Heenan Blaikie

FILED ELECTRONICALLY Of Counsel The Right Honourable Pierre Elliott Trudeau, P.C., C.C., C.H., Q.C., FRSC (1984 - 2000) The Right Honourable Jean Chrétien, P.C., C.C., O.M., Q.C. Original by mail The Honourable Donald J. Johnston, P.C., O.C., Q.C. Pierre Marc Johnson, G.O.Q., FRSC The Honourable , C.C. The Honourable René Dussault, O.C., O.Q., FRSC, Ad. E. Peter M. Blaikie, Q.C. André Bureau, O.C.

October 7, 2011

National Energy Board 444 Seventh Avenue S.W. , AB T2P 0X8

Attention: Ms. Anne-Marie Erickson Secretary of the Board

Your Reference: Hearing Order RH-003-2011 Our Reference: 003070.0326 Re: TransCanada PipeLines Limited (TCPL), NOVA Gas Transmission Ltd. (NGTL) and Foothills Pipe Lines Ltd. (Foothills) Application dated September 1, 2011 for Approval of the Business and Services Restructuring Proposal and Mainline Final Tolls for 2012 and 2013

Dear Ms. Erickson: Guy Sa rault

T 514 846.2317 Our client, the Industrial Gas Users Association (IGUA), received the above application on F 514 921.1317 st [email protected] September 1 and subsequent to that, a National Energy Board (NEB) News Release dated rd th 1250 René-Lévesque Blvd. West September 23 and an NEB Hearing Order dated September 27 announcing a Pre-Hearing Suite 2500 Planning Conference where parties are invited to address the NEB on procedural matters as well , Québec Canada H3B 4Y1 as the list of issues to be considered at the hearing. IGUA has also received the NEB’s procedural th heenanblaikie.com directives dated September 29 .

REGISTRATION FOR PRE -HEARING PLANNING CONFERENCE

IGUA members are both direct and indirect customers of the TCPL Mainline and are directly impacted by TCPL’s proposals.

IGUA (the undersigned and Mr. Murray Newton, IGUA President) will attend and participate in the Pre-Hearing Conference scheduled for October 12 th and 13 th (if necessary). As for languages, Mr. Newton will address the Board in English and the undersigned will use both official languages.

Heenan Blaikie LLP Lawyers | Patent and Trade-mark Agents Montreal Québec Calgary Sherbrooke Trois-Rivières Victoria Singapore

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THE TCPL TOLLING CRISIS

The TCPL application raises significant and far-reaching issues of national importance that present very serious implications for shippers, end-users and other stakeholders located at both ends of the Mainline.

Canada’s public interest is not served when out of control regulated pipeline tolls discourage Canadian markets from accessing competitively priced western Canadian gas supplies. Similarly, Canada’s public interest is not served when out of control pipeline tolls deter western Canadian producers from serving eastern Canadian markets.

THE TCPL TOLLING CRISIS IS NOT NEW

The tolling crisis on the TCPL Mainline is not a new phenomenon and it is not caused merely by recent events such as the growth of U.S. sourced shale gas supplies. The Mainline has been hemorrhaging firm long haul gas flow for several years. Many of the problems and competitive issues confronting the Mainline were foreseeable and should have been addressed by TCPL years ago. Some of the underlying causes to the tolling crisis even pre-date the current 5-year tolling agreement that is about to finally expire. This poorly conceived tolling agreement (which IGUA voted against in 2007) has protected TCPL’s revenues and insulated its shareholders from the consequences of the Mainline’s non-competitive tolls since 2007. Various TCPL management actions and omissions over the past several years have worsened TCPL’s competitive situation. These competitive tolling issues have been allowed to take root and flourish until they have now reached crisis proportions. It will require a great deal of effort and wisdom in order to find appropriate and fair solutions in an attempt to unravel the mess that TCPL’s tolls have become.

THE NEB MUST ESTABLISH A FAIR HEARING PROCESS FACILITATING ACTIVE PARTICIPATION

The TCPL Application is extremely complex and seeks to alter long-standing principles of rate design, cost allocation and financial regulation.It is therefore very important for the NEB to put in place a fair public hearing process that facilitates the active and meaningful participation of the parties most impacted by the TCPL tolling crisis. A hearing timetable of events including fair timeframes to navigate through the dizzying maze of TCPL’s tolling proposals is an essential first step.

