1
1996 FORM 10-K
EXHIBIT 10.17
UNITED STATES OF AMERICA
BEFORE THE
FEDERAL ENERGY REGULATORY COMMISSION
Lakehead Pipe Line Company, ) Docket Nos. IS92-27-000,
Limited Partnership ) IS93-4-000, IS93-33-000,
) IS94-20-000, IS94-24-000,
) IS95-5-000, IS95-26-000,
) IS95-27-000, and
) IS96-15-000
SETTLEMENT AGREEMENT
This Settlement Agreement is executed as of this 28th day of
August, 1996, between Lakehead Pipe Line Company, Limited Partnership
("Lakehead"), on the one hand, and the Canadian Association of Petroleum
Producers ("▇▇▇▇") and the Alberta Department of Energy ("ADOE")
(collectively "CAPP/ADOE"), on the other, each of which is a party to
various rate proceedings before the Federal Energy Regulatory Commission
("FERC" or "Commission") regarding Lakehead's interstate tariff rates, as
well as judicial review proceedings relating thereto (the "Lakehead
Proceedings"). In consideration of the provisions set forth in this
Settlement Agreement, Lakehead and ▇▇▇▇/ADOE (collectively the "Settling
Parties") agree as follows:
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1. Following the execution of this Settlement Agreement, the
Settling Parties will jointly submit it to the FERC for approval as an offer of
settlement under 18 C.F.R. Section 385.602 (1995). The Settling Parties shall
cooperate fully, each at its own expense, in seeking and supporting such
approval, including the opposition, whether written or otherwise, of all
protests, interventions and comments that seek modification or rejection of the
Settlement Agreement. Lakehead will prepare the offer of settlement
documentation, including the Explanatory Statement, for submission to the FERC,
subject to approval by ▇▇▇▇/ADOE. The Settling Parties agree to request and
support a stay of all aspects of the Lakehead Proceedings pending disposition
of this Settlement Agreement.
2. The Settling Parties intend this Settlement Agreement to be an
integrated package, no part of which is segregable from the whole. Each side
has made compromises on various positions in order to reach a voluntary,
negotiated resolution of the Lakehead Proceedings. Accordingly, as provided in
paragraph 15 below, this Settlement Agreement shall be deemed withdrawn, and
shall no longer be of any force or effect, in the event the Commission or a
reviewing court orders a modification of its terms.
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3. This Settlement Agreement is intended to resolve all
outstanding rate issues in all pending phases of the Lakehead Proceedings.
The FERC Dockets that are resolved by this Settlement Agreement, and that
will be terminated upon approval of this Settlement Agreement, are listed in
Appendix A hereto. In addition, within 20 days after the date on which this
Settlement Agreement has been approved by the FERC in an order that is no
longer subject to judicial review, the Settling Parties shall withdraw their
pending petitions for review at the United States Court of Appeals for the
District of Columbia Circuit in Docket Nos. 96-1177 and 96-1218.
4. The purpose of this Settlement Agreement is to avoid further
administrative and judicial proceedings with respect to Lakehead's interstate
tariff rates. This Settlement Agreement is not intended to be inconsistent
with any orders of the Commission previously entered in this proceeding,
including specifically Opinion No. 397, 71 FERC (CCH) 61,338 (1995) and
Opinion No. 397-A, 75 FERC (CCH) 61,181 (1996). This Settlement
Agreement also is not intended to affect the resolution of any issues
regarding facilities for transportation of natural gas liquids on the
Lakehead system.
5. Except with respect to paragraph 1 above and as otherwise
specified herein, the Effective Date of this Settlement
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Agreement shall be the date on which a FERC order is issued approving the
Settlement Agreement without modification.
6. Notwithstanding the Effective Date as specified in paragraph
5 above, no later than September 20, 1996, Lakehead shall file the rates set
forth in the pro forma tariff attached as Appendix B hereto ("Appendix B
rates") to take effect on October 1, 1996 pursuant to 18 C.F.R. Section
341.14 (1995), in place of the rates set forth in Lakehead FERC tariff nos.
18 and 19. The Appendix B rates constitute a rate decrease of approximately
6 percent across-the-board, and are intended to bring Lakehead's
forward-looking rates into compliance with Opinion Nos. 397 and 397-A on a
reasonable, compromise basis. If this Settlement Agreement has not received
FERC approval prior to October 1, 1996, it is the intent of the Settling
Parties that the Appendix B rates shall go into effect subject to
investigation and refund until such time as the Settlement Agreement is
acted upon by the FERC. If and when the FERC approves the Settlement
Agreement, the refund condition on the Appendix B rates will be removed and
any proceeding instituted with respect to those rates will be terminated.
If the Settlement Agreement is disapproved, disposition of the Appendix B
rates will be subject to further order of the Commission. The Appendix B
rates shall be subject to indexing under 18 C.F.R. Section 342.3 (1995)
commencing on July 1,
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1997. If and when the Settlement Agreement is approved by the FERC,
▇▇▇▇/ADOE agree that they will not thereafter challenge the Appendix B
rates, including any increases or decreases to those rates permitted under
the Commission's indexing regulations, 18 C.F.R. Section 342.3 (1995), in
any judicial or administrative forum during the Term of this Agreement as
defined in paragraph 12 below. If the Settlement Agreement is not approved
without modification, the Settling Parties shall retain all their rights
with respect to the Lakehead Proceedings.
