from it. And so I'm suggesting that it really -- I'm wondering how it fits into the statute authority that we have and, if that's the stumbling block, what's our decision. The parties may want to address that in their submissions. 232 MR. VEGH: I guess what a question may be is -- given that -- the parties are not, under this proposed section 7, in a position to unilaterally resile from this; they're in a position to ask the Board to change the compensation arrangement; which may or may not have an impact on what -- on your point. 233 MR. SOMMERVILLE: Thank you. 234 MR. VEGH: So, as I've said, there is a disagreement on section 7, or potential disagreement on section 7 and section 1, and a more pointed disagreement about whether or not this is ripe for determination right now. 235 In other words, I think the disagreement is over -- in the words of section 38.3 -- has there been a failure to make an agreement? I'd like to turn, now, to Part III of the issues list, and section 40 of the Act, and the next remedy requested. 236 The next remedy requested is that the Board provide a favourable record report to the Minister of Natural Resources under section 40 of the Act in respect of the application to drill wells. 237 And there has not been a lot of evidence on this matter at the hearing. Again, this could be partially because the author of the Stantec report was not cross-examined, and the Stantec report does deal with the drilling of the wells. 238 Again, the applicants have agreed to follow the environmental mitigation plan in chapter 6 of the Stantec report, as well as the technical requirements for drilling and maintaining a well under the CSA and the provincial operating standards under the Oil, Gas and Salt Resources Act. And this is confirmed at volume 2, paragraph 1152. 239 The final order requested is in part IV of the issues list, and this relates to rates. 240 The applicants originally filed for an order requesting the Board to forebear from setting rates on the grounds that the market for storage services is competitive. I won't read it to you, but that ability to refrain from setting rates is in section 29 of the OEB Act, which is included at tab 2 of the materials at 7.2. 241 So the original request was that the Board forebear from setting rates on the grounds that the market for storage was competitive, and that's at volume 1 of the pre-filed evidence, red tab 1, white tab 4, page 4. 242 The applicants have said on a couple of occasions in this proceeding that, as a result of conversations with Board Staff, they withdrew this request and instead asked the Board to set a rate under section 36. And again, the materials accompanying this application support the rate requested on the grounds that the market for storage services is competitive. And the evidence -- pre-filed evidence in this regard is pre-filed evidence book 1, colour tab 1, white tab 2, and that's identified as the addendum to pre-filed evidence of Dereck Francis. So both of these claims in the pre-filed evidence contain the assertion that the market for storage is competitive. 243 In cross-examination, Mr. Francis was pointed to the Board's July 21, 2001 decision in RP-1999-0017, which is included at tab 6 of the materials, and in particular the applicant was taken to the statement at paragraph 2.506, where the Board said in that case: 244 "Based on the evidence in this proceeding, the Board is unable to determine whether storage service can evolve to become workably competitive." 245 Mr. Francis also advised that he was aware that other utility regulators could effectively allow market rates on the grounds that the market is competitive, and particularly that the United States Federal Energy Regulatory Commission, or FERC, has the authority to do that. And I've included a document at tab 7 of Board Staff materials, which is FERC's statement of policy on alternative to traditional cost-of-service rate-making for natural gas pipelines, which identifies a policy on market-based rates. 246 And I could just indicate that this policy statement has been applied on a number of occasions to storage operators by FERC, and it sets out -- this policy statement sets out an analysis of whether market-based rates are appropriate. It starts that -- summarizes that at page 10. 247 Page 10 of the document, the paragraph underneath the citations reads: 248 "The Commission's analysis of whether a pipeline has the ability to exercise market power will include three major steps: Define the relevant market, measure a firm's market share and market concentration, and evaluate other relevant factors." 249 And then this document goes through the components of the analysis, and I just want to highlight a few of them. They're in bold print as we go through the document. First on page 10 there is, under the heading "Market Definitions," there's analysis of, A, the product market; going over to page 12, B, the geographic market -- I said "B," sorry, I meant "2," the geographic market; and then number 3, firm size and market concentration at page 13; and then on page 15, entry and other competitive factors. 250 So those are the factors that FERC has looked at in determining whether to apply market rates, and the applicant confirmed that they did not provide evidence on any of they these factors. 251 And my submission is not that the Board has to apply the FERC test in make making its determination in this case, necessarily, just that this is an authority that has looked at when it's appropriate to file market rates -- or to approve market rates and the evidence required to determine whether market rates are appropriate. 252 Because one -- and I do that because one of the challenges in this case, quite frankly, as I see it, is that there has not been much offered by way of evidence in support of the justness and the reasonableness of the rate that as applies to the applicant in this case. 253 The applicant has said on a couple of occasions that Board Staff has advised that it should seek a rate as opposed to a forbearance order. It's not clear to me whether that was interpreted to mean that it did not have the burden of demonstrating that the rate requested is just and reasonable. 254 So, as I've said, there's little evidence to support the claim that the market is competitive. The applicant is not seeking a Board-approved rate of return, so there's no evidence on the rate of return that it would receive if it charged the market-based rates. 255 The evidence is that, in this case, that Union and Enbridge do charge a rate that is effectively the rate that the applicants are seeking, this range rate. In their case, they earn a premium of approximately twice their costs, and those costs already include a rate of return. And the evidence in this regard is at volume 1, line 1257. 256 And again, there's no expert evidence so there's no real opinion as to whether or not this premium of costs amounts to an economic rent or simply accurately reflects the risks associated with the enterprise. 257 Having said all of that, the Board has allowed this rate and this margin for Enbridge and for Union, and so it's arguable that the rate -- the Board has determined it's just and reasonable and that the applicants are entitled to charge that rate as well. 258 And Mr. Francis points out that, from a customer's perspective, access to this service is of benefit, and that's at volume 2, page 505. So you may step back and say that, as a practical matter, if you do not allow the applicants to sell services at this rate, then the other utilities, Union and Enbridge, will sell services at this rate and customers will simply buy the service at that rate from the other -- from the other suppliers. 259 So from a customer's perspective, it is hard to -- and I think this is Mr. Francis's point, from the customer's perspective, it's hard to see the harm that's caused by allowing one more provider to offer a service at a rate that the Board already allows other providers to offer the service at. 260 The evidence also from Mr. Walsh -- I'm sorry, Mr. Francis's evidence was at volume 2 of the transcript, line 505. And the other evidence from Mr. Walsh is that it is necessary to allow this rate, which allows capturing the market value of storage, if necessary to do that, to develop private storage in the province. And his evidence is at volume 2, paragraphs -- paragraph 517. 261 But, you know, clearly, in this area there are some unresolved policy issues respecting competitive storage, and these may be addressed in the M16 review or the Natural Gas Forum, and both of these have been referred to. And the applicant has indicated that it understands that the current regulatory structure is subject to change, is in a bit of flux right now, and the applicant is prepared to take that risk. 262 The final issue I was going to address, then, is under the heading of "Other," and I think we've addressed, or I've addressed the -- almost all the issues there in the context of one of the orders requested. 263 The one issue that I can't really see how -- that I haven't really fit within a particular order requested is with respect to the Union M16 rate. And the issue, as framed, is whether it's appropriate for an embedded storage operator to have firm service. That's a fair summary of it. And the evidence, or the positions -- sorry -- the evidence is fairly straightforward. The applicants' evidence is that it seeks to provide storage service and, to back up that service, they need a firm storage rate. Northern Cross's evidence is that storage services could be provided on an interruptible basis, and firm service obligations could be met through a combination of interruptible services and other services such as gas trades. 264 Given the -- one thing for the Board to consider is, given the restrictions on the applicant as a storage company, that it cannot sell gas in the province; it may not have the flexibility to meet a firm storage service, say, by -- you know -- trading gas, or just purchasing gas to make up on days where it doesn't have firm -- where it doesn't have access to a firm service to back its own firm obligations. But this is an area where I think I'll leave it largely to counsel for Northern Cross, and for Union, and for the applicant to address the evidence and the arguments on this issue. I think they could probably do a better job of addressing their positions on this than I could. 265 So, subject to any questions from the Panel, those are Board Staff's submissions. 266 MR. BETTS: I think we've asked all our questions. Thank you very much, Mr. Vegh, for your submissions on this. 267 MR. VEGH: Thank you. 268 MR. BETTS: I think this is an appropriate time to take a break. I'm going to hold it to 15 minutes because we have a lot to do, and we've got very little time to do it. But the Board Panel will excuse you if you do want to bring in a coffee or a tea or refreshment with you, so try and do that in the next 15 minutes, and we will resume, then, sitting at, let's say, 5 minutes to 11. 269 --- Recess taken at 10:38 a.m. 270 --- On resuming at 10:58 a.m. 271 MR. BETTS: Thank you, everybody. Please be seated. Now, based on the order I heard earlier, it will be Mr. Leslie, representing Union, to come up next. Before we begin that, are there any preliminary matters for the Panel's consideration? And am I correct -- that is the order? Mr. Leslie? 272 MR. LESLIE: Yes. That's correct, sir. 273 MR. BETTS: Are you ready to proceed? 274 MR. LESLIE: Am I all right here or would you like me to move forward? 275 MR. BETTS: No, that's quite all right, where you are, thank you. 276 MR. LESLIE: All right. Thank you. 277 CLOSING ARGUMENT BY MR. LESLIE: 278 MR. LESLIE: Mr. Chairman, members of the panel, I will be relatively brief. I first wanted to say that Union does support the development of storage, generally, and in Huron County, in particular, and wants to assure the Board and the parties that it will take whatever steps are possible and economic to assist in the development of that storage. 279 Union is in the business of providing transportation and distribution services, and it wishes to do its best in that business. In this case, just by way of context, Union's role -- as the evidence, I think, makes clear -- is to provide transportation services on its Stratford-Goderich transmission system. The deliveries into this pool will come on that system. The deliveries out of the pool will be used for local consumption. In exchange, Union will make gas available at its Dawn storage -- from its Dawn storage, I should say -- for delivery to Tribute's customers. 280 In this connection, there have been references of the benefits to Union of local storage. And my cross-examination of the Tribute panel was intended, in part, at least, to make clear that those benefits are, perhaps, not as great as is sometimes claimed. Union must regard supply from a storage pool such as Tribute's as being subject to interruption, either by reason of equipment failure, or freeze-off, or gas quality problems or whatever. And, as a result, it must have facilities available that it can call on to move the gas -- in this case, from Stratford to the Goderich area, if there is any problem. 281 So then, on a peak day, the system continues to be designed without that storage being a factor. I don't think that's an issue in this case but it's something that we felt was important that the Board appreciate. 282 With respect to the rate, which is the principal reason that I am here, the M16 rate is an approved service. That service was available to both Tribute and to Northern Cross. Tribute chose to contract for service, and firm service, which is available under the M16 rate. Northern Cross took a different route, as they were entitled to do, because they had concerns about the -- at the time, at least, in my submission, and I think the cross-examination establishes -- about the amount that was being charged, as opposed to the nature of the service. Northern Cross itself intended -- if it could agree on the amount -- intended to take firm service, and to do more or less what Tribute is now proposing to do. 283 Our submission to the Board is that Tribute should be permitted to contract for that service on a firm basis. They've indicated the reasons why they require firm service. Perhaps more importantly, is the position that we understand Northern Cross is taking. Tribute have stated that they are aware that the Board will be reviewing the M16 service, and they accept the implications of that review. So, in our submission, there is no need to delay approval of this project for this reason, that is, for the reasons advanced by Northern Cross. 284 There has been some discussion of your powers under section 38, and I think this arises primarily from the question that was asked yesterday by Mr. Sommerville with respect to compensation for residual gas, and I've been asked to point out that compensation for residual gas was the principal subject of a hearing that Union was involved in in the mid-1990s. It's known as the Sombra compensation hearing, I think. It's EBO-184. And that hearing did deal expressly with compensation for residual gas. What is now section 38 was being applied, I think it was section 21 at the time. 285 One final point, and this anticipates the arguments on behalf of the submissions on behalf of TSLA. They have, in the filing that was identified this morning as Exhibit E.7.1, I believe it's headed "TSLA Submission" their first point is that you should grant approval for the storage rights requested, but limit that grant to a five-year term, and require Tribute, at the end of five years, to reapply, in effect. And that was done in the CanEnerco case that you've been referred to earlier today. 286 In our submission, in Union's submission, that should not be the preferred approach. Union believes that limiting approvals for storage developments of this kind could deter the development of storage because of the nature of the financing involved, and, also, the nature of the contracts for storage that are involved in the sale of storage, that is -- which can be on a longer term basis. And I'll point out, in that connection, that CanEnerco was not involved in selling storage; it was using it only for its own purposes. So there is a distinction. 287 The same objective, in our submission, can be achieved by the underlying objective -- by reserving to yourselves the right to review and intercede if the need arises. It's really a question of where the onus lies. And our submission is that there should be a presumption that the grant of authority will continue, unless there's some need to review it and, potentially, revoke it. 288 And the onus for bringing that need to the attention of the Board should lie, we think, with the people who assert that there's a need for review, rather than have a five-year term with an automatic requirement for an application which could be wasteful of time and resources. 289 Subject to any questions, those are my submissions. Thank you. 290 MR. BETTS: Thank you, Mr. Leslie. 291 [The Board confers] 292 MR. BETTS: Board Panel has no questions. Thank you very much for that submission. 293 I believe we'll be hearing next from the Huron County Federation of Agriculture and landowner, Ms. Broadfoot. Are you ready to proceed? 294 MS. BROADFOOT: Yes, sir. 295 MR. BETTS: Please do. 296 CLOSING ARGUMENT BY MS. BROADFOOT: 297 MS. BROADFOOT: Mr. Chairman, Members of the Panel, thank you for the opportunity to present our concerns to you. We appreciate your thoroughness and dedication to the process. Thank you to the very gracious and helpful Staff who guided us through this process. 298 Eighty-five percent of the Huron farm families are members of Huron County Federation of Agriculture. The outcome of this application is of great interest to all Huron County residents. 299 It was Huron County Federation of Agriculture's duty to participate and bring forth our concerns on the proposed application and its potential impact on the county's ecological system. We wish to clarify a few points. 300 Mr. Lewis has suggested that the landowners by their absence were not concerned. This is so far from the truth as to be ridiculous. Had this hearing been in the local community, or the date more convenient to the farming calendar, it would have been well attended. Some Huron citizens have listened in by Internet or read the posted transcripts. 301 This hearing is far removed from Huron County but the issues are extremely close to our hearts. The potential gas storage pool would be the first in our county and your decision here will stand as precedent in any future development. 302 We hope that you do not consider our message lightly. The landowners are very concerned and have sent Mr. Feddes, Mr. and Mrs. Dutot, and Mr. Lawson, and Huron County Federation of Agriculture people here to address their interests. They are the representatives of those who daily look after the livestock and crops that will be directly affected by this project. 303 Mr. Feddes in his evidence mentioned his two sons in the family business, Dwayne and Steven. Contrary to Mr. Lewis's belief, Steven was represented by his father. 304 Since there are a number of identified potential gas storage regions within the area, we consider it imperative that any project be developed safely, with due respect to the environment, particularly the groundwater. 305 Walkerton was not an agricultural problem, as was suggested by Mr. Lewis. It was mismanagement by the operators of the water system who skirted the regulations. 306 Mr. Lewis also implied that there's an urgency due to impending roadwork for an early decision from you, the Panel. I'm a landowner and a ratepayer in the municipality of Central Huron, and I can assure you that the municipality's paving program has been completed for 2004. Therefore, the Panel need not feel compelled to hasten their decision. 307 Huron County Federation of Agriculture hopes that our participation, through interrogatory questions and Mr. Vincent's evidence, have illustrated the feelings of the community, the dynamic state of Huron County agriculture, and its importance. 308 We hope that we have been of assistance to the Board in helping to outline relevant facts. We respectfully request that we be allowed costs. We have a letter stating that we are eligible for costs. 309 Thank you. 310 MR. BETTS: Thank you, Ms. Broadfoot. The Panel has no questions for you at this time. Thank you very much. 311 Mr. Chinneck, representing the TSLA, you would be next. And before you begin, can I ask what your position is with respect to questions from the Panel? During or after? 312 MR. CHINNECK: I'm prepared to take questions at any time, sir. 313 MR. BETTS: Okay, thank you very much. And are you ready to proceed with your submissions? 314 MR. CHINNECK: I am. 315 MR. BETTS: Please go right ahead. 