In a recent decision (GB 2003-28), the Alberta Energy and Utilities Board (EUB) decided to restrict gas production in the Fort McMurray area to maximize bitumen recovery. Following a review this past summer, approximately 630 wells have received exemption from the shut in order, leaving approximately 300 wells still shut in, as of October 31, 2003. In addition to the impact on area producers, GB 2003-28 has also affected the TransCanada Alberta System:

• A reduction in receipt volume results in a change in tolls. As a rule of thumb, a change (decrease) in volume of 100 mmcfd results in a change (increase) of approximately 0.3 cents/mcf in tolls (please note: this is less than one third of a cent).
• As area receipts decrease, TransCanada has to move gas a greater distance to meet our contractual commitments to customers. This may require additional facilities.

Initially, very little information was available to assess the potential impact on the Alberta System. An assessment was completed quickly to ensure that sufficient time was available to make any required modifications to continue to meet our contractual commitments.

TransCanada's forecasting team determined a range of possible impacts using information from EUB statements in addition to publicly available production information. The team estimated likely maximum, minimum, and expected shut in volumes. As additional information became available, we used this to refine our estimate of the range of possible impacts.

Using these estimates of area receipts, TransCanada examined a number of potential facility options. A facility solution that was the least cost and provided the greatest flexibility to respond to the supply uncertainty was determined. From this process, advancing construction of a new compressor station at LSD 7-29-086-01-W5M (Woodenhouse) emerged as the optimal solution.

There remains considerable uncertainty in the ultimate impact of GB 2003-28. Applications for exemption remain open to challenge from industry or the EUB. Undoubtedly some wells will be recompleted to maximize production from zones not covered by GB 2003-28. The EUB has stated that it hopes to have a resolution based on a geological study by April 1, 2004. Until then, all decisions are interim. TransCanada continues to monitor developments on the issue, as well as actual receipts in the affected area (see Figure), to ensure that the proposed facilities are optimal, and all contractual commitments can be met.