7. The Settling Parties agree that Lakehead shall fulfill its
obligation to provide a remedy for the past rates found not to be just and
reasonable in Opinion Nos. 397 and 397-A by providing total monetary relief
of $120 million measured as of October 1, 1996. This relief shall be
provided in two components: (1) a Refund Component of $37,144,124 for Phase
I of Docket Nos. IS92-27-000, IS93-3-000 and IS93-33-000, which is
addressed in paragraph 8 below, and (2) a Surcredit Component of
$82,855,876 for Phase II and subsequent rate periods, which is addressed in
paragraph 9 below.
8. No later than 30 days after the Effective Date defined in
paragraph 5 above, Lakehead shall pay the sum of $37,144,l24 (measured as
of October 1, 1996) to its shippers of record under FERC tariff no. 2,
which shall fulfill Lakehead's
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refund obligation in Phase I of FERC Docket Nos. IS92-27-000, IS93-4-000 and
IS93-33-000. Interest shall accrue on the Phase I refund amount of
$37,144,124 from October 1, 1996 through the date of payment of the refunds
provided for in this paragraph at the 90-day Treasury bill rate measured for
each quarter at the close of business on the last day of the previous
quarter. The amount to be refunded for the period May 3, 1992 through
December 31, 1992 is based upon an agreed-upon test period cost-of-service of
$214,830,000, and the amount to be refunded for the period January 1, 1993
through July 5, 1993 is based upon an agreed-upon test period cost-of-service
of $219,090,000. The amount to be refunded to each shipper shall be
calculated by comparing the rate actually paid to the rate applicable to each
service at the agreed-upon cost-of-service level using Lakehead's existing
rate design and shall reflect the Commission's ruling in Opinion Nos. 397 and
397-A regarding rate floors. Within 30 days after the date of payment of the
Refund Component, Lakehead shall file a refund report with the Commission
showing the amounts refunded pursuant to this provision. In the event the
FERC's initial approval of the Settlement Agreement is overturned or modified
through further administrative or judicial proceedings after the date of
payment of the refunds as provided hereunder, such that the Lakehead
Proceedings are reinstituted, Lakehead
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shall be entitled to credit any refunds paid under this Settlement Agreement
against any refund obligation ultimately determined to apply in that
litigation.
9. Within 20 days after the Effective Date as defined in
paragraph 5 above, Lakehead shall file a tariff provision in the form set
forth in Appendix C hereto establishing a Surcredit over a period of
approximately three years. The Surcredit shall consist of a 10 percent
across-the-board reduction in Lakehead's interstate tariff rates that shall
remain in effect until the purpose of the Surcredit is accomplished. The
purpose of the Surcredit shall be to reduce Lakehead's tariff revenues by the
sum of $82,855,876 plus interest on the outstanding balance for the period
from October 1, 1996 through the termination of the Surcredit (the total
amount, including interest, being referred to as the Surcredit Amount). Once
the Surcredit Amount has been exhausted, the Surcredit tariff provision may
be cancelled by Lakehead pursuant to paragraph 10 below. The interest
component of the Surcredit Amount shall be calculated monthly on the
outstanding balance of the Surcredit Amount using the 90-day Treasury bill
rate measured for each quarter at the close of business on the last day of
the previous quarter.
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10. Lakehead shall keep account of the cumulative amount of tariff
reductions pursuant to the Surcredit provided under paragraph 9 above. When
the total amount of tariff reductions received is expected to equal the
Surcredit Amount (including interest) within 30 days, Lakehead shall file a
cancellation of the Surcredit tariff provision, together with a report
showing the total amount accumulated, or expected to be accumulated within
30 days, under the Surcredit. The cancellation of the Surcredit tariff
provision shall be effective upon 30 days' notice. Lakehead shall have no
further obligation to make the Surcredit available after it has provided
Surcredit tariff reductions equal to $82,855,876 as of October 1, 1996, plus
interest calculated as set forth in paragraph 9. ▇▇▇▇/ADOE agree that, if
and when the Commission approves this Settlement Agreement, they will not
challenge the Surcredit or the cancellation of the Surcredit, provided such
cancellation conforms to the terms of this Settlement Agreement, in any
administrative or judicial forum.
11. In the case of the joint tariff between Lakehead and Portal
Pipe Line Company ("Portal") filed to be effective September 1, 1996 (FERC
Tariff No. 94), which sets forth joint rates for transportation via Portal
and Lakehead from the Canada-U.S. Border to various Lakehead destinations,
Lakehead
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will, within 20 days after the Effective Date as defined in paragraph 5
above, file a tariff reduction applicable to FERC Tariff No. 94. That
reduction will lower each joint rate by an amount at least equal to the
difference between (a) Lakehead's current local tariff rate for Lakehead's
portion of the joint movement and (b) the Appendix B local rate as reduced
by the Surcredit. For the duration of the Surcredit, Lakehead's share of
the Portal-Lakehead joint rates will be no greater than 90 percent of the
Appendix B local rates for corresponding local movements, as adjusted
pursuant to paragraphs 6 and 13. The Settling Parties accordingly agree
that Lakehead shall be entitled to credit 10 percent of the Appendix B local
rate otherwise applicable to each such movement against its Surcredit
obligation.