316 CLOSING ARGUMENT BY MR. CHINNECK: 317 MR. CHINNECK: Thank you. 318 This is my first time before the Board. I guess it was inevitable, given that my name is Jed, and given that I'm both a lawyer and a geologist. It's been a great experience for me so far, and I look forward to coming back, and I hope that I will be welcome. 319 I wanted to speak first about the issue that Mr. Lewis has raised regarding the amendment to his application by adding clause 5.1, that being the order to -- for just and equitable compensation for the owners. 320 You will recall by way of background that he served the amended application on day 1 of this hearing, which is the 9th of this month, and after some consideration, I believe the Board rejected his request and indicated that this would be a separate phase to start after some reasonable efforts for negotiation. 321 But at the end of the hearing, you indicated that you wished to receive submissions on two points: one was the sufficiency of the notice, and the second point was the reasonable process of negotiations and whether or not that had occurred. 322 With respect to the first point, I submit that there is no sufficiency of notice here. Mr. Dutot is authorized to speak for the TSLA group, but he is not authorized to bind them, and of course my -- I would submit that my authority, as the representative of that group, would be no greater than his authority. 323 I would bring to your attention that, in the past, the applicants have served each member of the DSA where they thought it was appropriate to do so. You'll recall the evidence from Mr. Jordan that the May 11th letter and amending agreement was served on all of the landowners directly and personally. And I would ask why it is that now they feel that they can amend that rule, because it now conveniences them. 324 I would suggest that they would be obliged to comply with their old procedure and not be allowed to argue that service on me, on the first day of the proceedings, is adequate notice on the other members of the group. 325 With respect to the second issue, that of has there been a reasonable process of negotiation, I would ask you to find that there has been no reasonable process of negotiation. 326 We've been through the facts many, many times. I can distill them down to, essentially, this: 327 A May 11th letter with a document attached. We've been over the particulars of the document. It wasn't dated, wasn't signed, and has the word "DRAFT" written in the background across each of the pages. A rejection by the landowners sometime thereafter in sort of mid to late May, and then essentially nothing in the way of documentation until July 28th, at 8 p.m., when a document that was delivered by fax to Mr. Dutot, that was essentially 11 days before the commencement of the hearing. 328 Now, there was some evidence from Mr. Dutot that Mr. Lewis was slow getting paragraph 7 into the draft, that he'd had some discussions with Mr. Jordan in the -- in that period, between May and July, and Mr. Jordan was on holiday during that time. 329 The TSLA prepared a draft of its suggestions and served it on Mr. Lewis on the morning of the 10th of August, which was day 2 of these proceedings, and essentially has heard nothing back until, I believe, yesterday when I understand that they have rejected that proposal. 330 The TSLA resents being made to look like the bad guy when it feels that it has been negotiating in good faith, and what it feels -- and when it feels like the applicant has caused the delays and is attempting to, essentially, strong-arm the TSLA on the evening of the hearing. 331 Mr. Dutot thinks he needs a little time to get agreements with the other landowners, and he believes that he'll be able to get agreement with them. He thinks that the negotiating teams for both groups should meet face to face to work on the issues. He feels that he can do this within a period of 60 days. I would submit that there has been no reasonable process of negotiation and, without that, there can be no failure of agreement that would allow the Board to set the rates or the compensation. I ask you to reject Mr. Lewis's request, and allow Mr. Dutot time to negotiate the final issues properly in the next two months. If there is no agreement after 60 days, then we would have no issue or difficulty with you allowing Mr. Lewis to schedule the compensation phase that you spoke of earlier, to allow determination of just and equitable compensation. 332 My draft submissions, which my friend referred to, Exhibit E.7.1, has a condition in it. It's condition of approval number 1. It's on the second page. It deals with landowners' compensation. I'll read it now. Paragraph 1: 333 "The applicant shall, before injecting gas into the pool, have entered into agreements with all the landowners in the DSA that are fair, just and equitable, or failing that, shall have settled such issues by way of a compensation hearing before the Board, which compensation hearing shall not be heard before a date which is 90 days following the date hereof." 334 I would ask that you consider including that condition in your decision. 335 I just want to speak for a moment about the TSLA. They -- like the Huron County Federation of Agriculture -- they appreciate the opportunity to intervene. They thank you all, all three of you, for listening so patiently and objectively to their submissions. They have special thanks that they have asked me to communicate to you with respect to the services that were provided them by Kathi Litt and Board Staff. They think that the service was very good. They believe that you will rule objectively and fairly, as you balance carefully these competing interests that have been brought to your attention through this process. 336 And they have asked me specifically to advise you that they will be happy to accept any decision that you make, whatever it may be. They are convinced and believe that you are a fair and just Board. 337 As the Huron County has said, the TSLA landowners view this as a precedent-setting decision. As you know, it's the first of eight reefs and -- actually, it's the second of eight reefs in Huron County that have potential to be storage reservoirs. There are more to come. What is done here can impact other farm communities, both in Huron County and elsewhere in the province. We believe it's worthwhile to do things right the first time, and it is their desire to assist you to set a good precedent for all parties. 338 With respect to the application to designate, inject, withdraw and store gas, and to drill, I would say that the TSLA does, in fact, support those applications. We believe that there is much potential for economic good. There is the ability to stabilize the supply of gas in the region and there's additional revenues to farmers and others. That is why the TSLA supports the designation. But, as I believe has been made clear through the testimony, TSLA does have conditions or concerns. There is potential for great loss. That is why TSLA respectfully requests that your decision contain additional clauses and conditions to minimize the potential for loss. 339 Now -- and those conditions and terms are included in the Exhibit 7.1 that I just, moments ago, referred to. And I'll take you through each of those classes as we get to it. The pool is a valuable provincial asset. There's no question about that. In our view, it is a valuable provincial asset and one that, if it's developed and managed properly, will continue as an asset for the province and the people of the province for years. It is truly a geological jewel. It's a gem. Huron County is also a valuable asset. It's an agricultural jewel -- I would say an equivalent jewel. You heard the evidence. This one county outperforms four provinces in Canada. If it were a province, it would rank 7th in agricultural output. That's impressive. 340 You heard from Mr. Vincent, when he was testifying about the spin-off benefits from agriculture in this one community. He talked about the job multiplier, which is significant, and he spoke about the sales expenditures of multipliers, all of which add dramatically to the gross domestic product for that particular area, and for the province. 341 Now, the DSA, I would submit, is in the heart of Huron's agricultural jewel. It's the sweet spot of this county. It is the most productive area of the municipality of Central Huron. The DSA, and the one-kilometre zone that surrounds it, are home to cattle, pig, chicken and crop operations. Of course, there are families there, as well, and there are over 200,000 animals that reside in that area that I was calling "the block" in my cross-examinations and in chief. Many of the farmers and families are generation farmers, working lands that were worked by their fathers. Mr. Dutot, for example, you heard, has lived there all his life. Mr. Middleton is a fourth-generation. The DSA families have built up good businesses and have huge investments in lands, buildings, equipments, crops, animals, and quoting, $30 million would be a light estimate for the value of those particular assets. 342 Quota -- you heard about that, that's the right to produce milk or chicken products -- I guess they call it "milk or feathers" -- is hugely expensive and comes with contract obligations to deliver both in quality and in quantity. 343 What is the underpinning for this agricultural jewel that exists in the DSA? It's water, lots of water, good water, and there's roughly 30 wells that penetrate down about 300 feet to this aquifer that exists down below the DSA and the one-mile -- one-kilometre area around it all draw from the same aquifer. There's no need to process the water. It's drinkable. They drink it right out of the wells. And it's been producing for at least 50 years. I think we all have to think of that as an extremely valuable resource for this area, as well as the rest of the area. I think of it, as a geologist, as almost like a flat lake that is -- that extends laterally below the DSA, and well beyond it; that, essentially, is there to provide water, fresh water, for these people. 344 I would submit that it would be a disaster if the water quality, or the quantity, were impaired by the operations from this particular facility. Animals would start dying, some within hours. You heard the testimony of Mr. Feddes that operates a number of large concerns in and around the area. Milk cow production, he said, would drop within days if there was any impingement on the amount of milk or water that was available to them. I couldn't believe the volumes of milk that one cow could produce but, according to his evidence, it would drop -- excuse me -- significantly if there were any abatement in the quality or quantity of supply. 345 Land values would drop. If you ask yourself -- if you just imagine, would you be interested in buying land in an area that you knew had a water quality problem? I suspect that you would not. The values of the businesses that are located in those areas would drop as well, and I would submit that it would be significantly. Rural residential properties, of which there are a number of them right in the DSA -- essentially homes that are in the farm area but not really farm homes -- those would obviously not be attractive to new buyers once they became aware of a problem in this area. 346 I would submit that the blame game of litigation might easily start. You only have to look at the Field case, which was submitted -- I believe it's in evidence as E.4.5 -- to see what it would be like to live through the nightmare of water problems. That case simply was one of farmers that had a high SPF herd, a herd of pigs that they had genetically engineered that was high quality. They discovered suddenly that because brine had gotten into the water that their herd of pigs was suffering dramatically. They were undergoing spontaneous abortions and there were deaths. And that problem has still not been rectified. And their losses have still not been satisfied. And they've been involved with litigation and issues for ten years. It becomes -- it becomes a serious, serious problem that just doesn't go away. 347 TSLA does not want to have to have to endure such a problem. They don't want to have to deal with diminutions in values of their real estate, loss of farm animals, loss of their home values. They don't want to have to deal with lawsuits and courts and judges. They don't want to have to breach their quotas. And they don't want to suffer farm divorces which might likely flow from disruptions to the families that might arise from a problem from these types of operations. 348 Now, if I could turn my thoughts to the -- just some observations about the applicants. I won't spend much time on it because my friend, Mr. Vegh, has done a good job, I think, of outlining most of the major points there. 349 With respect to the structure, I would submit that a limited partnership is really designed for tax purposes and to limit the limited partner's other assets to exposure for the risks and losses of the particular business activity. 350 I would submit it is not an ordinary structure for a gas storage company. And to the farmers and, quite frankly, to me as their lawyer, it seems like an unnecessarily complex arrangement. It's not really clear, you know, why Tribute and Tipperary are both on documents. It's not clear who holds the well licences. Is it Clearbeach or Clearwood, which are related companies? And it's not clear who they hold those licences for. Those are issues for us, as they appear to be for my friend Mr. Vegh. 351 With respect to the assets, our view of the financial statements and information that's been filed is that the amount of real assets that are on the books is actually quite low, probably lower than has been presented in the documentation. 352 If you discount, for example, the loan receivable that is owing by Clearbeach to the corporation, there's a debt of $91,000 that would come on. And then I think we do have to look carefully at the value of the major asset, which is the capital asset that was rolled into the limited partnership, the 1.6 or so, $1.7 million value of this operation. That was, I believe, disclosed in the examinations to have been a value that was reached between Ms. Lowrie and Mr. Crich, who are close business partners and have been so for years; and notwithstanding that they may not be technically partners at the time, there appears to be no real valuation of that asset, which causes concerns to the landowners. 353 With respect to cash flow, the cash flow of that corporation seems low. The revenues appear to have been around $400,000 in 2003, with net income of $42,000 in one of the corporations. 354 One of the issues that we have with respect to the corporation is that there is no firm financing. We do not think that Mr. Crich's letters represent any type of guarantee of the monies being there. At best, they're an expression of his interest. 355 We note that CanEnerco had significantly greater assets and cash flows, as was pointed out by Mr. Vegh. 356 We also note that the consultants may have a financial interest in this venture and the outcome. You will be relying on Dr. Walsh's professional opinions regarding geological matters. One wonders whether or not he and other consultants on the panel do actually have a financial interest, like Ms. Lowrie, Mr. Crich, in the success of this application. 357 In fact, I believe Mr. Walsh does admit at one point that he does have an interest in the partnership. We know Dr. Walsh to be a director and officer. One wonders if there is a risk that one's subjective financial self-interest in the results of an application such as this might affect that person's objective professional assessments about these matters. 358 One wonders further whether it might be in the public interest to ensure -- to insist on having reports approved by completely disinterested third parties. 359 I'd like to now make some observations about the applicants' conduct with respect to the landowners. 360 You have heard the landowners' concerns about dealing with the applicants and their representatives over the last five years. There is a track record. This particular applicant or these applicants have been operating wells on some of these properties in the DSA for at least that long. 361 The first point I'd like to make is that there were representations or misrepresentations made by Mr. Brown, who was the former land agent, and those misrepresentations induced some farmers to give leases based on the misrepresentation that they would be sharing residual gas over the whole DSA. 362 Point number 2: The applicants, if you believe the evidence from TSLA, do not appear to follow the recommendations of their own consultant, Stantec. 363 Just briefly, you heard evidence from Mr. Dutot that they did not restrict the road-building to the dry summer months when the damage to the crops would be minimized. You saw in the photographs, and you heard Mr. Dutot's evidence, that they drove onto the cropland when the grounds were wet and when the maximum damage would occur. You also saw that they did not make any effort, in Mr. Dutot's mind, to keep the noxious weeds down, even particularly destructive ones that he talked about. 364 These are all recommendations that are in the Stantec report that the applicant does not appear to have given any shrift to, and that causes the landowners great, great concern. We're embarking on a very long-term relationship with this designation, and they would like to know that this applicant or these applicants are going to deal with them and these issues and recommendations properly and proactively. 365 Another point is that they came onto the lands with very, very short notice. There wasn't -- they weren't abiding by the terms of notice that were recommended in the Stantec report. 366 A third point: They do not appear to have spent money on landowner matters unless they had to. You've heard about the Dwayne Feddes clean-up issue, and Mr. Feddes Senior's view that most of the work was accomplished at the last minute, when it suited the applicants, so that they would look good at this particular hearing. 367 This is, I would say, typical of the types of problems that the landowners have been experiencing with this particular applicant. And Ms. Lowrie's had similar issues in at least one other area. One has to query again the profit motive. If one does not spend money to, say, clean up a well site or plug a well, that would be money saved and more profit in the corporation. 368 Point number 4: The applicants do not appear to be cooperative with the landowners. You heard again Mr. Dutot's statements that he had trouble getting answers from the applicants unless it was in responses to the interrogatories. 369 Point number 5: They do not -- the applicant does not seem interested in spending monies on the proper studies. That's a conclusion, I guess, that I've drawn from the testimony. But you'll recall that the MNR has told the applicants what the MNR wants by way of professional reports, and yet the reports that Mr. Manocha requested have not been forthcoming, they're still outstanding. 370 The TSLA has told the applicant that they wanted and have yet to receive a water and health risk assessment study and emergency plan. The landowners told the applicants that they wanted insurance but there's no study. 371 The issue that we're simply having with respect to both of those points is that we feel that there should be a study that recommends appropriate courses of action and that that study should be reviewed with the interested parties, particularly the landowners, because it's going affect them. And the study should recommend a specific and clear plan of action that will allow the landowners to know whether or not the applicants are complying with the plan of action. 372 Now, I note that CanEnerco was advised in the decision that my friend referred to, I believe it's in tab 4 of the materials submitted by Mr. Vegh, I note that in that decision, the Board indicated that: 373 "CanEnerco should undertake the necessary studies to meet the Board's practice." 374 Now, that's paragraph 5.2.10. Now, in fairness, that was with reference to an environmental evidence regarding the gathering lines, but I submit it should apply to all of the areas that we've noted above, especially since Mr. Walsh -- or, sorry, Dr. Walsh and Mr. Gorman have been involved in both applications. 375 And my last point is that they tend to, in our view, and this may be a little strong, but they tend to bully the landowners. After letting the issues of the amending agreement sit for almost two months, a little bit over two months, the applicants have been putting pressure on the landowners to get it signed before the hearing. 376 My clients feel like they're being, essentially, victimized by and made to be portrayed as the bad guy when they feel that that's just opposite of the way it really is. 377 Whatever happened to sitting down with the other side, with the other side's decision-makers, and discussing these matters openly and fairly, and coming to an agreement? 