Consistent with Paragraph 33.2 of GTN's tariff, some current capacity holders with firm transportation agreements expiring October 31, 2005 have elected to enter the Right of First Refusal process. The volumes are shown in aggregate in the table below. Pursuant to the Right of First Refusal process in Paragraph 33.2, GTN will offer individual parcels of this capacity via open bidding at least three months prior to November 1, 2005, the earliest start date of new firm transportation agreements for this capacity.   Bids accepted by GTN are subject to match by the current capacity holder.

 

Kingsgate to Malin:          212,652 Dth/d

Kingsgate to Stanfield:       18,892 Dth/d

Stanfield to Malin:              13,125 Dth/d

 

Consistent with Paragraph 33.1 of GTN's tariff, some current capacity holders have elected to terminate firm transportation agreements on October 31, 2005 as shown in aggregate in the table below.   GTN will offer individual parcels of this capacity for sale via an open season at least three months prior to November 1, 2005, the earliest start date of new firm transportation agreements for this capacity.  

 

Kingsgate to Stanfield:     24,500 Dth/d

 

ROFR Q&A:

 

Contracts for 945,137 Dth/d of capacity on GTN were set to expire on October 31, 2005. Holders of that capacity had until October 31, 2004, to notify GTN of their intention to renew, terminate, or offer their capacity in the Right of First Refusal (ROFR) process.

 

GTN is pleased that 675,968 Dth/d of capacity was renewed for a year or more without using the ROFR process. In other words, holders of approximately 71.5 percent of the capacity set to expire next year chose to renew their contracts at maximum recourse rates.

 

In contrast, a very small fraction (24,500 Dth/d, or 2.6 percent) of capacity was terminated. Holders of another 244,669 Dth/d of capacity chose to pursue the ROFR process.

 

Capacity subject to ROFR may or may not renew, but GTN is pleased that so much of the capacity in the first large block of capacity subject to renewal was extended for a year or more. The results demonstrate the commitment of shippers to the value GTN provides in connecting prolific gas supply from Western Canada and the U.S. Rockies to markets in California and the Pacific Northwest.

 

In an effort to help customers and other interested parties understand the ROFR Process, GTN has prepared some information in a question-and-answer format.

 

How much capacity will revert to GTN on October 31, 2005?

 

We can't know the exact amount because we won't know the final results of the ROFR process until next year. We do know that very little capacity terminated, and more than 71.5 percent renewed without resorting to the ROFR process.

 

Who has ROFR rights?

 

All of the shippers whose capacity was scheduled to terminate on October 31, 2005 have ROFR rights because they were all at the maximum recourse rate for terms in excess of one year. Federal Energy Regulatory Commission rules require pipelines to extend ROFR consideration to shippers who meet those two criteria.

 

When will you schedule the bidding process?

 

Technically, we could start today. Our tariff gives us nine months. We cannot say today precisely when the ROFR process will begin.

 

Will you schedule the bid process for all volumes at once, or one contract at a time?

 

No decision has been made. The bid process described in our tariff provides considerable flexibility regarding how and when we post capacity.

 

If enough of the capacity subject to ROFR does not, in fact, renew, will that cause GTN to try to raise its rates to the remaining customers?

 

It's too early to speculate what course GTN will take. We don't know and can't predict how much capacity within the ROFR process will ultimately renew. But it is important to understand that contracted capacity is just one of many variables pipelines consider when deciding whether or not to file a rate case. We are always weighing our options, but we are not preparing for a rate case at present.

 

What if no one bids on the ROFR capacity? What if the bids aren't acceptable to you or the original shipper? Will you be willing to negotiate?

Our tariff provides for a negotiating period with the original shipper in the event we find none of the bids acceptable. Other than that, it's too early to speculate what course we might pursue.

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