In the event Lakehead enters into additional joint rates in the
future, the Settling Parties agree to negotiate regarding the extent to
which (if at all) any portion of the reduction in Lakehead's share of such
joint rates below the corresponding Appendix B rates should be credited
against Lakehead's Surcredit obligation.
12. The Term of this Settlement Agreement shall be for five years
commencing on the Effective Date.
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13. During the Term of this Settlement Agreement, Lakehead may,
at its discretion, seek to file tariffs containing rates in excess of those
set forth in Appendix B as adjusted pursuant to the Commission's index
methodology. ▇▇▇▇ and the ADOE are free to pursue challenges to any such
rate filings in excess of the indexed Appendix B rates, except as follows:
▇. ▇▇▇▇ and the ADOE agree not to challenge Lakehead's filing
of an incremental surcharge over and above the indexed Appendix B rates to
recover the costs of a significant enhancement to the Lakehead system
agreed to by ▇▇▇▇, including the System Expansion Program II ("SEP II")
project anticipated in 1998, provided that the incremental surcharge
conforms to the terms set forth in Appendix D hereto, which were previously
agreed to between ▇▇▇▇, Lakehead and the Canadian pipeline to which
Lakehead connects, Interprovincial Pipe Line Inc. ("IPL"), and provided
further that, in calculating the surcharge, Lakehead shall utilize a tax
allowance that is equal to 30 percent of the tax allowance that would apply
if Lakehead were a corporation; and
▇. ▇▇▇▇ and the ADOE agree not to challenge Lakehead's filing
of an incremental surcharge over and above the indexed Appendix B rates,
solely to recover non-routine cost increases limited specifically to the
events set forth in
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sections 7.1(d) and 7.1(e) of the Incentive Toll Settlement Agreement Between
IPL and ▇▇▇▇ dated February 16, 1995, which are attached as Appendix E hereto,
to the extent events of the type described involve Lakehead.
14. Lakehead agrees that it will file with the FERC, as soon as
possible but in no event later than October 1, 1996, a depreciation study
incorporating a new truncation date of 2020 A.D. and corresponding revised
depreciation rates for Lakehead's assets. ▇▇▇▇ and the ADOE agree that they
will support Commission approval of Lakehead's revised depreciation rates.
▇▇▇▇ and the ADOE further agree that the depreciation rates to be used in
calculating the incremental surcharge for the SEP II expansion costs
anticipated to be incurred in 1998 shall be determined using the same curves
and economic useful lives as in the depreciation study to be filed under this
paragraph.
15. If the FERC rejects this Settlement Agreement in its entirety,
or if FERC or a reviewing court makes approval of this Settlement Agreement
contingent upon modification of any provision of this Agreement, this
Settlement Agreement shall immediately terminate and shall be deemed withdrawn
as an offer of settlement or for any other purpose, and the Settling Parties
shall be free to pursue all appeals or other courses of action necessary to
protect their rights.
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16. This Settlement Agreement is intended to supersede the
Settlement Agreement filed with the Commission by Lakehead and ▇▇▇▇ and the
ADOE on March 23, 1995 in Phase II of the Lakehead Proceedings ("March 23
Settlement"). If and when the present Settlement Agreement is approved by the
FERC without modification, the March 23 Settlement shall be deemed withdrawn
and shall no longer have any force or effect.
17. Unless and until this Settlement Agreement is approved by the FERC
without modification in an order that is final and no longer subject to
judicial review, it shall be privileged and shall not be admissible in evidence
or in any way described or discussed in any proceeding, other than as necessary
to secure approval by the FERC or to permit judicial review of any order of
FERC approving, disapproving or modifying the Settlement Agreement. Approval
of this Settlement Agreement by the FERC does not constitute approval of, or
precedent regarding, any principle or issue settled herein.
18. The language of this Settlement Agreement shall, in all cases, be
construed according to its fair meaning and not strictly for or against any of
the Settling Parties. This Settlement Agreement may be modified, amended or
supplemented only by a written instrument executed by the Settling Parties.
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No obligation under this Settlement Agreement shall be for the benefit of or
be enforceable by any third party.
19. This Settlement Agreement shall be governed by, and construed
in accordance with, federal law to the extent applicable and otherwise by the
laws of the State of Minnesota. It is the intent of the Settling Parties that
the terms of this Settlement Agreement, once approved by the FERC without
modification, shall be enforceable by the FERC.
20. All notices under this Settlement Agreement shall be effective
when deposited in the mails, postage prepaid, certified mail, return receipt
requested, or when dispatched by Federal Express or by telefacsimile, addressed
to the respective Settling Parties at the addresses set forth below:
▇. ▇. ▇▇▇▇▇▇▇
Vice President, Operations
Lakehead Pipe Line Company, Inc.
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇
Manager, Markets & Transportation
Canadian Association of Petroleum Producers
2100, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
Calgary, Alberta T2P 3N9
Canada
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▇▇▇▇ ▇▇▇▇▇▇
Senior Regulatory Analyst
Markets and Regulatory Policy
The Alberta Department of Energy
1900, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
Calgary, Alberta T2P 3H7
Canada
A Settling Party may, at any time, substitute in writing a different person or
address for the one shown in this paragraph.