378 Mr. Dutot understands that Mr. Jordan is doing his best, but feels that it's difficult for him to do so when everything that he does has to go back and be ratified and approved by someone else. We would invite the applicants to sit with the landowners, the decision-makers of both parties, to attempt to resolve these issues. We feel that more would be accomplished -- 379 MR. BETTS: Mr. Chinneck, can I just ask you one question on that for clarification? I think I've heard in evidence that Mr. Dutot and his negotiating team are not the decision-makers either. Did I misinterpret that? 380 MR. CHINNECK: Actually, that's true, sir. They cannot make the decision, but they can certainly take what is being proposed back to the group quickly, and then get ratification. 381 MR. BETTS: Is that very much different than the situation with the counterparty? 382 MR. CHINNECK: I would say no, sir. 383 MR. BETTS: Okay. Thank you. Please proceed. 384 MR. CHINNECK: But I will say -- I will say that he is prepared to get his group together -- all, the entire group, together -- if that would facilitate discussions and a decision. 385 MR. BETTS: Thank you, Mr. Chinneck. 386 MR. CHINNECK: Thank you. 387 So, in summary, with respect to the landowners' comments or issues with the applicants, it would be fair to say that they are not happy with the applicants' conduct towards them over the last five years. It feels like the applicant has, to them, greater powers and is essentially wielding them over them. The landowners believe that people should do what is right and what they have agreed to do, without being essentially -- forced to do it. The landowners do not want to have to get involved with legal technicalities of the oil and gas game, and environmental legislation because, after all, they are farmers -- to keep the operator in line. They do not want to have to make appearances before the Board, or before the Mining Commission, to get the applicant to do what it's supposed to do without being told to do it. The landowners believe that this application may have been considerably shorter had the applicant taken all of the intervenors seriously, and produced studies and plans to satisfy those concerns before bringing the application on. 388 Now, I'd like to make some comments now about the application itself. The Landowners' Association believes that the application is premature in that it is not complete. In their view, it lacks the following: 1, a caprock report; 2, other reports signed off by professional engineers, as requested by the Ministry of Natural Resources yesterday; 3, a pipeline study, as reasonably requested by other parties; 4, a water study and plan, as requested by the TSLA, and then; 5, settlement of the landowner issues, after reasonable and fair negotiations -- which, it submits, has not happened, and; 6, an engineered pipeline study. 389 I'd like to turn now to the issue of damage to the reservoir. 390 We submit that damage to the reservoir is possible. The Langford Report, which is the report of the Committee on Oil and Gas Resources, part 2, "Underground Storage of Natural Gas", which is published in June, 1962, expresses some relevant concerns. If I could just refer you to Exhibit 7.2, which is filed by my friend, I believe you'll find that report at tab 5. 391 And if I could direct you to page 57 of that report, I'm just going to read into the last paragraph before paragraph 2: 392 "If storage operations fall into the hands of the speculator and entrepreneur, there is every expectation that their operations will be inefficient and premature, and will result in not only a more expensive operation, but might have an unhappy experience of impairing an underground reservoir. 393 Government regulation in that facet of the natural gas industry should be directed toward ensuring an orderly and efficient operation by qualified and experienced operators." I'm sure you, members of the Board, are aware of that provision. 394 In our view, the Langford Report, it acknowledges and confirms that there is a possibility of damage to a reservoir. We submit, as well, that the applicants, although they seem to speak strenuously against the possibility of a damage to a reservoir -- they admitted that certain activities could actually compromise a reservoir. 395 I'd like to speak now about damage to the water, the farm animals and the humans. 396 The applicants acknowledged under cross-examination that gas, brine, and other products could escape and cause damage, injury, and loss to water and the things that it underpins. The jewel of Huron County. 397 The applicants' own documents acknowledge the possibility of gas breakout. There are a couple of references to that in one of the documents involving the Reservoir Pressuring Plan that was produced by Mr. Fisher. And Dr. Walsh himself qualified his grand assurances about things not happening at volume 3, paragraph 726, as follows. He says: 398 "I mean -- I qualify this it's quite simple, you know. There are all kinds of things in this world that might be catastrophic that I have no control over. So when you're asking for an answer, I have to qualify it some way." 399 This was said after he gave his assurances that, you know, gas would not escape and get into the water, at line 725 of the testimony. The way the TSLA sees things -- and you may have a different view -- but it seems to us that you have four choices, as a result of this application. You have the option of rejecting it; you have the option of accepting it as-is; you have the option, number 3, of postponing it until the applicant has completed these various studies and reports, and its consultations with third parties; or you have the option to approve it with conditions. 400 The TSLA would not encourage rejection or acceptance; in other words, they do not recommend the first two options. The TSLA would be happy with postponement or approval with conditions. The TSLA just wants to be sure that whomever is entrusted with the reservoir develops it and operates it properly and safely, so that it will bring the benefits that it should to all Ontarians, and that the TSLA and Huron County will -- and it will not destroy the agricultural jewel that is the DSA and Huron County. And it wouldn't hurt if the operator complied with its own consultants' reports when it comes to dealing with farmer's lands, and if the applicant took a proactive approach to dealing with landowners. We think that the statement "do unto others ..." goes a long in the farming community, and it wouldn't hurt the applicants to apply that rule to their dealings with the farmers. 401 Now, with respect to TSLA's specific requests. The first one is that there be a water and health risk assessment study and emergency plan. That's request number 1. I submit that the applicant has no study, and no plan. And I submit that they've admitted that on the record. The applicant has really not considered the issue carefully and, in our submission, they need to. One wonders whether they rushed into this application because they got wind of the Northern Cross application that was started earlier. The Stantec report deals more with how to deal with farmers and land issues, things like weed control and dry-weather road work, et cetera. But it was ignored in any event. 402 We would request that you order a study and we would request that you have a third party perform that work, and that the plan that it contain a plan with both short- and long-term perspectives. There is a need for a study and plan when it comes to the issue of water, and not damaging the agricultural jewel that we have just above it. Just think of the number of animals that will start to die or will stop producing if they don't get water for one day. Just think of the chaos to the farming communities if pigs start to die, or if the rumour gets out that the water's been tainted. The applicants do support the need for a study and plan. 403 If I could refer you to volume 3, paragraph 1549, Mr. Fisher said the following: 404 "I think it makes sense to look at the potential risks in the study that you identified earlier." 405 Mr. Lewis, in response to questions from the Chair about what would be done if there was a water problem, yesterday, was not sure what the plan would be or where the water would come from. It might come from as far away as London. 406 The DSA farming community is a jewel. Surely it is worth a study such as the TSLA is requesting. 407 If you need to, please delay the application or consider the addition of condition number 2 in my submission to your order. 408 If I could just take a moment and have you look at condition number 2. I'll just read it for the record. [As read]: 409 "The applicants shall, before injection of gas into the pool, have completed by a third party qualified professional approved by TSLA a water and health risk assessment study (hereinafter the Water and Health Risk Assessment Study) for the Board which assesses the risks of the contemplated operations on the landowners and which recommends a detailed long- and short-term emergency plan to deal with water, safety and health issues that might arise from operations (the Emergency Plan), including response times, recommended response resources, equipment, personnel, and providers, costs thereof, and appropriate security to be posted by applicants for each such contingency; and, the applicants shall have entered agreements with the landowners whereby the landowners have approved such emergency plan; or, failing that, shall settle such emergency plan by way of Board decision." 410 The rest of the paragraph is the paragraph in the Board draft conditions that contains the amendment agreed to by the applicant. 411 It is our view -- 412 MR. SOMMERVILLE: Mr. Chinneck? 413 MR. CHINNECK: Yes, sir? 414 MR. SOMMERVILLE: Mr. Chinneck, are you familiar with -- are there any other studies or any other assessments that have been done in the area with respect to any of the other risks that are present in the area? We've heard about the hog operations, the livestock operations. Have any risk assessments been done with respect to those operations and their potential to impact the groundwater? 415 MR. CHINNECK: I don't know, sir. Let me just ask my client. 416 MR. SOMMERVILLE: Please. Ms. Broadfoot, I think, may be able to assist you. 417 MR. CHINNECK: Thank you, sir. My client has no knowledge of any other studies. 418 MS. BROADFOOT: In order for a farmer to get a building permit inside of Huron County, and in many parts of the province, for a permit to expand, they must meet regulations under the Nutrient Management Act and they must file all this detailed study of their operation, their proposed operation, and how they will use things. 419 Farmers have established buffer strips along their properties, along water, in order that they're not in contamination. They follow these rules that there are setbacks. So there are plans out there, and things that they do and respect. 420 Does that help you? 421 MR. SOMMERVILLE: Well, are you familiar with any such plans that have been prepared within the DSA? 422 MS. BROADFOOT: Yes, I am very sure that -- do I need to name the person who has expanded? 423 MR. SOMMERVILLE: No, it's probably not necessary to do that. But are there such plans -- 424 MS. BROADFOOT: Yes, sir. 425 MR. BETTS: -- available that have been done within the area? 426 MS. BROADFOOT: Yes, there will be. And the farmers who are producing livestock or milk or whatever, they're expected by their, maybe, commodity boards or people to whom they sell to provide water-test results on a regular basis so that they know that things are above -- farmers also have to keep records on the feed samples and how they were compiled and the percentages. So these kinds of things are there. 427 MR. SOMMERVILLE: What I'm most interested in are sort of the risk assessment activities. 428 MS. BROADFOOT: Yes. Well, inside that thing for the nutrient management, they have to evaluate their personal situation, I mean, the geography of where they are, the type of land, the slope of the land, what amount and what type of manure could be applied, when it can be applied. 429 MR. SOMMERVILLE: Thank you, Ms. Broadfoot. That's helpful. 430 MR. CHINNECK: Thank you, sir. 431 As I was saying, the TSLA believes that, and would request that any report should be circulated or discussed by the interested parties. And we would submit that we have similar feelings with respect to an emergency plan. 432 We expect that if the report is prepared for the Board by an independent third party, it would have great credibility. And we would ask that the farmers have input into both. 433 The suggestion by my friend Mr. Lewis and his clients that they simply obtain a plan as approved by their insurance companies, that lacks the ability for the farming community to review it and comment on it and perhaps revise it so that their interests are met as well. 434 MR. BETTS: Mr. Chinneck, I'd like to ask a question, and it's a little bit of a follow-up to that posed by Mr. Sommerville. It's my efforts to kind of evaluate the issue of equity here, and I'll pose the question. 435 It appears to me that the farmers in this area are, in fact, business people, business operations in the agricultural sector. If we look at Walkerton, and I'm going by my recollection of what I read in the paper and therefore no specific knowledge, I tend to recall that the initial contamination came from above and came from a farming operation. And I stand to be corrected. 436 One way or the other, we have operations above the aquifer that have wells that are connected to the aquifer, and we are considering a storage operation that has wells that go through the aquifer. Both have access to the aquifer. In my mind, there is the potential of contamination both from above and from below. 437 With that in mind, there's an implication here that, in this particular condition, the applicants should be able to -- or be prepared to provide potable water to all affected landowners in accordance with some plan. I assume that would involve either bonds or an insurance program. 438 Why would it not be reasonable to expect every farmer to undertake the same condition with respect to their business and the potential of contamination of that aquifer? 439 MR. CHINNECK: Well, I'm not -- I wouldn't say it wouldn't be reasonable for them to do that. My understanding, and I don't have much of an understanding of the Walkerton situation myself, but my understanding is that the agricultural activities in this area have gone on for 50 years, with no contamination from above, notwithstanding that the agricultural use has been -- has been quite intensive. So it doesn't seem to have a problem at this stage of the game. 440 MR. BETTS: You're sounding an awful lot like Mr. Gorman, who said it's very unlikely that anything will ever happen. And I'm just curious, if one looks at the potential for risk, again, is it -- would the farmers undertake to provide the same level of liability insurance with respect to their neighbours as they're asking of this applicant? 441 MR. CHINNECK: I can ask. 442 Well, they're telling me, sir, that they have that in place now. 443 MR. BETTS: I understood from evidence that in one particular case, one of the farmers had insurance that was limited to $2 million for general liability and $2 million for environmental. So is that the standard that the farmers would expect of the applicant? 444 MR. CHINNECK: Thank you, sir. That's a good question. I believe that the evidence was that, on each of the farms that Mr. Feddes was aware of -- there were three of them -- they each had identical coverage, so the effective, cumulative insurance was $6 million. So my submission would be that the appropriate amount of insurance in this place -- in this case -- has yet to be determined. And, really, if we have some qualified professional that can examine that issue, the risks and the likely costs of mediation, then they can make a recommendation to you and to the farmers that, I believe, will be acceptable to the farmers. 445 MR. BETTS: Thank you. And just one more question. I think Mr. Sommerville may have a follow-up to that, too. But it relates to the point that you made earlier, and it's a valid point. You referred to this as a big flat lake under the ground, and I think that describes it pretty clearly to me. But it does extend beyond the DSA. 446 MR. CHINNECK: Yes. 447 MR. BETTS: How do the people outside of the DSA get impacted by what's going on here? 448 MR. CHINNECK: Well, sir, this is just going to be conjecture on my part. It's a hypothetical. But my understanding of groundwater is somewhat limited. I did study it as a geologist but not -- it wasn't a speciality for me. Groundwater can move through aquifers and it can move fairly extensively and fairly quickly, beyond where it happens to be. So if there's introduced contaminant into a groundwater from above, or below -- at a certain point, some of the studies that I've heard of suggest that it can move very quickly, literally miles, beyond the point of initial contact. 449 I know -- I was at a seminar in Stratford a couple of years ago when they were dealing with some of the fallout of the Walkerton problem, and the expert there -- it was a real estate individual who had a lot of experience with this said that they had done some injection tests whereby they put some type of marker down a well, and then they were testing the extent and the rate of dissipation of this marker into the underlying groundwater lake. And they were, I recall him saying, shocked at how quickly and how far it moved. They were talking about movement, you know, 2 1/2 miles or so beyond where they had expected to see it, in very short order. So does that assist you, sir? 450 MR. BETTS: I'm thinking more about, do the landowners within the DSA have any more or less concerns or rights to this matter than those outside? 451 MR. CHINNECK: Well, I would think that they would not have any more rights. Their issue is -- because they're proximal to the activity and to the reservoirs -- that, if there is an escape of brine or hydrocarbons or gas into the environment, that likely it would affect their supply more quickly, and perhaps more potently, than other users of the water in that general lake, beyond the four corners of the blockway. 452 So that's, perhaps, why they're more intensely interested in ensuring that the operations are effected safely and properly. They're right there. Ground zero. 453 MR. BETTS: Thank you. 454 MR. SOMMERVILLE: Just a bit of a follow-up. 455 It seems to me, from the answers -- the evidence and from answers to questions from the Board, that what we're talking about here is a community of interest, and a community interest. And one of the difficulties that I have is trying to put that community interest and place it appropriately, and with perspective and kind of appropriate burdens across the community, and not to try to burden any one segment of the community with an inordinate obligation. It seems to me that everybody here, in this community, has the potential to influence the groundwater, and a responsibility to protect against that, and to insure their neighbours against the -- that kind of thing happening. 456 And I guess the question I'm putting to you is, in that community of interest, I don't see why the applicant ought to carry an inordinate burden around that. And the other eight storage sites that are down the road -- whether we ought to be creating an obligation on these operators that is disproportionate to the risk. And maybe asking them to engage in an effort that is somewhat disproportionate. And the purpose of my question to Ms. Broadfoot -- or to you that Ms. Broadfoot very kindly assisted us with -- is, is there a sharing of effort here that needs to be undertaken? Should we be trying to develop some kind of methodology in which this community interest is expressed somehow in a community approach to this subject matter? 457 Is sharing of surveys, for example, the sharing of these assessments, are your members, for example, prepared to share environmental assessments that they've had to do with respect to their operations in coming up with an overall assessment of risk for this aquifer? 458 MR. CHINNECK: Well, sir -- sorry, I just wanted to consult briefly with my client. 459 I agree with you that there is a community of interest here and, really, I don't envy your task. You have to balance the interests fairly. And we certainly are in support of that. We think that the interests should be balanced fairly. And I have no idea what quantum of insurance or bonding that would be required in these circumstances. But I do know this is a new activity in this area; that there is a risk that there could be damage to the water table; that it could cause a problem to the existing businesses. And if that were to be the case, it would be prudent that there be some mechanism to restore the surface community, the agricultural jewel of this area, to its original condition, if that's possible. 