Operations Task Force
Control of Over Production

Background

General Philosophy

Initially, weekly and monthly reports were issued to the industry providing information on over production. To reduce the size of the weekly reports, which have now been discontinued, NGTL elected to report only those plants exceeding 3% or 50 E3M3 for more than one day. In the monthly report, NGTL lists plants with excess production exceeding 3% or 50 E3M3 for more than four days. The process of identifying excess production, determining the customers' positions with respect to the allocation of excess production, and the setting of nominations as established in the original excess production procedure has been discontinued due to the lack of response from the industry. However, this does not mean that NGTL condones excess production or considers over production within the reporting levels to be acceptable. The action NGTL will request of producers will be determined by specific circumstances, as described below.

1. High System Pressure

   When NGTL encounters high pressures due to excess production beyond market demand and supply must be reduced in order to protect the system, NGTL will request reductions at those plants who contributed most significantly to the problem based on the weekly reported over production. NGTL may not routinely contact the plants which are producing excess volumes to request reductions in volume, as this would require significant resources. Regardless of the frequency of contact, NGTL reserves the right to apply this procedure with minimal notice to protect the system's integrity.

   In order to provide some advance indication of action, NGTL will publish on a weekly basis a list of receipt points which would most likely be required to reduce production in the event of general system over pressure due to excess production. The list will contain those plants with the largest amount of excess production calculated as a percentage of their allocated volumes. Actual daily volumes will be used for this calculation. The list will have three groups of plants; small plants producing less than 5 mmcf/day, intermediate plants producing 5-20 mmcf/day, and large plants producing more than 20 mmcf/day.

   In the event that supply must be reduced to protect the system, and over production has been a major factor causing general over pressure, NGTL will request production cuts at plants from each of the three groups. The lists will be ranked in order of decreasing severity of over production. NGTL will choose an equal number of plants from each group, selected from the top of the list down regardless of contactibility, to meet the volume reduction requirement. The plants will be requested to reduce to their minimum turndown rate. If this minimum rate still results in excess production, the plant will be requested to reduce production to nil.

2. Service Restricted Areas

   When NGTL's facilities are not able to receive all of the gas being produced in an area, it becomes necessary for NGTL to restrict service in that area according to the tariff and contractual entitlements. Customers are allowed to nominate at a receipt point a volume of gas up to their allowable amount as determined by the restricted capacity and the maximum daily quantity specified in their contract. If, however, gas produced exceeds the allowable amounts, NGTL must reduce the entitlement of all customers to protect the system integrity. In effect, the unauthorized production displaces gas which has a contractual right to flow. It is therefor necessary for NGTL to ensure that no excess production is allowed, in order that customers with contracted service receive the maximum level of service possible. As such, NGTL expects that a producer will not exceed the sum of nominations for each day. NGTL recognizes that it is not always possible for plants to produce precisely to the nomination. Thus, when system conditions permit, NGTL may be able to accommodate limited over production (3% or 25 E3M3 per day) for short periods without affecting other producers or customers. In this case, the excess production must be balanced by production below nomination; the net production over time must not exceed the nominations. When it is evident that a producer has delivered above nomination for two days, NGTL will contact the plant to request a reduction in production so that the two days of excess production has been offset within 24 hours from receipt of notice. This avoids the accumulation of excess production in the system, with the consequences described above.

Compliance

1. NGTL will advise the plant that the meter station will be shut in at a specified time. The plant may at this point agree to comply.

2. If the plant still declines to comply, or NGTL observes that the required flow reduction has not been provided by the plant by the agreed time, NGTL will escalate communication of the situation within the producer's organization.

3. NGTL will advise the affected customers of their loss of supply, and the circumstances.

4. If no indication of compliance is received, NGTL will proceed to close the valve at the inlet of the meter station.