21. This Settlement Agreement may be executed in separate and
identical counterparts.
WHEREFORE, the foregoing Settlement Agreement is executed on behalf
of the Settling Parties by their duly authorized representatives on the date
indicated below.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
-------------------- ----------------
▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
& ▇▇▇▇▇▇▇▇ LLP ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇ ▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇-1526
Counsel for Lakehead Pipe Line
Counsel for Canadian Association Company, Limited Partnership
of Petroleum Producers and the
Alberta Department of Energy
Dated: August 28, 1996
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APPENDIX A
Below is a list of the FERC Docket Numbers associated with Lakehead's
rate prodeedings.
IS92-27-000
IS93-4-000
IS93-33-000
IS-94-20-000
IS94-24-000
IS95-5-000
IS95-26-000
IS95-27-000
IS96-15-000
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APPENDIX B
Attached is a proforma FERC No. 20 tariff filing reflecting the rates
agreed to in the Settlement Agreement.
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FERC No. 20
DRAFT Cancels FERC No. 18 & 19
LAKEHEAD PIPE LINE COMPANY, LIMITED PARTNERSHIP
LOCAL TARIFF APPLYING ON CRUDE PETROLEUM AND NATURAL GAS LIQUIDS
FROM
THE INTERNATIONAL BOUNDARIES NEAR NECHE, NORTH DAKOTA, AND
GRAND ISLAND, NEW YORK, AND POINTS IN THE STATES
OF ILLINOIS, INDIANA, MICHIGAN, AND MINNESOTA
TO
POINTS IN THE STATES OF ILLINOIS, INDIANA, MICHIGAN, MINNESOTA,
NEW YORK, WISCONSIN AND
THE INTERNATIONAL BOUNDARY NEAR MARYSVILLE, MICHIGAN
The rates listed in this tariff are for the transportation of Crude
Petroleum and Natural Gas Liquids by the Carrier. The transportation
rates listed in this tariff are subject to the Rules and Regulations
published in the Carrier's Tariffs FERC Nos. 16 and 17, supplements
thereto and reissues thereof.
The provisions published herein will, if effective, not result in an
effect on the quality of the human environment.
ISSUED EFFECTIVE
ISSUED BY
▇.▇. ▇▇▇▇▇▇
President and Chief Operating Officer
Lakehead Pipe Line Company, Inc.
General Partner
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
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PAGE TWO DRAFT
FERC No.20
The rates listed in this tariff are payable in United States currency and are
applicable on the United States movement of Crude Petroleum and Natural Gas
Liquids tendered to the Carrier at established receiving points in the United
States for delivery to established delivery points in the United States.
TRANSPORTATION RATES
Commodities shall be classified on the basis of the density and
viscosity of such commodities at the earlier time of receipt by the Carrier or
Interprovincial Pipe Line Inc. and assessed a transportation rate as listed in
the transportation rate tables below. Density shall be based on 15 degrees
Celsius. Viscosity shall be based on the lower of the temperature of the
commodity at the time of receipt or the Carrier's reference line temperature at
the time of receipt. Where the density of a commodity falls within the
density range of one commodity classification and the viscosity of the
commodity falls within the viscosity range of another commodity classification,
then the commodity shall be deemed to be in the commodity classification with
the higher transportation rate.
NGL - A commodity having a maximum absolute vapor pressure of 1 100 kilopascals
at 37.8 degrees C and a density of up to but not including 600 kilograms
per cubic metre (kg/m(3)) and a viscosity of up to but not including 0.4 square
millimetres per second (mm(2)/s) will be classified as Natural Gas Liquids.
LIGHT CRUDE PETROLEUM - A commodity having a density from 600 kg/m3 up to but
not including 876 kg/m(3) and a viscosity from 0.4 mm(2)/s up to but not
including 20 mm(2)/s will be classified as Light Crude Petroleum.
MEDIUM CRUDE PETROLEUM - A commodity having a density from 876 kg/m(3) up to but
not including 904 kg/m(3) and a viscosity from 20 mm(2)/s up to but not
including 100 mm(2)/s will be classified as MEDIUM CRUDE PETROLEUM.
HEAVY CRUDE PETROLEUM - A commodity having a density from 904 kg/m(3) to 927
kg/m(3) inclusive and a viscosity from 100 to 250 mm(2)/s will be classified as
HEAVY CRUDE PETROLEUM.
NATURAL GAS LIQUIDS
TABLE OF TRANSPORTATION RATES FOR NGL IN DOLLARS PER CUBIC METRE
FROM
TO International Boundary near Neche, North Dakota
Superior, Wisconsin (c) 1.491 [D]
Rapid River, Michigan (i) 2.457 [U]
Marysville, Michigan (c), (g) 3.576 [D]
International Boundary near Marysville, Michigan (g) 3.410 [D]
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ALL RATES ON THIS PAGE ARE DECREASES.