460 But that's one of the reasons why we're urging you to, you know, order or request a study. We don't know what the real ramifications of a problem would be, but we are concerned that they might be extensive. 461 You did hear some evidence, I think, about the costs of pipelines. You saw some filings from my people, that I think it was the Seaforth case that -- if they're considering piping water into that community if that's what the solution has to be for them -- it's about $20 million. That's a lot of money. And we're not seeking to impair this operator's -- this applicant's ability to proceed with this plan. We just want to make sure it's done properly and fairly. I can't say it any more clearly. 462 I hope that there is an insurance solution that is reasonable and fair, that is not expensive to the operator, but that will give the landowners the comfort and protection that they want. I hope that's the case. At this point in time, though, I do not know what the insurance options are. The applicants have not provided us with that information. I don't believe they have provided you with that information. And that's, again, one of the reasons why we are urging you to ask for a study or a report from somebody that is a third party individual that can give assistance in fairly balancing those rights. 463 MR. SOMMERVILLE: Thank you. 464 MR. BETTS: Please proceed. Thank you. 465 MR. CHINNECK: Okay. Thank you. 466 We understand -- just continuing now from where I was before -- we understand that the applicant, you know, must show that the development of the DSA is in the public interest, and, without a report and a plan, we fail to see how it could be in the public interest. If this group ruins the reservoir -- and I'm not saying that they will, but there's a possibility that they may -- that's one tragedy. But let's make sure they don't compound it by not having a real plan for saving the agricultural jewel which has been ongoing for at least 50 years. 467 The next request is the request for security for the emergency plan. I think we just touched on that a bit, just momentarily. There seems to be some confusion about this issue. Farmers are concerned about the structure -- the lack of financing and complexity of the corporate structure for the applicants. They think it is underfunded and has no access to financial resources to deal with the big problem. They are very aware of the fact that CanEnerco was the first private storage company and it went bankrupt. They are very aware of the fact that Dr. Walsh disclaims any responsibility for the trading losses in a subsidiary of CanEnerco, when his resume, in fact, shows him to have been the director and vice-president of corporate development, gas supply, storage, and marketing in 1996 to 1998. 468 They are simply look for a protection if something large or small happens to the water, or their health, animals and business. This is not an unreasonable request in the circumstances. And I believe Mr. Fisher agrees with that at volume 3, paragraphs 1548 to 1555, he says -- I asked him at 1548: 469 "And the idea I'm getting at here, of course, is that it makes sense for them, being TSLA, to be interested in being sure that they have the financial means to effect remedial work if that becomes a problem down the road." 470 Mr. Fisher's response at 1549: 471 "I think it makes sense to look at the potential risks, and if there are recommendations in that study that identify risks that have financial implications, I would expect the farmers to ensure that they can have something that makes sense." 472 And then we went on and we talked about, at 1550: 473 "So if you were going to do a trade with some of the gas, you want to make sure you're going to get paid. You want to make sure that credit is available so that once you deliver the gas, you get paid." 474 Mr. Fisher's response: "I don't mess with that." 475 My question: "No, that's right, you don't mess with that." 476 Mr. Fisher: "Absolutely." 477 Then I say at 1554: 478 "Right. So then my question is, it makes sense, doesn't it" -- I'm just going to paraphrase here, that if people are going to go on to the farmers' lands and potentially affect their livelihood and businesses, that they should make sure that there's a credit there to fix the problem if you folks go down the drain. 479 And Mr. Fisher's answer at 1555 is: "I believe they're being wise, yes." 480 And I believe that Mr. Lewis supports that as well. In volume 6, at line 296, he says: 481 "So I would submit, before we even get to the question of water contamination insurance and methods of protection, we have to assess here the risk of it occurring. And any insurance company or independent insurance evaluator would have to perform that assessment and, I would submit, couldn't perform that assessment without the type of technical evidence that we've had the benefit of hearing at this hearing." 482 The farmers don't really care what the security is as long as it's going to work when they have the problem. They will take insurance if it covers what they are worried about; but if the insurance does not cover the problem, they would like to have security. Security could be a cash deposit or a letter of credit posted by someone on behalf of the applicants, in an appropriate amount. 483 The problem? There is no insurance study that dovetails with the water and health risk assessment study. Therefore, no one knows how expensive the problem might be and whether or not there is an insurance solution that can protect the agricultural jewel in the DSA. 484 We request that you postpone the application to allow the applicant to have a third party report completed and shared with interested parties; or that you grant your approval with condition 3 as in our draft conditions. 485 Condition 3 in our draft conditions, Exhibit E.7.1, reads as follows: 486 "The applicant shall, before injection of gas into the pool, have entered into an agreement with the landowners regarding the amount, form, and terms of security to be posted by applicants as security for payment for the emergency plan, or, failing agreement, shall settled such issues by way of a hearing before the Board." 487 As an afterthought, the applicants seem to have had some confusion, or not just them, I guess this intervenor as well, considerable confusion about whether or not there is environmental insurance in place or available. 488 One clear answer, though, came from Mr. Fisher. In volume 3 of the transcripts, paragraph 1016 to 1017, he advised that the applicants did not have insurance to cover a catastrophic loss. 489 So it seems to me that the applicants have no insurance to cover a catastrophic loss, which really, to us, is not surprising, because they have no plan to deal with one either. 490 If their insurance agent is making inquiries, perhaps they could roll that information into a request that could be shared with all. As the Chair pointed out at the proceedings yesterday, if the risk is as low as they suspect it is, then perhaps the premiums will be quite low as well. 491 The third area of request, number 3, relates to liability insurance. This insurance is not to be confused with environmental insurance, whatever that is. This is liability insurance. It's basic coverage. Our request is that the landowners be added as named insureds on the policies of insurance for basic insurance. This is not unusual. Virtually all commercial leases require the lessee to add the landlord as a named insured under the lessee's insurance policy. We would suggest that it's a good idea to do that. 492 I'm sure the Board is aware of the Occupiers' Liability Act, which essentially imposes liabilities on landowners. Essentially, if someone is injured on a property, there's a very high likelihood that the owners would be sued. If the injury is from escape of gas or brine, then even though the lessee may have caused the problem, the landowner may still also be sued. And it would be our submission that he shouldn't have to pay for that coverage or that protection. 493 Now, you heard some evidence recently about having to have $5 million of liability insurance coverage to cut Ontario Hydro's grass. We also heard evidence that the wind companies in Huron County are prepared to add the landowners to their policies, which are $11 million policies. We would ask that the applicants be required to do the same with respect to the landowners and their policies. 494 Issue number 4 -- request number 4, it relates to the Dwayne Feddes clean-up. As we understand it, operators such as the applicant are required to comply with two pieces of legislation: the Ontario Gas, Salt and Resources Act and the regulations in the CSA standards and also the Environmental Protection Act. 495 The applicants spilled oil on Mr. Feddes' property. In addition to the clean-up of the site and the oil, Mr. Feddes simply wanted a piece of paper that would satisfy lenders or prospective purchasers of his land. That piece of paper is a certificate prepared by someone who certifies that the contaminants have been removed and that the property is free of contaminants. That is what people get in the city. Why wouldn't he get that here? 496 A lender or purchaser would not be satisfied with the MNR clean-up report because it does not say that the contaminant was no longer there. 497 Just pretend for a minute that it's your property and you're trying to sell it and your agent asks you to sign a disclosure statement. There's a clause about spills. You have to tell the truth. You've got to make a disclosure. Do you think you'd want a piece of paper that said that the contaminants have been removed? That's a little better than a cite in a report that you get from the MNR. 498 Fair is fair. The operator made the spill. It's only fair that the operator clean it up and produce the right certificate so that the owner is in the same position that he was in before the spill. 499 The same logic applies to the rezoning of that property. You heard evidence about the fact that the little area of the strip along the easterly portion of Mr. Feddes' land is zoned commercial. We ask that you require the applicants to pay for the rezoning for the strip from commercial to agricultural. 500 It's true, Mr. Feddes bought it knowing it was zoned commercial, but the applicants bought the lease with the same understanding. But for the battery site, it would have been zoned agricultural. Don't you think the applicant should pay to rezone now that it's decommissioned the site? To me, it seems only fair that they would. 501 And there are other things that ought to be removed from this property, but we suspect that that can be dealt with with the applicants. 502 Now, our request, then, with respect to that issue is, again, to postpone the application; or, if you're inclined to proceed with the application, to insert condition number 5, which again is in my Exhibit E.7.1. 503 Condition number 5 reads -- 504 MR. BETTS: Sorry, Mr. Chinneck, can I -- oh, sorry, keep going. I want to come back to 4 and I have a question about 5 as well. Please finish with 5, and we'll come back to it. 505 MR. CHINNECK: Thank you, sir. 506 Condition 5 reads: 507 "The applicants shall, before injection of gas into the pool, have completed the clean-up of the well site and the battery site on the Dwayne Feddes property and all related facilities, and shall have provided the said Dwayne Feddes with a certificate or certificates from persons competent to provide such certificates that the clean-up had been performed in accordance with the regulations, administered by the Ministry of Natural Resources and the Ministry of the Environment, and that the battery site is free of contaminants, and shall have agreed to initiate, prosecute, and pay, at applicants' expense, for a rezoning application to convert the portion of said lands that is zoned commercial to agricultural." 508 MR. BETTS: First of all, a question about 4, if you don't mind me just going back to that. 509 I know you heard the testimony of MNR with respect to their position on these plugged wells, that, if I can paraphrase it correctly, and I stand to be corrected if I'm wrong, that basically, they were -- there was an expectation of a risk analysis and, I guess, a performance analysis by an appropriate body, and I think he indicated an engineering analysis; and then, based upon that, they would conclude whether or not the plugs had to be changed. 510 What is the TSLA's position on that? I see here the only recommendation is simply to change the plugs. 511 MR. CHINNECK: Well, quite frankly, sir, I think we would be happy with what the MNR's requesting there. It seems like a reasonable way to proceed. If there's a report done by a qualified third party professional that says, This plug meets or beats the current-day standards and it's satisfactory, then we wouldn't have a problem with that as a course of action. 512 MR. BETTS: Let me -- you were very careful to say "a qualified third party." Let me bring that one to the table and say: If the applicants felt that -- or if MNR was satisfied with the qualifications of people within the applicants' group, would that not be satisfactory to TSLA? 513 MR. CHINNECK: Well, sir, that's a good question, too. I think that they would be. Although we do have an overriding concern that the panel that was presented may have financial interests in the result by virtue of an interest in the applicant itself, and we would feel most comfortable if the opinion was provided by someone who has no interest, no conflict of interest, at all. 514 MR. BETTS: Thank you. That's all my questions on those points. 515 Oh, Ms. Nowina? 516 MS. NOWINA: I have one on the clean-up of the Feddes property. 517 MR. CHINNECK: Yes. 518 MS. NOWINA: Actually, it's not on the clean-up, it's on the rezoning. 519 MR. CHINNECK: Yes. 520 MS. NOWINA: So your request is that at the applicants' expense the rezoning application take place. I'm a little curious about that, because I'm assuming that when Mr. Feddes bought it, it was already zoned as commercial. 521 MR. CHINNECK: That's correct. But the same applies to the applicants. When they bought the leases, it was zoned commercial as well. 522 MS. NOWINA: Well, and to talk about Mr. Feddes' interest. And he would have paid an appropriate price for it, given the commercial zoning. Now, I have no idea in the area, whether an agricultural zoning means that it's more valuable land or whether the commercial zoning does, but that the price he paid for it would have reflected that zoning. 523 MR. CHINNECK: I don't -- I have no knowledge of that, but that's -- that's possible, yes. May I just take a moment to confer with my client? 524 I'm being told by my client - this is not on the record, but I'll share it with the Board if it's of assistance - that when he acquired the property, he acquired it for a dollar, and it was zoned commercial. But at that time there was no understanding that there was going to be a designation of the particular property. His expectation was that it was going to carry on as a production site or production battery, in this case it's the battery. So it was commercial, and he expected to carry on as commercial. 525 But now that it turns up that there's going to be a change in the use, and essentially, the designation, hopefully, will proceed for the applicants, his thoughts are, and it makes sense to me, that the user that caused it to be designated commercial by the township has ceased, or will have ceased; and accordingly, it's appropriate for, essentially, the property to be restored to where it was before, from a zoning perspective. And that should be at a cost that's borne by the applicant. 526 MS. NOWINA: So, then, the condition is that when he acquired it as a commercial property, it had some value as a -- being zoned commercial. It will no longer have that value being zoned commercial because it's no longer being operated in that manner, and therefore any value would be as it being agricultural land. 527 MR. CHINNECK: I think the farmers would prefer to have the lands zoned agriculture. I don't see that they would see it as valuable to have a portion of it zoned commercial. 528 MS. NOWINA: Okay, thank you. 529 MR. CHINNECK: Thank you. I hope that was an adequate answer. 530 Moving on to issue number 5, and I just wanted to make -- with respect, you've heard a lot of testimony with respect to Imperial 397 and 368, and you just heard my recent comments about the fact that the TSLA would be satisfied if there was a report by an independent third party that ceased that issue, at least the ability of -- to assess those two wells and made a recommendation that was followed by the applicants. 531 On the issue of plugging, just generally, I just have, I guess, an aside. The Ministry's evidence, I think, was that $6,000 was being placed into trust for each of the wells to a maximum of $70,000, and as well that the cost to plug a well of this nature ranges between 15,000 and $55,000. 532 Now, with respect to that issue, if it turns out that the operator fails in the catastrophic situation that I had talked of earlier, and was unable to plug the wells, then it is conceivable that the owner of the lands would be obliged to plug that well; and if that were the case, they would have to bear the expense of the plugging themselves and then seek a reimbursement from the trust fund that's being held by Mr. Lewis. 533 So, I just wanted to make the point that the amount of money that's being held in trust to plug the wells for this particular project are very clearly not adequate to satisfy the entire plugging costs; and if there was this catastrophic event where the operator was no longer able to function or operate, the landowners themselves might be responsible for doing that -- would be responsible; and if they did, they'd have to bear the costs, which are in excess of the deposits or the trust amount, and try to recover the trust amounts from the trust fund. 534 Point number 6: Landowner compensation. There are many issues here. I don't propose to spend a lot of time on each of them, but I do feel I have to touch on them as quickly as possible. 535 As indicated earlier, I guess the first issue would be a compensation hearing. We would submit that there has not been enough opportunity to come to an agreement, and accordingly there is, we submit, no basis for you making a compensation order at this hearing. 536 We also submit, as I did earlier, that the notice given on August 9th, 2004, the first day of the proceedings, is deficient. 537 The applicant is in the oil and gas business. They know the regulations. My clients are, essentially, farmers. They work with plants and animals. The Oil, Salt and Gas Resources Act, the MNR, the OEB, those terms and the legislation and the rules that relate to them are all essentially foreign to these clients of mine. 538 Is it not unusual or sharp practice for the applicants not to warn the farmers that their May 11th letter -- that they intend to rely on that letter as a basis for making an application for compensation from you? In my submission, if you're going rely on rights that arise under complicated legislation, that the parties opposite have no real appreciation of, it makes good sense that those -- that that is made very, very clear to the parties opposite. In this case, that was not done. 539 If I examine just for a moment the letter and the amending agreement, the draft amending agreement that were September over on May 11th, I would submit to you that that -- those two documents do not constitute an offer. There's no way they can constitute an offer because, in my view, they're not capable of acceptance in the form that they're in. My understanding of basic contract law is that an offer must be capable of acceptance, and in my view, those two documents are not. 540 I would submit that it was a document that was submitted, really, to invite further comment and invite further negotiation in order to get that process of negotiation going. But I think -- I would have difficulty with a conclusion that it actually constituted an offer. 541 So, as you know, we are requesting that the compensation phase be postponed, as indicated earlier, and that relates to condition number 1 of TSLA's submission. 542 It has been my experience that a process that allows respectful, direct negotiations and compromise can often lead to satisfactory agreement. Let us hope that that can be accomplished here. 543 Now, Mr. Dutot has asked me to advise you directly that he is basically ambivalent as to which manner of compensation the -- or which way the residual gas is calculated. He advises me that, as far as he knows, he gets nothing no matter how it's calculated. 