Statement of Corporate Governance

The Board and the members of TransCanada's management are committed to the highest standards of corporate governance. TransCanada's corporate governance practices comply with the governance rules of the Canadian Securities Administrators (CSA), those of the New York Stock Exchange (NYSE) applicable to foreign issuers and of the U.S. Securities and Exchange Commission (SEC), and those mandated by the United States Sarbanes-Oxley Act of 2002 (SOX). TransCanada is in compliance with the CSA's Multilateral Instrument 52-110 pertaining to audit committees (Canadian Audit Committee Rules). TransCanada is also in compliance with National Policy 58-201, Corporate Governance Guidelines, and National Instrument 58-101, Disclosure of Corporate Governance Practices (collectively, the Canadian Governance Guideline).

Independence of Directors

The Board has determined that, other than Messrs. Kvisle and Stewart, all of the existing directors of TransCanada (including Mr. Jackson, the Chair) have no direct or indirect material relationship with TransCanada and are therefore independent.

Mr. Kvisle, as the CEO of TransCanada, is not independent. Mr. Stewart is not independent as he provided consulting services to TransCanada and received more than $75,000 in compensation during the 2005 financial year. Mr. Stewart's consulting contract terminated on December 31, 2005.

The Governance Committee reviews, at least annually, the existence of any relationship between each director and TransCanada to ensure the majority of directors are independent of TransCanada.

The Board believes that, as a matter of policy, there should be a majority of independent directors on TransCanada's Board. The Board is charged with making this determination. The determination is made annually in accordance with the definition of "independence" in the Canadian Audit Committee Rules and the Canadian Governance Guidelines. The independence criteria also conforms with the applicable rules of the SEC, the NYSE and those set out in SOX. The NYSE's extended definitions of independence that apply to directors of U.S. companies are also considered.

Further, the Board considered whether directors serving on boards of non-profit organizations which receive donations from TransCanada pose any potential conflict. The Board determined that such relationships, where they exist, do not interfere with any such director's ability to act in the best interests of TransCanada, as all decisions on making donations to non-profit organizations are made by a management committee on which no directors serve. The Board also considered family relationships and possible associations with companies which have relationships with TransCanada, in its determination of independence.

Although some of the proposed nominees sit on boards or may be otherwise associated with companies that ship natural gas on TransCanada's pipeline systems, TransCanada as a common carrier in Canada cannot, under its tariff, deny transportation service to a credit-worthy shipper. Further, due to the specialized nature of the industry, TransCanada believes it is important for its Board to be composed of qualified and knowledgeable directors, so some of them must come from oil and gas producers and shippers; the Governance Committee closely monitors relationships among directors to ensure that business associations do not affect the Board's performance.

In a circumstance where a director declares an interest in any material contract or material transaction being considered at a meeting, the director absents his or herself from the meeting during the consideration of the matter, and does not vote on the matter.

Financial Literacy of Directors

The Board has determined that all directors are financially literate. An individual is financially literate if he or she has the ability to read and understand a set of financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of the issues that can reasonably be expected to be raised by TransCanada's financial statements.

TransCanada PipeLines Limited

Governance documents relating to TransCanada PipeLines Limited, a wholly owned subsidiary of TransCanada Corporation, are also available.