PAGE THREE
FERC No. 20
LIGHT CRUDE PETROLEUM
TABLE OF TRANSPORTATION RATES FOR LIGHT CRUDE PETROLEUM IN DOLLARS PER CUBIC METRE
------------------------------------------------------------------------------------------------------------------------------------
TO FROM
------------------------------------------------------------------------------------------------------------------------------------
International
Boundary
near Neche, Clearbrook, Mokena, ▇▇▇▇▇▇▇▇,
North Dakota Minnesota(a),(b) Illinois(b) Indiana(b),(h)
------------------------------------------------------------------------------------------------------------------------------------
Clearbrook, Minnesota (c) 0.908 - - -
Superior, Wisconsin (c),(d) 1.704 1.545 - -
Lockport & Mokena, Illinois (c) 3.348 3.188 - -
Griffith, Indiana (c),(e) 3.348 3.188 0.757 0.656
Bay City, Michigan (c) 3.620 3.461 - -
Stockbridge, Michigan (c) 3.986 3.825 1.346 1.346
Marysville, Michigan (c) 3.986 3.825 1.707 1.707
International Boundary near Marysville,
Michigan 3.820 3.660 1.553 1.553
West Seneca, New York (c) 4.078 3.919 1.811 1.811
TABLE OF TRANSPORTATION RATES FOR LIGHT CRUDE PETROLEUM IN DOLLARS PER CUBIC METRE
------------------------------------------------------------------------------------------------------------------------------------
TO FROM
------------------------------------------------------------------------------------------------------------------------------------
International
Boundary near
Stockbridge, Lewiston, Grand Island,
Michigan(b) Michigan(b),(f) New York
------------------------------------------------------------------------------------------------------------------------------------
Clearbrook, Minnesota (c) - - -
Superior, Wisconsin (c),(d) - - -
Lockport & Mokena, Illinois (c) - - -
Griffith, Indiana (c),(e) - - -
Bay City, Michigan (c) - .967 -
Stockbridge, Michigan (c) - - -
Marysville, Michigan (c) 1.018 1.302 -
International Boundary near Marysville,
Michigan 0.863 1.147 -
West Seneca, New York (c) 1.122 1.400 0.498
------------------------------------------------------------------------------------------------------------------------------------
MEDIUM CRUDE PETROLEUM
------------------------------------------------------------------------------------------------------------------------------------
TABLE OF TRANSPORTATION RATES FOR MEDIUM CRUDE PETROLEUM IN DOLLARS PER CUBIC METRE
------------------------------------------------------------------------------------------------------------------------------------
TO FROM
------------------------------------------------------------------------------------------------------------------------------------
International
Boundary
near Neche, Clearbrook, Mokena, ▇▇▇▇▇▇▇▇,
North Dakota Minnesota(a),(b) Illinois(b) Indiana(b),(h)
------------------------------------------------------------------------------------------------------------------------------------
Clearbrook, Minnesota (c) 948 - - -
Superior, Wisconsin (c),(d) 1.801 1.601 - -
Lockport & Mokena, Illinois (c) 3.583 3.383 - -
Griffith, Indiana (c),(e) 3.583 3.383 0.765 0.656
Bay City, Michigan (c) 3.878 3.678 - -
Stockbridge, Michigan (c) 4.272 4.071 1.401 1.401
Marysville, Michigan (c) 4.272 4.071 1.791 1.791
International Boundary near Marysville,
Michigan 4.107 3.906 1.637 1.637
West Seneca, New York (c) 4.372 4.172 1.904 1.904
------------------------------------------------------------------------------------------------------------------------------------
TABLE OF TRANSPORTATION RATES FOR MEDIUM CRUDE PETROLEUM IN DOLLARS PER CUBIC METRE
------------------------------------------------------------------------------------------------------------------------------------
TO FROM
------------------------------------------------------------------------------------------------------------------------------------
International
Boundary near
Stockbridge, Lewiston, Grand Island,
Michigan(b) Michigan(b),(f) New York
------------------------------------------------------------------------------------------------------------------------------------
Clearbrook, Minnesota (c) - - -
Superior, Wisconsin (c),(d) - - -
Lockport & Mokena, Illinois (c) - - -
Griffith, Indiana (c),(e) - - -
Bay City, Michigan (c) - .993 -
Stockbridge, Michigan (c) - - -
Marysville, Michigan (c) 1.047 1.354 -
International Boundary near Marysville,
Michigan 0.894 1.199 -
West Seneca, New York (c) 1.159 1.460 0.505
20
ALL RATES ON THIS PAGE ARE DECREASES.