544 Now, with respect to the issue of the residual gas payout, which I believe is referenced in paragraph one of the amending agreement, as the applicant has stated, it, the applicant, is essentially disinterested in the outcome. Once the amount is actually quantified, they have to pay it and they don't really care how it's split up amongst the landowners. 545 This, in my view, makes it even more important that the TSLA members have an opportunity to discuss this issue among themselves, and also the two Brands, that the applicants signed up on August 9th, the first day of negotiations. Mr. Dutot believes or is hopeful that they can come to an agreement if they have some time to do that. 546 At this point in time, Mr. Dutot and Mr. Feddes prefer to see the residual gas payout made on the basis of the footprint of the reef itself, with reference to the iso -- without reference to the isopach map drawn by Dr. Walsh. They say it's in keeping with the recent Mandaumin decision. 547 Mr. Dutot's and Mr. Feddes' reason is that Dr. Walsh's isopach maps are inaccurate and unreliable. They have witnessed two changes by Dr. Walsh of the original isopach map that was drafted by Mr. Welychka, the original geologist, and they wonder how many other amendments there are going to be. 548 They are most suspicious of the latest or most recent version of the gas -- gross gas isopach map which suggests two things: The south Tip. pool conforms to the south unitization area when previous maps showed almost one-half of the gas volume in the south Tip. pool to lie north of the south Tip. boundary. And -- which also shows that there's no longer any gas on Mr. Vermue's land. 549 Now, I wonder if I could refer you to the second exhibit that I filed this morning, the three maps exhibit, with specific reference to map number 2. 550 Now, just -- okay. Does everybody have that document? 551 MR. BETTS: Yes. Can you provide some reference, though? Since you indicated it's already been filed, can you provide a reference as to where that would be? 552 MR. CHINNECK: Yes, sir. 553 MR. BETTS: And I'd look for the same thing on what you've indicated to be map number 1 and map number 2. 554 MR. CHINNECK: Yeah. I believe that map number 1 is Exhibit A, tab 3, tab 2. That's the original map. I believe that exhibit -- sorry, page 2 comes from Exhibit 1.4, tab 1, and that page 3 comes from Exhibit 1.5. 555 MR. BETTS: That's excellent. Thank you. And you can continue to refer to those as pages 1, 2, and 3, now that we know what they are. 556 MR. CHINNECK: Okay, thank you, sir. 557 If you look at page 2, I want to make two comments. The first one is that the -- you can see the south pool. It's essentially the circles that form, I guess, circles on the south part of the structure, and you can see that the -- that it appears that the volume of gas as outlined in this isopach map in the south pool extends north of the north boundary of the south Tipperary unit agreement. In fact, it appears as though the north limit of the south Tipperary unit agreement splits that pool almost equally in half. 558 And the second point that I want to draw your attention is that, if you'll note just to the left of the south pool, there's a little handwritten "V" in the document. If you're all with me? That "V" is designed to indicate the lot that is owned by Mr. Vermue, or the Vermues, that appears to contain gas from the isopachs in 2, in map number 2. That piece of land, of course, is an unleased piece of land, and not included in the north or south unit agreements. 559 Now, this map, then, map 2, creates two problems for the applicants that I can see. 560 The first is that almost one-half of the gas in the south Tipperary pool is lying in the north unit area, but the north unit area-holders are not getting royalties on that gas. 561 The second problem is that Vermue, if this map is to be believed, should be getting gas royalties because there is gas under his lands. But he's not. He's not leased and he's not getting any royalties because he's not part of the unit agreement. 562 Now, how does the applicant -- how do they solve those two problems? If you would direct your attention to map number 3, we see Mr. -- or Dr. Walsh's reinterpretation as of June 2004. 563 If you look at the south pool, the isopachs that define the lateral extent of the gas reservoir for the south pool now lie entirely south of the north limit. So there's no longer any issue with the north owners not getting paid for gas that lies on their property because, if this interpretation is to be believed, there is no gas from the south pool lying north of that boundary. 564 The second thing we notice is that if you look at the -- to the left and -- I guess, to the north and to the left of the south pool, you'll see the words "Tipperary South No. 2," the lot that -- the words "Tipperary South No. 2," those are the same Vermue lands that we just talked about earlier. And you will note from this map, if this interpretation is to be believed, that there's no longer any gas on Mr. Vermue's property. 565 Both problems have been solved with a new map But there are problems. In my mind, there are, anyways. In my experience, geology rarely conforms with man's arbitrary boundaries, such as unit boundaries in this case. Usually, it's the other way around: Man's boundaries are determined by nature. 566 And the other comment, I guess, is that there is really precious little geological data with which to make these interpretations. If you look, there's really only two wells, number 22 and number 71, in the south reef. 567 TSLA wonders why it is that Ed Welychka, the geologist who drew map number 1, the first geological interpretation of where the gas is, why he was not presented as a witness. TSLA wonders about Dr. Walsh's objectivity as a geological professional in the face of his admitted directorship, authorship, and financial interest in the applicants. Does he resolve his conflict of interest in favour of pure objective geology, or does his financial interests in the outcome colour his geological interpretations? 568 The landowners, quite frankly, wonder about where the gas really is in light of these interpretations, and, quite frankly, they prefer Mr. Welychka's interpretations. 569 Now, the applicants have somewhat compounded the problem of landowner compensation by signing up the Brands on the first day of these proceedings. It's not surprising the Brands took the deal. They essentially, for no cost to them, they took compensation at a much higher rate. In fact, it was a rate that was essentially negotiated by the TSLA, but they got to take advantage of it. Is that fair? The Brands did no work. 570 Is it fair for the applicants to argue that because the Brands are now signed, you should impose their deal on the TSLA because the residual gas split that we will want does not dovetail with the residual gas split in the Brands' lease? I say it is not fair. The Brands are only two or 20 landowners. The applicants could have waited and allowed the negotiation process to unfold but chose to run up and get these two landowners signed. 571 I wish to turn to the issue of the actual compensation. 572 MR. BETTS: Mr. Chinneck, why do I have two map 3s, two page 3s? 573 MR. CHINNECK: I don't know, sir. 574 MR. SOMMERVILLE: Is there any reason, or is it just an extra? 575 MR. CHINNECK: You should have one, two, and three maps. 576 MR. SOMMERVILLE: I've got one, two, three. 577 MR. CHINNECK: I don't know, sir. I apologize. 578 MR. SOMMERVILLE: Well, I'm going to take this one out. 579 MR. CHINNECK: So the issue of the actual compensation. I think it's fair to say that there is an agreement in principle with respect to the actual rates that are payable for the acreages, the roads, the facilities, based on the Lambton decision. But there is still no agreement regarding paragraph 7, about how to dovetail or piggyback rate increases in the Tipperary area to the rate increases in the Lambton area, although I would say it's fair to say there is an agreement in principle, the detail just has to be worked out. 580 It is very important to the TSLA that that clause be worked out properly and fairly. They would like to have a mechanism that would essentially facilitate them not having to come back to the Board, as much as I like being here. 581 The parties are close. I would, again, ask for time to settle these terms with the applicants. 582 Now, I'm moving to the next issue of delta pressuring. I think you have heard probably more than enough on this issue. We just would prefer that there not be pressuring in excess of initial pressure unless there is a report, as we mentioned earlier, and it is -- it can be done safely, without damage to the reservoir or water. 583 I do have a comment, though, about the caprock. I guess it's the appropriate juncture to discuss the issue of the sampling of the caprock. 584 You'll recall that the caprock sample was taken on the Tribute number 22 well, and that was the well that was drilled on Mr. McCulough's property, right, essentially, in the middle of the DSA. And you'll recall as well that the applicants are maintaining that is not an area that is a storage reservoir -- of the reef, it's a storage reservoir. 585 So, essentially, it was taken between the two geological structures that form the north pool and the south pool, it was taken in between. And it would be fair to say that the samples were not taken directly above either of the storage reservoirs that have been identified by the applicants. It was taken in between them. And that causes us some concern. 586 Our view is that it's possible that the caprock features may differ and that, in effect, there is not -- and the applicants have not taken a sample of the caprock above the reservoir that is going to be pressured and ultimately utilized for storage. 587 The characteristics of the caprock could be materially different over the actual reservoir, those reefal portions of the reservoir, than they are in the area that they were taken. 588 Moving on to point 8, a request to log and report landowner complaints to the Board. 589 You have heard the landowners' concerns about the applicant and its principles that have arisen over the last five years. The landowners believe that the applicant should do and perform its work and services on the surface and below-ground professionally, on a timely basis, properly, and without being asked by them or forced by them to do it. And that's why the landowners are requesting that your decision contain a clause similar to that found at the bottom of page 1 of our submissions. 590 If I just read that clause, it's entitled "Log and Address Landowners Complaints," paragraph 4: 591 "The Board reminds the applicants that they shall maintain a detailed log of all landowner complaints both inside and beyond the DSA, which details, as a minimum, the identities of the party complaining and the date, time and nature of each such complaint, the date, time and nature of the initial response and each subsequent response to such complaint, the details of all remedial action taken to resolve the complaint and the date each complaint filed is settled and closed; and further reminds the applicants that they shall file with the Board every six months following the date hereof copies of such log." 592 We hope that the threat of action by you will keep the applicants' feet to the fire when it comes to dealing with landowner issues. 593 Point number 9: CanEnerco. I couldn't help but noting the similarities between the CanEnerco decision of this Board and the case at bar. In the CanEnerco decision, there were provisions designed to address the first private gas storage company, and we submit that some of those provisions should apply here, and would ask that your decision contain clauses 1 to 3 at page 1 of my submissions. 594 Just a word about timing. Mr. Lewis urged you yesterday to decide by September 1st so that they could proceed with their plans. He says there is a need to proceed so they can get the pipe in the ground and so the township can do its roadwork. 595 But I don't believe that the engineering pipeline study has been completed, and if you assume for a moment that would take a week to do. I don't think they've ordered the pipe itself, and I understood from the evidence that that would be six to eight weeks for it to be delivered. If you take six or eight weeks and go on the outside from September 7th, then the pipe wouldn't be delivered until November 7th, and in Huron County, that's when the snow starts to fly. 596 It's unlikely, in our submission, that there is any chance of them proceeding to lay pipe this year. We say, take your time. Let's do this right; right for the reservoir, which is a valuable provincial asset; right for the farmers and their businesses; right for the water. Let's not rush; let's do it properly. 597 So we urge you to postpone the application until late winter, to allow the applicants the necessary studies, to get those studies and reports and plans finalized and in place, and to finalize their negotiations with the landowners; or grant the application with the additional terms and conditions that we request. 598 I would ask that the Board grant costs. I understand that my clients have received a letter and that they are eligible under article 3.03(c). We trust that we have assisted you to a better understanding of the issues, that we have complied with your directives, including our pre-filing of written evidence, and that we have addressed issues that are relevant to you. 599 Thank you. Those are my submissions. 600 MR. BETTS: Thank you, Mr. Chinneck. The Board Panel has no further questions. 601 MR. CHINNECK: Thank you. 602 MR. BETTS: Thank you for your submissions. 603 At quarter to one, Ms. Paulus, how long do you anticipate needing? 604 MS. PAULUS: Well, I would, of course, do everything to accommodate your concerns and expectations to complete today. I have to remind you that my client has gone to considerable expense to fly me out, so I do feel compelled, as I would in any event, to do my best to present their submissions, and I don't think realistically that would be done in less than an hour. And an hour assumes not too many questions. 605 MR. BETTS: I think you're indicating that's the best horizon of time. It could be beyond that? 606 MS. PAULUS: I apologize if that's what you took away from it. I assume that what I gave you is a realistic estimate, again, trying to foresee what your questions will or won't be. 607 MR. BETTS: Mr. Lewis, based on that, and the Board would like to offer, because we don't want anybody to be rushed in their submissions, the Board would like to offer to you the opportunity to reply in writing, if you choose. So, first of all, have you any initial position with respect to that offer? 608 MR. LEWIS: I would accept that offer. I think that's appropriate, and I accept that offer. 609 In terms of timing, perhaps after the lunch break I could get back to you on what I would feel to be a reasonable time frame within which I can have those written -- that written reply to you and to everyone else. 610 MR. BETTS: Thank you. 611 And Ms. Paulus, any comment? 612 MS. PAULUS: Sir, again, in efforts of keeping the playing field as level as possible, and that was a consideration when we went to the expense to come to present orally, I think, because of time constraints, it may be appropriate that the final reply be in writing, but I anticipate that the applicant would have been asked to make its reply, essentially, immediately following our submissions. I don't think that by allowing it in writing that the time should be unduly extended. 613 MR. BETTS: That the time should be what? 614 MS. PAULUS: Unduly extended. 615 MR. BETTS: I think that would be reasonable, again to keep things on an even playing field. And we all are cognizant of the pressure to try to deal with this as promptly as possible, so we would be looking for a very quick turnaround, appreciating that it takes longer to write things than it does to express them orally. 616 MS. PAULUS: Absolutely. 617 MR. BETTS: I think we will break right now. I hope all of you will forgive me, but I'm going to really shorten the break period, with the hope that we still might be able to do this today orally. 618 So let me ask everyone to be back at 1:30 p.m. and we will resume at that time. Thank you. 619 --- Luncheon recess taken at 12:50 p.m. 620 --- On resuming at 1:36 p.m. 621 MR. BETTS: Thanks, everybody. Please be seated. And before we begin with the submissions from Northern Cross and Ms. Paulus, are there any preliminary matters for the Panel's consideration? 622 MR. LEWIS: Did you want me, Mr. Chairman, to address this issue of my written reply and the timing of that at this point? Or -- 623 MR. BETTS: I think we'll ask you to hold off until Ms. Paulus is done. 624 MR. LEWIS: Fine. 625 MR. BETTS: And then we'll know exactly what you have to deal with and we'll consider your position at that time. 626 MR. LEWIS: Thank you. 627 MR. BETTS: Ms. Paulus, are you prepared to proceed? 628 MS. PAULUS: I am. 629 MR. BETTS: Please do so. 630 MS. PAULUS: Thank you. 631 MR. BETTS: And if you can point that mike directly at yourself, you have a lovely, soft voice, but sometimes I lose it there. 632 MS. PAULUS: That's not what my children think of my voice. 633 MR. BETTS: Well just pretend that you're oldest and golden -- 634 CLOSING ARGUMENT BY MS. PAULUS: 635 MS. PAULUS: Before I begin with my formal submissions, I'd like to thank the Panel very much for considering our time constraints and arranging schedules. I'd also like to thank the court reporters who made valiant efforts in getting the transcripts to us in time for us to review them before travelling. 636 If there's one issue that probably everyone in this room could agree on -- that is, one issue in addition to how good the court reporters are -- it would be that storage in Huron County and its development is a good thing, and we're all supportive of that. The only real issue is -- is the applicants' particular project at its current stage of development, a project that really meets the criteria of being part of a plan for the rational, and orderly and successful development of storage in Huron County? And on that point is where, I guess, there remains some disagreement from the perspective of Northern Cross. We do not believe that the project at this juncture, as it stands today, is a project that really falls into the category of being one ready for approval and one that would leave the Board with confidence that, if approved, it will be part of a successful development. 637 Now, the reasons that we say the project isn't mature enough or fully or properly developed enough to meet the criteria of being part of a rational plan really can be categorized into nine categories. And I give you that cue so you can follow and know where I'm at. 638 So the first category would be what I call "technical concerns." And, simply put, there are outstanding technical issues. And these include things like the delineation of the boundaries of the pool, as well as issues about the caprock. The sample has not yet been analyzed, and I think there also have been some questions raised about whether it is an appropriate sample. 639 Northern Cross doesn't propose to comment on these technical issues, but we do think it's important that they be seen as a back drop against which Northern Cross is raising other issues, and against which Northern Cross is proposing particular remedies. 640 The second category are what I might call "landowner concerns." The primary concern here, as has been already fully canvassed, is the issue of water contamination; but over and above these, I think there's other landowner concerns. They really fall into a whole gamut, from things like lack of finalized emergency response plans, to lack of finalized operating procedures, and lack of insurance arrangements being put in place. 641 In their entirety, these -- particularly coupled with all the complaints about past operations by the applicants or related entities -- really paint a picture of an underfunded and unresponsive operator, one which the community does not have confidence in. And I think here it's important that we start putting these pieces together -- because there's a tendency, when we go through a cross-examination and the presentation of evidence, to keep dissecting things, but at some point you have to stand back and look at the collectivity. 642 The third category concerns relate to the lack of committed financings. Now, I think there's three ways in which the lack of financial commitment impacts. The first is that there's no real assurance that there will be the financial resources there to ensure the project proceeds. The second, and I'm sure from the perspective of many of the intervenors, the most important, is that there's no assurance that there will be adequate finances there, and financial backing, in the event that some problem arises. And the third area is that, without an outside lender, there's really no independent party that's assessing the risks of the project. Realistically, many parties today rely on banks and bank financing as a test of a project. Banks are in the business of assessing risks, and when they extend credit, third parties do have some confidence that the risks have been canvassed and the likelihood of success reviewed. 