Regulatory certainty is valued by all parties. However, it would be unwise for the NEB hearing process to be rushed with constrained timeframes, just so TCPL can hurry to implement continued uncompetitive tolls for 2012-2013 that fail to address the underlying problems causing this crisis. A comprehensive public hearing process is required to provide parties time to digest TCPL’s proposals and to develop alternative responses and proposals. A fairly scheduled review including proper timeframes for parties to react will reduce the risk that we will all have to return to the NEB in the near future to revisit these very same issues once again.

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IGUA has had a chance to review the letter dated September 19, 2011 submitted by the attorneys of the Canadian Association of Petroleum Producers (CAPP) providing suggestions and comments on TCPL’s application and the procedural issues associated therewith. IGUA agrees with the vast majority of the comments contained in the said letter, starting with the need for a more complete application and to establish a procedural process properly suited to the size, complexity and vital importance of this application.

Under reserve of the more specific procedural suggestions contained in the next section of this letter, IGUA also shares the procedural suggestions contained in CAPP’s letter.

PROCEDURAL SUGGESTIONS

The following sets out IGUA’s own specific procedural suggestions:

1. The public hearing should be held at various Canadian locations (including Calgary, Toronto, Montreal) so more TCPL stakeholders have a more convenient opportunity to actively participate;

2. Multiple rounds of written information requests (IRs) to TCPL, providing a minimum of three (3) weeks for parties to review TCPL’s IR answers before follow-up IRs are required;

3. The filing date for Intervenors written evidence should be no less than 3 weeks after the completion of the last round of TCPL’s answers to written IRs;

4. The public hearing should use a multi-phased process where cost of capital is dealt with in a later phase of the public hearing, after the NEB issues its decisions on various matters impacting the Mainline business model and associated business risks.

PRELIMINARY LIST OF ISSUES

In addition to items 1 to 9 inclusive of the NEB’s Preliminary List of Issues, the following provides a preliminary list of the additional issues IGUA intends to address, either on its own, or in collaboration with other stakeholders, during the hearing. Additional issues will likely arise once we will have had the opportunity to review the additional evidence to be filed by TCPL by October 31 st :

1. Examine whether TCPL has prudently managed its regulated Mainline assets over the past several years for the purpose of determining whether TCPL’s shareholders should continue to be insulated from sharing any of the financial burden or volume risk associated with the ongoing management of its regulated pipeline assets;

2. Investigate opportunities to restructure, reconfigure and/or redeploy Mainline assets and TBO arrangements in ways that would improve the Mainline’s alignment with North American gas supply and markets for the purpose of improving the competitiveness of Mainline tolls;

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3. Examine cost effective approaches to temporarily setting aside or permanently removing under-utilized or unused assets from service (or writing them off or down in TCPL’s financial statements) and identify various alternatives and options that may be available to address competitive issues caused by the under or inefficient use of regulated pipeline assets that are no longer used and useful;

4. Consider the appropriateness of TCPL continuing to recover all of its costs, in addition to earning a regulated return, on assets that are no longer used and useful or may only be sporadically used during the year for discretionary volumes;

5. Review the appropriateness of planned capital expenditures on TCPL’s Northern Ontario Line (NOL) 2 in the light of excess capacity that may no longer be required to transport firm long haul gas from western supply areas to markets; and

6. Given the exceptional magnitude, complexity and vital importance of this application, consider the exercise, by the NEB, of its discretion pursuant to article 16.3 of the National Energy Board Act to “establish a participant funding program to facilitate the participation of the public” in the hearing of this case.

THE WHOLE RESPECTFULLY SUBMITTED

Heenan Blaikie LLP

Guy Sarault

GS/mg

Cc: TCPL c/o Caroline Shaw

TCPL c/o Bernard Pelletier – Regulatory Services TCPL c/o Jennifer Scott – Senior Legal Counsel

BLAKE , CASSELS & GRAYDON LLP c/o Kemm Yates, Q. C.

IGUA c/o Murray Newton

Heenan Blaikie