PAGE FOUR
FERC No. 20
HEAVY CRUDE PETROLEUM
TABLE OF TRANSPORTATION RATES FOR HEAVY CRUDE PETROLEUM IN DOLLARS PER CUBIC
METRE
TO FROM
International Clearbrook, Mokena, Griffith,
Boundary near Minnesota Illinois Indiana
Neche, North Dakota (a), (b) (b) (b),(h)
Clearbrook, Minnesota (c) 1.009 - - -
Superior, Wisconsin (c),(d) 1.945 1.686 - -
Lockport & Mokena, Illinois (c) 3.936 3.677 - -
Griffith, Indiana (c), (e) 3.936 3.677 0.778 0.656
Bay City, Michigan (c) 4.263 4.004 - -
Stockbridge, Michigan (c) 4.702 4.441 1.484 1.484
Marysville, Michigan (c) 4.702 4.441 1.917 1.917
International Boundary near Marysville, Michigan 4.537 4.275 1.765 1.765
West Seneca, New York (c) 4.813 4.553 2.042 2.042
TO FROM
International Boundary
Stockbridge, Lewiston, near
Michigan Michigan Grand Island, New York
(b) (b),(f)
Clearbrook, Minnesota (c) - - -
Superior, Wisconsin (c),(d) - - -
Lockport & Mokena, Illinois (c) - - -
Griffith, Indiana (c), (e) - - -
Bay City, Michigan (c) - 1.030 -
Stockbridge, Michigan (c) - - -
Marysville, Michigan (c) 1.090 1.431 -
International Boundary near Marysville, Michigan 0.938 1.278 -
West Seneca, New York (c) 1.215 1.550 0.516
(a) RECEIPT TANKAGE-The transportation rates from this receiving point include a receipt tankage charge of $0.091 per cubic metre.
(b) RECEIPT TERMINALLING-The transportation rates from this receiving point include a receipt terminalling charge of $0.251 per
cubic metre.
(c) DELIVERY TERMINALLING-The transportation rates to this delivery point include a delivery terminalling charge of $0.165 per
cubic metre.
(d) DELIVERY TANKAGE- The transportation rates to this delivery point include a delivery tankage charge of $0.091 per cubic metre.
(e) In addition to the transportation rate shown, a delivery tankage charge of $0.091 per cubic metre will be assessed if the
Carrier's delivery tankage at Griffith, Indiana is used by the Shipper.
(f) BREAK-OUT TANKAGE CREDIT-The transportation rates from this receiving point include a break-out tankage credit of 1.992 cents
per hundred cubic metre miles for light crude petroleum, 2.151 cents per hundred cubic metre miles for medium crude petroleum,
and 2.390 cents per hundred cubic metre miles for heavy crude petroleum.
(g) BREAK-OUT TANKAGE CREDIT-The transportation rate to this delivery point includes a break-out tankage credit of 0.541 cents per
hundred cubic metre miles.
(h) In addition to the transportation rate shown, a receipt tankage charge of $0.091 per cubic metre will be assessed if the
Carrier's receipt tankage at Griffith, Indiana is used by the Shipper.
(i) The toll includes a delivery terminalling charge of $0.182 per cubic metre and a break-out tankage credit of 0.594 cents per
hundred cubic metre miles.
[D] - Denotes decrease in rate.
[U] - Denotes unchanged rate.
21
APPENDIX C
Attached is a proforma supplement to FERC No. 20 reflecting the 10% surcredit.
22
SUPPLEMENT
DRAFT Supplement No. 1
to FERC No. 20
LAKEHEAD PIPE LINE COMPANY, LIMITED PARTNERSHIP
LOCAL TARIFF APPLYING ON CRUDE PETROLEUM AND NATURAL GAS LIQUIDS
From
THE INTERNATIONAL BOUNDARIES NEAR NECHE, NORTH DAKOTA, AND
GRAND ISLAND, NEW YORK, AND POINTS IN THE STATES
OF ILLINOIS, INDIANA, MICHIGAN, AND MINNESOTA
to
POINTS IN THE STATES OF ILLINOIS, INDIANA, MICHIGAN, MINNESOTA,
NEW YORK, WISCONSIN AND
THE INTERNATIONAL BOUNDARY NEAR MARYSVILLE, MICHIGAN
Issued under authority of 18 CFR 341.4(a). This supplement is issued pursuant
to F.E.R.C. Order No. approving the settlement agreement between Lakehead Pipe
Line Company, Limited Partnership, on the one hand, and the Canadian
Association of Petroleum Producers and the Alberta Department of Energy on the
other. As provided in F.E.R.C. Order No. , all rates in FERC No. 20,
supplements thereto and reissues thereof are subject to a 10% surcredit
reduction until such time as the total surcredit amount plus interest is
exhausted, at which time the surcredit will be subject to cancellation as
provided in the settlement agreement.
This supplement is issued on days notice under authority of 18 CFR 341.14.
This publication is conditionally accepted subject to refund pending a 30 day
review period.
The provisions published herein will, if effective, not result in an effect on
the quality of the human environment.
ISSUED EFFECTIVE
ISSUED BY
▇. ▇. ▇▇▇▇▇▇
President and Chief Operating Officer
Lakehead Pipe Line Company, Inc.