643 I think here in looking at our comment that there's no committed financial arrangement in place -- I think it's very important to start distinguishing between hopes and expectations and commitments, legal commitments. After all, what we're dealing with here is a commercial venture. And it's fair to say that parties should have an expectation that it will be treated as such, and that there will be the appropriate paper in place. 644 Now, it may be that Mr. Crich is a very honourable man, and no one is here to suggest otherwise. But that is not the same thing as saying someone has committed to funding. Now, at least in Alberta, parties are quite accustomed to entering into limited partnership arrangements as a tax deferral, if nothing else. And it's customary -- in fact, it's customary in all jurisdictions that have securities regulations -- to enter into subscription agreements when one is making a commitment to acquire units in the partnership. That's what one does. You sign a subscription agreement, and then the units are issued to you. 645 If there's certain conditions upon the circumstances in which you prepare to take the units and advance the money, then you put those conditions into the subscription agreement. But there's an agreement that, if the conditions are met, you must fund. And that, simply, is totally lacking here. I think, before leaving this area of financial arrangements, I do want to comment on the extent of finances that are likely to be required, not only to meet the initial needs to construct the project, but also to assure third parties that there's a party to stand behind the project that has sufficient assets to meet any emergency or untoward situations. 646 Mr. Vegh, in his listing of the issues, did an admirable first take at the types of financial needs that may arise, but it really was only a first, and very preliminary, list, and I would say one that really underestimates the requirements of a project of this kind, and very significantly underestimates the kinds of costs that may accrue to the public in the event the project's not successful. 647 We all know that when you have unsuccessful projects, you have court proceedings, you have bankruptcy or receivership proceedings, and there is a large cost to the public to these proceedings, not only in terms of court time but in terms of real interruption to businesses and hardship on third parties. And these matters cannot be discounted. 648 With a venture of this size, there would potentially be quite significant third parties involved, and third parties that may be impacted by any failure in the project. 649 One of the categories left off, for example, would be employees that would go unpaid as well as, of course, other creditors. There's also the impact on the public of tying up assets, because we all know that if there is a receivership or bankruptcy, these things take time; and while the time's ticking away, there's uncertainty and there's a lack of ability for the assets to be dealt with. And we've already heard, in connection with problems relating to constraints on facilities, that there are problems involved in further developing assets outside of agriculture in Huron County. 650 The other very significant cost to the public is, again, as has been said before, this asset is a provincial asset, and it's not only important that it be developed but that it not be damaged. And, of course, this is a very big risk to the province if things aren't operated properly. 651 I think I've said a bit about why I think they have underestimated the costs of repairs or damages if this project is unsuccessful or runs into problems. But I'd like to just look ahead a bit and look at the costs of the project development as well, and remind you that not only are there the costs associated with things like pressuring the reservoir, which really haven't been adequately spoken to, but also other costs such as compliance with any of the additional conditions that are imposed as part of these proceedings. 652 I think that another area where there's going to be costs that haven't been factored in anywhere yet are costs that may be associated with the marketing efforts, and just to presage a point I'll be coming to in a few minutes, you can expect that any third party putting its gas into this facility, if it was even prepared to do so, would certainly want security. And I haven't seen any indication where that money would be coming from. 653 I'd like to turn now to the fourth list or category of concerns, and that would be the organizational structure of the applicant. 654 I think counsel for the Board has tried admirably to deal with the question of how do we get around the issue that the applicant is a limited partnership. And a limited partnership means that the investors don't have any obligation to put up any capital other than the capital that they've already committed to. That's the capital they put in when they obtained their units. And how do we deal with the fact that the general partner, who is at risk for all his assets, only has $10 on his bank account -- on his list of assets? 655 And, really, the suggestion has been to make all three parties, that's the limited partners, the general partner, and Tribute, all jointly and severally liable. 656 I think that anything that can be done, of course, is a good thing. But frankly, I'm not sure that that solution goes anywhere close to meeting the concerns that, even when you put all three of these entities together, there is not sufficient capital there to cover the foreseeable costs and to cover the risks. 657 And I say that because, really, even as Mr. Vegh suggested, that what one does is look for the deep pockets in a bad situation, really, the only deep pockets here are the pockets of Mr. Crich. And I don't think there's been any suggestion that his investment would be anything other than as a limited partner. 658 I'd also like to suggest that, you know, we have a funny tendency of thinking, if you just keep adding to the pot and putting everyone together, that we'd create something better. But that's just not always the case. In fact, I would suggest that, at least from Mr. Crich's perspective, one of the benefits of the limited partnership structure was that he took the one good asset, the storage facility, and put it into a separate entity; and that his investment is in that entity alone and that entity is not affected by the risks and the liabilities associated with Tribute. And that's an important point that can't be missed. 659 And so what I'm saying here is, when you put the three together, you do not necessarily have a stronger entity. In fact, what you're really doing with that if you extend it is you're extending the risks that are associated with Tribute. 660 Keep in mind that Tribute is the active exploration company, so that's the company that really has a high level of risks. And you'll recall that there's been much discussion of the extent of its abandonment liabilities. And I believe that Tribute, it's suggested on the record that they would be abandoning five wells a year. Well, given the large numbers, that is really over a 20-year program, and with respect, it's hard to believe that the regulators will allow the program to extend out that time. 661 So the liabilities sitting on its books and its potential for running into real hardship is significant. And it's dealing with reservoirs that are on their last legs of production, and its income should be decreasing except for any income associated with the storage project. 662 Yes? 663 MR. SOMMERVILLE: Ms. Paulus, it's always easy to consider the financial arrangements surrounding projects when parties are huge and have unlimited financing, and that's sort of the pattern in Ontario with respect to storage. But we don't anticipate that every operator is going to fall into that category. And, you know, I need to understand your submissions in light of the fact that we don't want to create unnatural barriers to operators who may not be -- may not have billion-dollar balance sheets. 664 MS. PAULUS: Exactly. And believe me, the last thing that Northern Cross wants to do is raise the bar unrealistically. But it's important that the bar is set at an appropriate level. And I do have some -- 665 MR. SOMMERVILLE: You're going to come to that. Thank you. 666 MS. PAULUS: I think insurance, of course, is one aspect, but I have to emphasize, it is only one aspect. Insurance is something that covers disasters; it doesn't cover operating expenses and other things. And no one wants to be fighting with insurance companies. So that's only part of a puzzle, but it is one. 667 And, with respect, I did listen to all of the discussion about what's appropriate insurance. And I would, first of all, recommend there are several associations that do have committees that deal with the insurance for oil and gas operations on a regular basis, and I would be pleased to put anyone in touch with them. 668 But, as I said, that's just a starting point. I think the other thing, as I've already alluded to, is the importance of bringing on deck qualified lenders. That does really give some teeth to the applications. And I would note that, even in the CanEnerco example, there you did have a situation where you did have some outside party, and I think that did make it to the Board to approve the project, for better or worse. 669 I think, also, that it's critical, when you're looking at approving projects for smaller corporations, that you do have a good feeling of what the income projections will be, and the timeline for those projections, as well as the costs. And I think that is something that has been really lacking in this application, and that's what makes it so hard to evaluate the project, and to see whether there really is a reasonable expectation that it can be successful. I think, too -- and again, this is a contrast between the project before you and some others -- this project relies entirely upon income from one source, that is, the leasing-out of the storage capacity. There isn't any evidence that someone's prepared to lease it out on these arrangements. And this is particularly important because you have to keep in mind some of the constraints on this system that Mr. Leslie alluded to. 670 This is not storage at Dawn, at the hub, it's away from it -- and it's in an area where, in some respects, it's always going to be interruptible, that is, the ability to take the gas out. And so you do have to look carefully at what is that income stream going to look at? And I say that because, obviously, there's other models that could be followed that would give the Board better assurance that, at least in the early stages, while they're trying to market the resources, that there was a revenue stream. 671 For example, had the applicant come to you with a program of how it was going to use the storage for its own purposes, and how it was going to make money from that, and had some confidence in that ability; or, if the storage project had been tied to another project, like a power generation project, then you would have had a revenue source there, and I think that would make it much easier to confidently approve the project. 672 Every day you see small projects that have significant risks associated with them being developed by independents. And, almost without exception, they always have behind them a financial contract, a commitment from someone. You know, whether it's a production facility, and there's a commitment to buy the gas, that supports the project; or you have a winter-buying or a power generation facility, and you have that electrical power purchase contract. And you have the power purchase contracts or the gas purchase contracts from a party that has financial strength. 673 So the Board, when it's assessing the project, can look and say: Well, look, that's where the revenue stream's going to come from. And it's going to come from someone that has significant financial wherewithal, so we have every expectation that it will be paid. And that's why it is significant -- and I come back to the lack of marketing plan here. It is a real problem. And you saw, when you looked at the documents that were put before you, that the applicant did initially anticipate going out and getting commitments from third parties to take up storage if and when this project was approved, and if and when the rates were approved. 674 Well, they didn't follow through with that open season, and they didn't follow through getting any of these commitments. If you had had those commitments in your hand now, well, then you could look at the project differently because you'd see that there was a secure revenue stream associated with the project. And, really, I mean, that's -- to me regulators are very much like banks, and that's what you have to do. 675 MR. SOMMERVILLE: Thank you. 676 MS. PAULUS: I think where I left off was, in some discussion of limited partnerships, and I will assure you that all this dialogue is very good, and it will cut short a lot of things I would have otherwise said. 677 MR. BETTS: Ms. Paulus, Mr. Sommerville did pass me a note with the word "questions" on it. And I said go for it. So he asked you the question. Do you mind interruptions? 678 MS. PAULUS: It's a pleasure, because it really makes it so much more productive, I think. 679 MR. BETTS: Thank you. That's fine. 680 MS. PAULUS: There has been discussion about the structure of the limited partnership and some of the problems posed by that, including difficulties in knowing who is the applicant, and who is bound by restrictions on the sale of gas, and so forth. So I won't repeat those. But I do think it's important not to try and draft around the problems created by the limited partnership structure too much, because that's dangerous. While this Board has very ample powers, there are limitations to them. And I think it's fair to say that even though the Board can easily, on the approvals it grants, have two parties jointly accountable, that does not necessarily provide too much security to third parties in various situations which -- we just, you know, don't want to start imagining the different legal situations that could arise, and complications. 681 I think it's also, though, important to note, in looking at the limited partnership structure, that very significantly, the agreement in place now does not even contemplate any further subscriptions for units. All that funding was supposed to be in place in 2001. So, again, you have to ask yourself: What happened? And you have to ask yourself: Do we know with any kind of assurance that the agreement that ultimately is put in place is going to do the job? 682 I think, too, that it's very kind of Ms. Lowrie to suggest that she never had any intention of taking advantage of the limited liability that the structure provides her; but, with respect, we really all should be entitled to rely on what the documents say they are, and what they're intended to be. It's not a good situation to be in to say: "Well, we entered into a limited partnership agreement, and that's what it says, and it's filled with provisions that say our liabilities are limited, but that's not what we would do, because we're nice, responsible people." 683 We're really not here to judge nice responsible people; we're all nice, responsible people, you know. 684 The other thing, and the practical one, of course, is -- as I did suggest in the cross-examination -- Tribute is a public entity, and I'm sure some of its shareholders would be very surprised to find out that someone's just giving away the protections that were afforded them. But over and above that, you know, management can be replaced, and we don't have any assurances that the next president of the company would take the same position with third parties. 685 The fifth issue of concern I had intended to raise related to gas pressurization, or the pressurization of the facility and the gas required to do that. 686 I've mentioned already to the Board now that this involves a significant commitment of funds, and it's really an open question in my mind, who's putting the money up to do that, especially because I think you have to look a little bit behind the limited partnership structure. 687 What I see is people invest in limited partnerships that are oil and gas -- that are for oil and gas purposes because there's nice, juicy tax write-offs associated with them. But these tax write-offs are associated with the drilling of wells. And that's what people invest in when they buy units in limited partnerships. They buy tax write-offs, and, of course, the hope that maybe you'll make some money. But it's essentially a tax write-off that one acquires. And those tax write-offs are most realizable when what you're investing in are the drilling of wells. 688 And, of course, that has been the case to date with this limited partnership. But now we're talking about millions of dollars that need to be invested, and there won't be tax write-offs, at least no obvious tax write-offs, associated with them, because the gas that's put in to pressurize the reservoir, which was estimated at costing $1.8 million, I believe, would be a -- it would be an asset on the books of the company. So there's no write-off associated with it. It's not like drilling a well and you're spending risky dollars and you get a tax write-off. What happens instead is, it's just an asset and it sits on the books and you hope that the price of gas goes up and it appreciates. 689 So it's really -- when I look at this structure, I question where that money's going to come from. And particularly again, assuming every one of the parties, including Tribute, has committed to be bound by the obligations not to sell gas, just where is this coming from? 690 And along that line, I'd also suggest that Tribute did say that it intended to, effectively, sell the gas that's in situ, that's already in the reservoir, the smaller remaining amount, to the partnership to provide part of that pressurization. That would be a sale. But over and above that, I want to remind the Panel that any of these transfers, and it does look like they're incomplete, will just move assets from, you know, one of these three entities to another. It's not contributing new assets to that total balance sheet. 691 I'd like to now move on to number 6 of the categories of concern, and this relates to the marketing plans. And I have talked about that some now so I'll try and skip over it lightly, but I'll take a moment as well to make sure I don't forget anything. 692 You'll recall that, first off, I did, on cross-examination, ask questions about the marketing plan, and what happened on that cross-examination is, it went from a plan that hadn't been filed to a plan that was nowhere except in the consultant's head. And, with respect, that just is not appropriate. 693 The other issue, and it is one I raised a few minutes ago in response to some of the questions from the Panel, is the question of what the terms of the marketing agreement or the leasing -- or agreement to use the storage by a third party would look like. 694 Now, as I indicated, there is a draft agreement in the materials that were provided by the applicant, and that's the agreement that I cross-examined the panel on. And you'll recall that, first of all, it became apparent that that agreement was no longer what they were contemplating in all respects, but no one had updated it. So, by that, I mean the recital, so the first part of the agreement, where they set out that this was supposed to be an agreement that would be entered into before we were all sitting here today, that just hasn't happened. 695 But more than that, because after all, recitals could be changed easily if that was the heart of the matter, but instead what I think is at the heart of the matter is that the fundamental terms may need considerable reworking. And this happens for many reasons. Some of them relate to practical constraints that may be there because, as Mr. Leslie indicated, we're dealing with a particular situation where we're dealing with the Stratford-Goderich leg, where you can only take off gas by having a consumer on that system use the gas, and then do a trade. So there's those aspects. 696 There's also the possibility that the M16 review may result in changes to that contract that would change the third party contract. But, more than that, and more fundamentally, as I raised with this Board, you really have to question how appropriate it is to take a contract that's really been pieced together from the Union contract, and other contracts that are provided by public utilities, and try and just change the name and use it for an entity of the size of the applicant. 