General Partner
▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Tel. (▇▇▇) ▇▇▇-▇▇▇▇
23
Schedule of calculating the remaining refund Surcredit
to be Applied to Transportation Revenue Invoices in
Accordance with the Negotiated Settlement with ▇▇▇▇
Assuming Interest
Compounded
Monthly
---------------
Negotiated Settlement Contingent
Rate Refund and Interest
Amount as of October 1, 1996 $ 120,000,000
Less the Payment of Phase I of the Contingent
Rate Refund and Interest Amount on October 1, 1996 ($37,144,124)
--------------
Remaining Balance of the Contingent Rate Refund and
Interest to be Repaid by a Surcredit Over
the Next Three Years $ 82,855,876
Plus Estimated Interest Calculated on the Remaining
Balances of the Rate Refund over the 3 Year Pay Back
Period (See Attached Schedule) $ 7,702,581
--------------
Total Amount of Rate Refund Estimated Interest to
be Paid Over the Next Three Years $ 90,558,457
Divided by the Long Range Plan Planned Case Total
Transportation Revenue Over the Next Three Years
From January 1, 1997 Through December 31, 1999
(See Attached Schedule) $ 899,780,028
-------------
Surcredit as a Percentage of Invoiced Revenue to be
Applied to Each Transportation Revenue Invoice 10%
=============
N:\Fercdec\Repayment Summary of Refund over next three years monthly
compounding
24
Lakehead Pipe Line Company, Limited Partnership
Example of Calculation of Interest on
Refund Balance Going Forward (Compounded Monthly)
Included as Part of the Settlement Agreement
Interest Accrued
90 Day on Remaining
Description Beginning Balance T-Bill Rate Balance
----------- ----------------- ----------- ----------------
(a) (b) (c)
10/1/96 120,000,000
12/31/96 82,855,876 5% 1,035,698
1/31/97 83,891,574 5% 349,548
2/28/97 81,741,722 5% 340,591
3/31/97 79,582,913 5% 331,595
4/30/97 77,415,108 5% 322,563
5/31/97 75,238,271 5% 313,493
6/30/97 73,052,364 5% 304,385
7/31/97 70,857,349 5% 295,239
8/31/97 68,653,188 5% 286,055
9/30/97 66,439,843 5% 276,833
10/31/97 64,217,277 5% 267,572
11/30/97 61,985,449 5% 258,273
12/31/97 59,744,322 5% 248,935
1/31/98 57,493,857 5% 239,558
Long Range Plan
-----------------------------
Estimate
Description Refund Payment Beginning Balance Period Revenue
----------- -------------- ----------------- ----------- --------------
(d) (e) (f) (g)
10/1/96 (37,144,124) 82,855,876 Jan-97 24,994
12/31/96 83,891,574 Feb-97 24,994
1/31/97 (2,499,400) 81,741,722 Mar-97 24,994
2/28/97 (2,499,400) 79,582,913 Apr-97 24,994
3/31/97 (2,499,400) 77,415,108 May-97 24,994
4/30/97 (2,499,400) 75,238,271 Jun-97 24,994
5/31/97 (2,499,400) 73,052,364 Jul-97 24,994
6/30/97 (2,499,400) 70,857,349 Aug-97 24,994
7/31/97 (2,499,400) 68,653,188 Sep-97 24,994
8/31/97 (2,499,400) 66,439,843 Oct-97 24,994
9/30/97 (2,499,400) 64,217,277 Nov-97 24,994
10/31/97 (2,499,400) 61,985,449 Dec-97 24,994
11/30/97 (2,499,400) 59,744,322 Jan-98 24,994
12/31/97 (2,499,400) 57,493,857 Feb-98 24,994
1/31/98 (2,499,400) 55,234,015 Mar-98 24,994
25
Lakehead Pipe Line Company, Limited Partnership
Example of Calculation of Interest on
Refund Balance Going Forward (Compounded Monthly)
Included as Part of the Settlement Agreement
Interest Accrued
90 Day on Remaining
Description Beginning Balance T-Bill Rate Balance
----------- ----------------- ----------- ------------
(a) (b) (c)
2/28/98 55,234,015 5% 230,142
3/31/98 52,964,757 5% 220,686
4/30/98 50,686,043 5% 211,192
5/31/98 48,397,835 5% 201,658
6/30/98 46,100,093 5% 192,084
7/31/98 43,792,777 5% 182,470
8/31/98 41,475,847 5% 172,816
9/30/98 39,149,263 5% 163,122
10/31/98 36,812,985 5% 153,387
11/30/98 34,466,972 5% 143,612
12/31/98 32,111,184 5% 133,797
1/31/99 29,745,581 5% 123,940
2/28/99 27,370,121 5% 114,042
3/31/99 24,984,763 5% 104,103
4/30/99 22,589,466 5% 94,123
Long Range Plan
------------------------
Estimated
Description Refund Payment Ending Balance Period Revenue
----------- -------------- --------------- ------ ----------
(d) (e) (f) (g)
2/28/98 (2,499,400) 52,964,757 Apr-98 24,994
3/31/98 (2,499,400) 50,686,043 May-98 24,994
4/30/98 (2,499,400) 48,397,835 Jun-98 24,994
5/31/98 (2,499,400) 46,100,093 Jul-98 24,994
6/30/98 (2,499,400) 43,792,777 Aug-98 24,994
7/31/98 (2,499,400) 41,475,847 Sep-98 24,994
8/31/98 (2,499,400) 39,149,263 Oct-98 24,994
9/30/98 (2,499,400) 36,812,985 Nov-98 24,994
10/31/98 (2,499,400) 34,466,972 Dec-98 24,994
11/30/98 (2,499,400) 32,111,184 Jan-99 24,994
12/31/98 (2,499,400) 29,745,581 Feb-99 24,994
1/31/99 (2,499,400) 27,370,121 Mar-99 24,994
2/28/99 (2,499,400) 24,984,763 Apr-99 24,994
3/31/99 (2,499,400) 22,589,466 May-99 24,994
4/30/99 (2,499,400) 20,184,189 Jun-99 24,994
26
Lakehead Pipe Line Company, Limited Partnership
Example of Calculation of Interest on
Refund Balance Going Forward (Compounded Monthly)
Included as Part of the Settlement Agreement
Interest Accrued
90 Day on Remaining
Description Beginning Balance T-Bill Rate Balance
----------- ----------------- ----------- ----------------
(a) (b) (c)
5/31/99 20,184,189 5% 84,101
6/30/99 17,768,890 5% 74,037
7/31/99 15,343,528 5% 63,931
8/31/99 12,908,059 5% 53,784
9/30/99 10,462,443 5% 43,594
10/31/99 8,006,637 5% 33,361
11/30/99 5,540,598 5% 23,086
12/31/99 3,064,284 5% 12,768
1/31/00 577,652 5% 2,407
---------
7,702,581
=========
Long Range Plan
-------------------------
Estimated
Description Refund Payment Ending Balance Period Revenue
----------- -------------- -------------- ----------- ------------
(d) (e) (f) (g)
5/31/99 (2,499,400) 17,768,890 Jul-99 24,994
6/30/99 (2,499,400) 15,343,528 Aug-99 24,994
7/31/99 (2,499,400) 12,908,059 Sep-99 24,994
8/31/99 (2,499,400) 10,462,443 Oct-99 24,994
9/30/99 (2,499,400) 8,006,637 Nov-99 24,994
10/31/99 (2,499,400) 5,540,598 Dec-99 24,994
11/30/99 (2,499,400) 3,064,284
12/31/99 (2,499,400) 577,652
1/31/00 (580,059) (0)
(a) = PREVIOUS ENDING BALANCE CARRIED FORWARD
(b) = 90 DAY T-BILL RATE PER SETTLEMENT AGREEMENT
(c) = BEGINNING BALANCE x (B) x 1/12
(d) = MONTHLY ESTIMATED REVENUE x 10%
(e) = BEGINNING BALANCE + INTEREST ACCRUED - REFUND PAYMENTS
(g) = LONG RANGE PLAN ESTIMATED REVENUE
N:\RATES\REFUND INTEREST CALCULATION GOING FORWARD 2
27
APPENDIX D
Attached is a copy of the terms and conditions of the Risk Sharing Agreement,
which were previously agreed upon by ▇▇▇▇, Lakehead and IPL.
28
IPL/LPL and ▇▇▇▇
SEP II
Risk Sharing Agreement
- Agreement relates to both IPL and Lakehead in respect to the System Expansion
Program Phase II facilities and is subject to National Energy Board and
Federal Energy Regulatory Commission approvals.
- At 75% utilization of facilities or 90,000 b/d, the return on deemed
expansion equity will be the annual multi-pipeline rate as determined by the
National Energy Board.
- Up to 50% facilities utilization or 60,000 b/d, the return on deemed
expansion equity capital would be the multi-pipeline rate less 3.00%, subject
to a minimum rate of return of 7.50% in years 1 through 10 and 8.50% in years
11 through 15.
- Rate of return on deemed expansion equity increases with facilities
utilization on a straight line basis, to multi-pipeline rate plus 3.00% at
100% utilization, subject to a maximum rate of return of 15% during the term
of the agreement.
- Drag reducing agent costs flow through as a surcharge if appropriate.
- All costs including operating, interest and depreciation costs flow through
to tariffs.
- Volume "at risk" would have incremental capacity expansions "stacked" on top.
- Total tolls will be charged in a manner and amount consistent with existing
toll design for Lakehead and IPL. Point to point tolls will reflect a
volume-distance allocation of costs. Distribution of revenue and costs
between IPL and Lakehead will be at IPL/LPL's discretion, subject to
regulatory approval.
- The agreement is subject to approval of IPL and LPL Boards of Directors.
- The term of the agreement is for 15 years commencing on the date of
completion.
- This agreement is without prejudice to any other discussions or negotiations,
and does not necessarily reflect the views of any of the parties as to
appropriate costs of capital in either Canada or the United States.
29
APPENDIX E
Attached is the applicable section of the Incentive Toll Settlement Agreement
dated February 16, 1995, between Interprovincial Pipe Line Company and the
Canadian Association of Petroleum Producers.
30
INCENTIVE TOLL PRINCIPLES OF SETTLEMENT
Between
Interprovincial Pipe Line Inc.
and
Canadian Association of Petroleum Producers
7.0 NON-ROUTINE ADJUSTMENTS TO ANNUAL REVENUE REQUIREMENTS
7.1 Circumstances may arise which necessitate adjustment to the
annual Revenue Requirement and resulting tolls. Events
resulting in Non-Routine Adjustments shall be:
(d) Changes in costs resulting from legislation,
regulations, orders or directions by any government
authority which result in changes to safety or
environmental requirements, practices, or procedures
for IPL.
(e) The cost of distinct and new programs necessary to
address new or unanticipated failure mechanisms and
significant increases in the rates of cracking and/or
corrosion in the pipeline or other existing failure
mechanisms experienced by IPL.