697 I think it's really important that the Panel appreciated that, when you enter into an agreement to have your gas stored, you're putting a very large asset, potentially millions and millions of dollars worth of gas, into someone else's facility, and you're giving possession and control of that asset to the third party and title will pass to that third party, because that third party is permitted, and the terms of the agreement that is proposed by the applicant expressly allows that gas to be commingled with the gas of others. 698 So we all know, when you mix things up and you can't separate my property from your property, then it all will be deemed to be the property of the party that's holding this asset. And so that means that, before someone's going to just ship millions and millions of dollars worth of gas to the applicant to hold, they're going to want to make sure, very sure, that there are proper arrangements in place to ensure that their gas isn't at risk for liabilities of the applicant. 699 That's something that's just not spoken to in this contract. Instead, this contract contemplates that the gas owners provide security and meet tests of creditworthiness to the owner of the storage facility. In other words, this contract designed, for example, by Union would want Union to have assurances that the party that is using this storage has the money to pay for the storage rates. 700 And that makes sense when you're talking about a big company owning the storage and a smaller company using it. And the potential with the value of gas moving, it may be that someone doesn't cover their storage costs. But certainly when we're talking about a situation where the owner of the storage facility would be a very junior company without any assets other than the storage facility, this just doesn't make sense at all. 701 When pressed, I think the panel's response was, Well, some changes may have to be made and that would require some negotiation, but that's glib. And it's really pretty facile to suggest that that kind of fundamental issue, that hasn't been dealt with, would be just a minor correction. Because the applicants did maintain, on cross-examination, that no major changes are foreseen. And I just point out, when they say that "Well, you know, it's possible those clauses would be reciprocal", well, I don't understand how this project would meet any creditworthiness test. It certainly wouldn't meet any creditworthiness test that I'd be accustomed to. And the cost to provide separate financial assurances, in the way of bonds or something, to each user of this storage, may very well make the project untenable. 702 I move now to the seventh of the concerns, and that is the lack of evidence on rate-setting. And here I think there was a good -- a case made -- though made entirely, I'm amazed to say, by my friend, counsel for Board Staff, and not by the applicant -- as to why the Board may be inclined to set rates even in the absence of any evidence before it. But as good a case as it was, it wasn't that good. And by that I mean, the Board does have a serious obligation before it, in setting rates, to ensure that they're just and reasonable. And, with respect, with no financial information before you, with no information of what the market will bear or pay for storage away from Dawn, and subject to the constraints that exist, and without the financial backing of a Union, there really is no evidence of what would be just and reasonable. 703 Just and reasonable has to take into account, to some extent, the costs and the expenses associated with the project. Those are entirely lacking here. They also have to take into account something to do with the profit or the margin that the proponent proposes to make. 704 And you know, it's quite a different matter to deal with a company like Union or Enbridge that are before this Board every year, and have filed evidence of their costs and any margins they make -- and to just make a similar order, in this very different context, for the applicant. And I will remind the Panel here, too, that this isn't an order that has been requested before, either in the CanEnerco proceeding or at the application that was submitted by Northern Cross -- because, in each of those cases, the applicants were intended, at least initially, to use the facilities themselves. 705 I think, too, that there's been a little bit of a game played here, and it concerns me that there's an impression that there is this whopping profit to be made from the operation of these storage facilities. It's really nice to hear things like that, and think the applicants stand to make this whack of money -- and, you know, if that was the case, then we should all be just investing in storage, and we shouldn't worry too much about the downside possibilities because that won't happen. 706 But, again, sadly, there's no evidence of that at all. And, in fact, you do have on the record a lot of evidence that a similar project could not bear the costs of the M16, or did not believe that it would be economic to do so. And I suggest to you that, again, even with the project before you, the fact that there is no bank financing speaks to real questions about whether there really is this profit margin. 707 You have to remember that when you're dealing with something like storage that's created by Union, these are assets that have been fully paid for already and with a company that has access to gas -- the initial pressurization and is a totally different kettle of fish when you're dealing with someone that has to pay for all those things now, at the outset of a project. 708 And it's a totally different kettle of fish when the storage facilities are away from Dawn and have to bear more transportation costs, with the additional uncertainty that it may be that the marketing of the use of this storage will not bear the same rates. In other words, people that go to use your facility won't pay you as much as they may pay for a facility that is closer to the hub. So we're dealing with a project that may have very, very slim margins at all. 709 And when you're look at setting rates, not only are you concerned with the upper rate that the applicant may make too much money; really, I suggest to the panel that your better issue is the protection of the downside, that the rate cannot be too low; that the project is at risk. And you need evidence before you, before you can make a reasonable assessment. 710 Mr. Sommerville? 711 MR. SOMMERVILLE: Ms. Paulus, the idea, with respect to -- 712 MS. PAULUS: I'm sorry? 713 MR. SOMMERVILLE: I beg your pardon. The idea with respect to these rates is that people who engage in this arrangement for storage are volunteers. They are not subject to a monopoly rate. They have, presumably, other options, to some extent. But, to the extent that a rate is negotiated, do we need to have the same kind of assessment of just and reasonableness in that context? Do those words not take on a different tone in that context? 714 The FERC material, for example, draws the dichotomy between operations that have significant market power, and the importance of ensuring that those rates are cost-based; and, in other circumstances, look to a negotiated rate -- a market rate, in effect -- as being a rate that the market will bear and, hence, is sort of inherently reasonable. What's your response to that? 715 MS. PAULUS: Well, the real issue -- and it's one, not being that familiar with the history of your legislation, I can only speak to in part, but I will do my best. That was a preamble to saying -- the real issue is: What purpose is intended to be served by having this Board oversee the setting of rates for storage? And I would submit that, given the objectives set out in your legislation which do call for the development of storage, that one of the objectives in ensuring that the Board has an overseeing function with rates is to ensure that the rates are such that they actually promote the fair usage of storage, because the storage -- and I'm not sure this is the same in all American jurisdictions -- your storage assets are an asset of the province. And it is important to the province, then, that these assets are used and available to third parties. 716 So, to go back to your question on this issue, I think it comes down to, you know, are you a price-setter or a price-taker on a market? If what you're trying to do is just ensure that there's competition, well, then, the question of whether you're a price-taker rather than a price-setter is important, or may be the only relevant criteria. But when your goals have other regulatory objectives in mind, like making sure that your assets are appropriately used, I think the fact that you may be just a price-taker, that, I mean, there are other large players in the market that set the price, that may just not be enough to protect the province's interests. 717 Also, I'd suggest that because there has been no evidence provided of what the boundaries of this market is -- I'm sorry, boundaries are, that means that you don't really know whether the applicant is a price-taker or a price-setter. Because if the market is geographically bounded and is just storage away from Dawn, in Huron County, for example, well, then they are the price-setter because there isn't anyone else in that market. 718 And that's why you need some information first, before you -- and then it would be fair, if you came to the conclusion that there is sufficient competition and they are just a price-taker, to, in a future proceeding, more readily just approve a range rate. 719 MR. SOMMERVILLE: Thank you. 720 MS. PAULUS: Before just moving off this issue, I would point out that the applicant has gone back and forth now on the issue of whether they were applying for rates or applying for forbearance, and they elected not to go for forbearance. 721 Under the forbearance, they would have had to demonstrate that there was competition in the market. And it doesn't seem like they should be now able to do an end-run, so to speak, and obtain what would effectively be a forbearance application by going for a rate application without any evidence. 722 I move on now to the eighth issue, and that is the appropriateness of their reliance on the M16 form of service on the Union system. 723 Now, I have to say, in some respects, I'm a little chagrined to raise this because I've been crying now that the applicant doesn't have any contracts, and one place it has a contract is with Union, so I'm a little bit shy to object to those terms. But that's what is. 724 I think, first off, it's important to distinguish what Northern Cross has asked for from what Mr. Leslie suggested. Northern Cross is not saying that Union should not be permitted to enter into an M16 contract with the applicant, nor are we saying the applicants don't have the right to enter into such a contract with Union. Of course they do. However, we are saying that the fact that that contract was entered into does make it a relevant part of this project, and its terms can be taken into consideration, and the impact of its terms as well can be taken into consideration, in this Board's determination. 725 Now, one thing that's clear is that the review of the M16 contract has been ordered, and that was done in the recent Board decision in the Union Gas rate hearing. 726 I understood counsel for Union Gas to be suggesting that the only issue raised was one of rates, but that's not -- I think that is to put too narrow a construction on what was ordered and what was said in that hearing. And I think it's important that the Panel look at what was ordered within the context of what was said in that order. 727 So I would direct the Panel to that submission. The portion I would like to direct your attention to is under tab 2 of the submissions and pre-filed evidence of Northern Cross, and part of schedule A. It's on the page that's labelled 159. 728 And if it's convenient to the Board, in the interests of time, rather than reading full paragraphs, I'll direct you to the paragraphs and just quote a few lines -- 729 MR. BETTS: That's satisfactory. 730 MS. PAULUS: -- and phrases; and if you need more context, we can do so. 731 So, in the second full paragraph on page 159, it's relevant to see that the Board is saying it doesn't have evidence "on the extent to which the claimed lower priority of service," so there is a quote showing that the Board did understand that Northern Cross was not suggesting that it only obtain a lower rate for service, but that it was suggesting that a lower priority type of service be used for storage. 732 In the paragraph that follows that, it goes on in the third line to say: 733 "The appropriateness of classifying NCE," which would be Northern Cross, "as an M16 customer is unclear." 734 In the line after that, it says: 735 "The need to investigate the classification of customers..." 736 In the paragraph after that, the third line: 737 "The reduced level of service and the ability of storage operations to inject and withdraw different rate and time versus service requirements of a pure gas consumer in its rate design..." 738 These paragraphs, I submit, indicate that the Board, in hearing the submissions of Northern Cross, did clearly understand that at issue was not just tolls or fees to be paid, but what was the appropriate type of service. 739 This is important because it is the type of service that brings into question how the applicants' project impacts on the capacity-constrained system. 740 Mr. Leslie would have had you believe a load is a load, and by "a load," I mean a bunch of gas on the system. But that's not the entire story. It is also the priority that that load takes. And again, Mr. Leslie would have had you say, well, there's firm or interruptible service, and there's only two kinds, and it's got to be one animal or the other. 741 With respect, there are many permutations that are possible, and that is the reason there should be a review. Because what's needed in Huron County so that all assets can be developed given the existing limitations on service -- is a priorization of service, so that you make sure that the consumers and producers on the system take in priority to storage users. Storage should act as a swing. That's how it adds to system security, and how it delays unnecessary expansion of systems. But when storage takes firm service, then it displaces other parties. 742 And that's what we're suggesting is the problem, and that's the negative impact of the applicants' project on other parties in Huron County, given the system as it stands. On this matter, I would like to acknowledge that we understand that the applicant has said it would prefer firm service; that it has marketing strategies that it believes should be underpinned by firm service. But, as we've heard from Mr. Leslie, "firm" is always a relative thing in any event. 743 But more to the point, if the M16 review determines that embedded storage providers like Northern Cross and like Tribute are ineligible for the M16 -- which is the wording used by the Board in the rate hearing -- then they are ineligible, and that means whether they want firm service or they don't want firm service, it has been determined as inappropriate. And that means that, if, as they have stated, they are now of the belief that their marketing plan depends upon the availability of firm service, and if it's not going to be available, then their marketing plan, such as it is, is not going to be able to be implemented. 744 And I think it's here that we really have to be cautious, because it's quite easy to keep getting up and saying, you know, "the investors are prepared to take this risk, so let's all get on with it", but, with respect, that's not real. What we had to do was determine whether investors are prepared to take a risk, you wouldn't need any approval of a project, because you would have the approval when you knew that the investors are standing up to the plate. 745 The idea of approval is that there is an independent third party that's looking after the public interest, and that public interest wants to ensure that a project that's planned is going to be implemented as planned. And that's why it is relevant to you that the review of the M16 contract may force a change in the plans of the applicant. 746 And, just to recap, it may change not only the types of contracts they can enter into, but also their operating costs or their income. 747 The ninth, and final, list of concerns relates to project timing. The applicant has argued very strenuously that it's ready to proceed, and that there's real urgency in it obtaining the requested approvals as quick as possible. On cross-examination, when I put their project timetable before them, they insisted -- even though they hadn't reviewed it for a long time, as was apparent from their responses, that they were on track, at least subject to very minor variations. But, you know, saying and doing are two different things. And I would suggest that there really isn't very much evidence to support the idea that this project is ready to proceed along the timetable that's proposed by the applicant. 748 And here I'm going to, if you don't mind, just run you very quickly through some of the items that are suspect. 749 It begins with the drilling of the well, which is now going on for months longer than anticipated, and, frankly, going on for months longer than anticipated without a very satisfactory answer as to why. That in itself puts the whole project out. 750 The next thing is that the applicant itself, just before this process started, requested an extra additional year for completion of the pressurization of the reservoir. And in the letter where they requested the extension, they suggested that it may be market-driven. On cross-examination, they suggested that wasn't really the concern, but no other adequate reason was provided. 751 What's very important here is that by saying it would take an extra year before they are under an obligation to reach the pressure -- or complete the pressurization of the reservoir, this is very, very significant. Not only does it cast doubts on the likelihood that this project is proceeding along in an expedited timetable, but it has the potential of keeping all other projects in the area tied up for a longer period of time. And this uncertainty is really untenable and really adds to the questioning of whether this project, as it's configured now, is in the public interest. 752 And if I can just expand on this point for a moment -- I think there were some questions from the panel yesterday of Northern Cross relating to system expansions, and a suggestion that, if there's no capacity on the Goderich-Stratford line, then why isn't that increased? And that sounds good, and it's hard to answer that simply, but let me add something into the mix. Right now, Union -- at least according to its own evidence -- is right in saying that all capacity has been contracted for on the Stratford-Goderich line. So it would appear that an expansion would be justified. But expansions are costly. And the first question is, who's going pay for that? 753 But the second question, and the more germane one, in a sense, is: Is that capacity really gone? Or is it just temporarily off the market? And this is the problem -- and, with respect, this is the problem with allowing an application to sit for a long period of time with its approval, but yet not have any assurance that it's proceeding. Because, as long as that capacity under the M16 is contracted for, it looks as if there isn't anything available. That means that other projects, be it for other storage facilities, or power generation projects, or even new exploration activities -- all of which my client has, but so do others in the area -- none of these projects can proceed because there's no transportation. 754 But there's also no reasonable prospect that the pipeline's going to be expanded, because everybody's waiting to find out whether the pipeline's really full. And it may not be full if the project that's approved cannot really proceed. And so that's why adding to the time frame granted the applicant to pressurize is so damning. It really holds up any possibility of expansion or use of the area for an undue amount of time. 755 Going back to the issue of whether the applicants will meet their time frame. I think it's already been brought to the Board's attention that the construction of roads which seem to be the linchpin issue is not the issue it appears to be. In any event, there is not likely to be movement on that this year. 756 According to the evidence of the applicant, they don't have any commitments for the supply of pipeline, for the supply of compressors or any of the other equipment. As well, they don't have any commitments for who's going to do the construction. All of this means, when you take into account the time required for ordering the equipment and then constructing, this isn't going to happen on the time frame they suggest. If it does happen at all, all of the agreements without, you know, labeling each and every one of them again, need to be put in place. 757 There are no contracts now with the exception of the M16 and perhaps the limited partnership agreement, which, by admission of the applicant, requires amendment. 758 There's outstanding issues with the landowners, and, you know, added to that there's not insurance in place; there's not the studies done that have been requested; there's not a field operator hired; there's not an emergency response plan design. All of this put together -- and as I suggested earlier, at some point you have to stop taking each of these pieces apart and look at the whole. And, with respect, when you put this together, there is not a viable project there at this time. There may be an idea of a project, a lot of hopes and intentions, but that's not what decisions should be based on. They should be based on hard evidence and contracts. 759 So where does this bring us to? What does it mean? It means, at least from where Northern Cross sits, and as I follow these proceedings now, there is not a good basis for approving this project at this time. There's just too many uncertainties and too many things left undone and issues unresolved. 760 And equally importantly, there is not a real prospect that a delay in this application at this point would cause any undue hardship, because the applicant hasn't entered into any commitments with third parties that depend upon it carrying out its obligations. 761 Now, why is Northern Cross so concerned about this project not being prematurely approved? We have three reasons. 762 The first is that the independent storage operation industry is in its infancy, and by "independent," we mean not developed by a public utility. And it's important that this industry proceed in an orderly manner now, that will encourage investment and regulatory and public confidence. Northern Cross intends to participate in that industry, and has a real interest in trying to make sure that we're not going to be met with another CanEnerco and another bankruptcy. This will just kill any kind of confidence in the industry. 763 The second reason is, as we've stated, we are awaiting the M16 review, and I believe that allowing this contract -- this application to proceed now is detrimental to that review and discourages a fulsome review. And I think there may have been some misunderstanding of why we say that. It's really twofold: One is the precedent value and the second is the issue of third party reliance. 764 Now, when we say that granting the approval would set a precedent, we, of course, understand that this Board can make new decisions and change rates and do all kind of things at any time. 765 But, having said that, in the approvals you're being asked to grant today, you must be taken as, at least tacitly, agreeing that this project is economically viable. If you grant the approvals, you must saying that the project can support payment of the M16 rates and still be profitable. You must also, at least tacitly, be saying that a project that is supported by the M16 and uses firm capacity, potentially to the detriment of consumers and producers, is in the public interest. 766 And so if you're tacitly making those findings, that must have some impact on the other issues that will be before the Board in the M16 rate review, because the issue there is whether or not it's in the public interest to have the rates for storage/transportation structured other than by way of the M16. And it is an issue that there is some doubt whether storage can be effectively developed outside of the Dawn hub if it has to be with the support of an M16 contract. 767 With respect, it would be one thing if you had had available to you full financial information and marketing plans and the rest that could justify a finding that this project really is economic and viable, and really can and will proceed with the M16; but, with respect, with all the gaps before you, it's hard to see how you can make that finding. 768 The other point we raised in saying that granting the approvals today would make it difficult to unwind matters and change them in the M16 review is simply that once the approvals are granted for this project, that means that they really are free to contract with third parties for the use of the storage; and when they contract with third parties for the use of storage, it would be the storage underpinned by firm transportation arrangements. And once you do that and allow third parties to rely on the availability of that transportation structure, then it does become more difficult to unwind things. 769 So we do believe that there is more at stake than just saying, Well, let's just not call this a precedent. The fact remains that the approval here will have an impact. 770 The third reason that Northern Cross says that they are concerned about the premature approval is, as we've indicated to you, the area is capacity-constrained, and if you approve a project prematurely, then the transportation will be tied up for longer than necessary, without any necessary use of it. And I think that is the point that Mr. Thompson was trying to get across -- or at least one of the points -- yesterday, that we're in favour of projects, and in favour of development, and would be happy to see pipeline used because that would mean it would now be appropriate to work on expansion. 771 The problem is just with having transportation indefinitely tied up. So here we have it -- I think everybody has tried very hard in these proceedings not to say, The application should be denied. Instead, each of the interveners, and the applicant themselves, to some extent, have suggested that it may be appropriate to just keep laying on conditions of approval upon conditions of approval, and that maybe it would be a compromise, I guess, and nobody will have dealt a hard blow to anyone. 772 And we all like to be good guys, but from where Northern Cross sits now, having heard the whole proceedings, Northern Cross does not believe it's appropriate to grant the approval merely subject to conditions, but rather the approval should be denied at this time. And we say that very cautiously, having given it good consideration. 773 There's a point at which there's either too many conditions to make it feasible, or the reasons are too difficult to structure, and to police, or the number of conditions make the project too vague to properly assess. In each of those three circumstances, it's appropriate to deny, rather than to grant, subject to conditions. And, with respect, I think we're there on each of those three criteria. There's too many conditions. And the conditions are ones that are not easy to structure, and it's not easy to see who would police these many, many conditions. And, with so many conditions and so much data missing, it's not easy to say that the properties -- the project has been properly evaluated 'til the evidence is in. And, with respect, it is a difficult position to put the intervenors in. 774 If all the evidence had been before the Board at the commencement of this proceeding, then all the intervenors would have had an opportunity to review the evidence, to cross-examine on it, and to advocate for changes. 775 For example, if a landowner had a concern with an emergency response plan, it would have had an opportunity to voice its concerns. If it had a concern about an insurance report or proposal, it would have had an opportunity to raise it. It would have had opportunities to have caprock subject to independent review. 776 And all those things are intended to provide intervenors with meaningful participation. And when what you do is, instead, allow a project proponent to not file the evidence, but make the filing of the evidence a condition of its approval, you take away the rights of the intervenors to participate. And that's just not right here. 777 It's one thing if you have conditions that are fully within the control and of interest to the regulator only. But in this case, there are third parties that are severely impacted and have reasons for wanting to participate in those decisions. 778 And I think it's totally unrealistic to think about drafting those conditions so that the intervenors are not denied their rights. It's important that they participate and get the comfort that comes from participating and reviewing the material yourself. 779 MR. BETTS: Ms. Paulus, while you're pausing there for a moment, I'm just going to take the opportunity to ask a question, which I think is pretty clear in my mind. 780 But I've heard previous parties talk about several options before the Board in considering this application. Two that were posed were to -- well, actually, I think I heard four posed. One is approve. One is deny. One is to approve with conditions. And the other one is postpone. I thought I'd heard you say at some point, postpone a decision on this. I think I clearly heard you say just recently: Deny the application. Would you make certain I understood that correctly? 781 MS. PAULUS: You know, lawyers love to be creative and to comply with their clients' wishes. And at Northern Cross we worked hard to be courteous to the applicant, who, after all, is a neighbour of ours and in the same industry. And so we came into this not knowing fully what the evidence would be, but hoping that there would be quite a complete application, subject to some concerns that we were aware of. 782 And with that expectation -- and, frankly, with the hopes that our friends at Union Gas may be more receptive to committing to an earlier date for completing the M16 review, which I do suggest is still open to them -- we thought that it may be feasible to talk about deferring your decision. We didn't want to suggest delaying the application, because it did seem like they were ready. The trial time was booked. And so we thought, well, if it's a matter of a month, something, then it may be feasible to have your decision just deferred. 783 But from what I've heard thus far with time scheduling, as long as the applicant continues to take the position that it's urgent and critical that it get its approvals, you know, in the next -- really, what amounts to in the next couple of weeks -- and as long as Union continues in its position that it doesn't intend to complete the M16 review until year's end, I don't, with respect, see that a deferral of a decision or postponement is really practical. 784 So that's the driving force. The other driving force is, of course -- I suggested that lawyers like to be creative, and it's nice to say 'defer', and I think, with respect, Northern Cross was careful in its submissions to say it believed the Board should defer making a decision that this project is in the public interest, or that the application should be granted, which, of course, does not preclude the possibility that you make a contrary finding, that it is not in the public interest, or that the applications are denied. 785 So we were merely saying, Don't yet until the completion of the M16 -- make a decision in favour. 786 So, having left that door open, I come back to what options were available. And while, again, I'm not entirely familiar with the practices of this particular Board, typically, in my experience, if a decision was going to be deferred for more than a matter of the weeks taken that I had originally hoped would be necessary in order to complete the M16, then I would suspect that that would have to be with the consent of the applicant. In other words, they can consent or request that their application be put on hold until something happens. 787 As I say, I had hoped that between Union and the position of the applicant, that there would be room for that kind of compromise. And I guess I'd like to still think that's possible. But from what I've heard on the record, it's not feasible. So, unless the applicant agrees to some postponement of its application, I'm not sure how else you accomplish the deferment. But I leave that in your hands. 788 Northern Cross's submission is, firstly, that a decision in favour of the project should not be made until the M16 is completed, and that it should not be made on the basis of the information that's been provided to date because it's too incomplete and has too many uncertainties. 789 MR. BETTS: Was that just a long way of saying that you do not oppose the idea, if it's within our procedural bounds to do so, to defer the decision? 790 MS. PAULUS: We certainly don't oppose it, because I think everyone would be better served by making a decision when there's more information available. 791 Having said that, and I want to be clear, because I think there's been some attempts to suggest that all Northern Cross is looking for is a deferment, that that's not the case. We think that you should defer your decision. But, based on the evidence that's been provided to date, we think that when that decision is ultimately made, it should not be in favour of this project proceeding. 792 Now, having said that, it would be a hope and an expectation that, with the benefits of all the information that's come out in this proceeding, that, if the applicants do have a viable project, that they would use the time to fill in some of those gaps and complete some of the negotiations and third party studies so that when the application came before you again, Northern Cross and other intervenors would be in a position to say it's a project that they're supportive of. 793 MR. BETTS: I'll take that answer, Ms. Paulus. I wouldn't say that it's crystal clear, your position. But I'm going to take that and I'll read it carefully. 794 Please proceed with the remainder of your submissions. 795 MS. PAULUS: Thank you. 796 Those are the submissions of Northern Cross, though I will take a moment to try and clarify the position because it is important, and I sense that there's something that we left less than clear. 797 A deferment doesn't mean a yes or no, so we would be happy with a deferment at this juncture. But if a decision was to be made at a later juncture and there was no other evidence before this Board but for the evidence that's before the Board today, our position at that later date would be that the application should be denied. 798 MR. BETTS: That was clear. Thank you very much. 799 MS. PAULUS: Thank you. 800 MR. BETTS: Thank you very much, Ms. Paulus. We do not have any more questions on your submission. 801 MS. PAULUS: Thank you. 802 MR. BETTS: I look at the time. I see it's ten after three. Mr. Lewis, we would be prepared to hear your submissions now on reply arguments. 803 MR. LEWIS: Yes, Mr. Chairman. I would attempt to provide my reply arguments in writing to everyone, I would like to get them out by Friday, close of business Friday this week, but I will commit to having them in everyone's hands by Monday, close of business at the latest. 804 I would like to get this over with. I fear that the moment I leave this conference room in the city and go back to my office, having been gone for seven business days, it might not be quite as easy to live up to a commitment of Friday. So I will endeavour to have them by Friday, but I will promise them by Monday, close of business at the latest, bearing in mind that my client is desirous of an early answer; and any delay that I cause by being longer than I should with this reply will obviously extend the time it takes to make decisions. 805 MR. BETTS: I will take submissions from intervenors just with respect to that recommendation from the applicant. 806 MR. CHINNECK: Sir? 807 MR. BETTS: Mr. Chinneck? 808 MR. CHINNECK: I would wonder, if we could canvass the possibility of taking some time today and allowing Mr. Lewis to reply today so this matter could truly be over. I knew there was some discussion earlier that there was a possibility of sitting longer if that was required. But that would certainly be the preference of my client, if that could be accomplished. 809 MR. BETTS: I think, in reality, it's gone beyond the Board's ability to deal with this today. And we're looking at a quarter after three. We would feel that it would be only fair for Mr. Lewis to have some time to prepare, and he's, at the very least, got to respond to, I think, about five hours of intervenor argument in a very short period, and I don't think that's fair or practical. So let us push that one off as a non-starter. 810 Any other comments with respect to the applicants' recommendations? 811 MS. PAULUS: Let me try for a compromise here. 812 When it was originally proposed that we have written argument, the suggestion would not have provided Mr. Lewis with the amount of time he's now proposing to take on written argument, so I propose that we go back to a schedule that more closely parallels the time he would have had. And I would have thought, frankly, somewhere like 24 hours, given that we're not dealing with a weekend, would be appropriate, and if it's 48. 813 But maybe what he should really do is not go back to his office, where we all know, once you get there, you're met with a lot of work, but should try the Inn at the Park with the rest of us and take a day and get it done. 814 MR. BETTS: Any further submissions from intervenors? 815 MR. LESLIE: Mr. Chairman, for our part, we have no trouble with Mr. Lewis's suggestion. If he were to be required to do this in 48 hours, if it were me, at least, I'd want to do it orally in 24 or 48 hours, because writing it out takes some time. 816 MR. BETTS: That's a fair comment, Mr. Leslie. Thank you. 817 Are there any other submissions? Mr. Lewis, would you reply to those? 818 MR. LEWIS: I find the prospect of staying at the Inn at the Park and trying to type this out, with my typing skills being not that great, for another couple of days is not workable. I have to get back to my office to do it in writing. I agree with Mr. Leslie, if we're going to be postponing this at all, to do this in writing, some time is needed; otherwise -- and I don't see, frankly, how Ms. Paulus is prejudiced at any -- in any way, whether the submissions are delivered -- my reply is delivered in two days or four days, as the case may be. She has no further submissions to make on that. 819 So, really, if anything, it would cause timing inconveniences to my own client, and possibly some inconveniences to the Board. But we're prepared to live with that slight timing difference, and I stick with what I initially said on this point. I will endeavour to have them by Friday and commit to having them to everyone by Monday, close of business. 820 MR. BETTS: Thank you. I'll just take a moment to confer with my fellow Panel Members. 821 [The Board confers] 822 MR. BETTS: Thank you. 823 We may have found a compromise. Mr. Lewis, we will take written arguments but we will require them filed with the Board by 4 o'clock on Friday. Certainly, we feel as though you probably should have been, and are prepared to give oral argument now, so that the time that's required over the next couple of days is primarily for transcription rather than rethinking the issues. So, with that in mind, I'm sure you will be able to provide that to ourselves and to all parties by Friday afternoon at 4 o'clock, please. 824 Can you live with that? 825 MR. LEWIS: Yes. 826 MR. BETTS: Thank you. 827 I believe, then, that will conclude the hearing portion of this session. I want to thank all the parties. I know many of you are unfamiliar to the Board, and I know there are some familiar faces here as well, but we as a Panel would like to compliment all of you on how you dealt with the procedures that the Board follows, which I know are not identical to others that you had to deal with. You've done it very, very well, you've all presented your positions very well, and you've assisted the Board in going through some very tricky issues that we have yet to decide, but certainly we've been getting our minds around. So thank you all very sincerely for your contributions, and a well put forward case. 828 Once again, as others have already said, I'd like to thank the court reporters for their efforts. The one thing I remark about is the fact that the Board is always dealing with very different applications, and the court reporters have to deal with different language every time they come forward and understand what it is that we're talking about. And I find that remarkable, that they can do so, as well as to accomplish some very, very tight timelines that fit all of our schedules. 829 You've all complimented our Staff on what they've done. We share those accolades. They do a great job, and this is another example of that very same thing. 830 So, on behalf of Mr. Sommerville and Ms. Nowina, I thank you all. We will try to do our part now with what you've given us and reach an appropriate decision. 831 With that, we will adjourn our hearing. Thank you. 832 --- Whereupon the hearing concluded at 3:20 p.m.