Fasken Martineau DuMoulin LLP * Barristers and Solicitors Patent and Trade-mark Agents

Suite 21 00 1075 Georgia Street West Vancouver, British Columbia, Canada V6E 3G2

604 631 31 31 Telephone 604 631 3232 Facsimile

Matthew Ghikas Direct 604 631 3191

Facsimile 604 632 31 91 mghikas@van.fasken.com

October 26,2007 File No.: 252295.00089

BY E-MAIL and COURIER

Lawson Lundell LLP Barristers and Solicitors 1600 - 925 West Georgia Street Vancouver, BC V6C 3L2

Attention: Ian D. Webb

Dear Sirs/Mesdames:

Re: Tolling Application of Trans Mountain (Jet Fuel) Inc.

We enclose TMJ's Information Requests No. 1 on Chevron Canada Limited Intervenor Evidence, Exhibit C 1-4.

Yours truly,

FASKEN MARTINEAU DuMOULIN LLP

[OPiginal signed by Matthew Ghikas]

Matthew Ghikas

MTGifxm Enc cc: Cornmisson Secretary

all other ilitervenors D. Scott Stoness, Vice President, Regulatory, Kinder Morgan Canada Inc.

* Fasken Mairineau DuMoulin LLP is a limited liability pannership under the laws of Ontario and includes law corporations.

Vancouver Calgary Toronto Ottawa Montreal Quebec City London Johannesburg New York

B-11

TRANS MOUNTAIN (JET FUEL) INC. ("TMJ") INFORMATION REQUESTS ROUND 1 TO

CHEVRON CANADA LIMITED (CCCHEVRON") OCTOBER 26,2007

Trans Mountain (Jet Fuel) Inc. Application for Approval of Tolls and Accelerated Depreciation

Project: 3698466

1.0 Reference: Exhibit Cl-4, Evidence, Mr. Innis states:

"So long as the overall slate of products Erom the stream can be sold profitably, the Bumaby refinery will continue to operate and jet fuel will continue to be produced." (Q11)

"We would consider [shipping jet fuel to YVR by barge] but I would not expect it to be economical. I have not undertaken an in- depth analysis of either the capacity of the Chevron dock to handle the additional number of shipments or the costs if it could. .. ." (Ql5)

Requests:

1 .I In stating his expectation that barging would not be "economical", does Mr. Innis mean that the overall slate of products from the crude oil stream cannot be sold profitably using barging (i.e. the Chevron refinery as a whole would operate at a loss and would have to shut down)? Or, alternatively, is Mr. Innis expressing his opinion that shipping jet fuel to YVR by barge will be more costly than shipping through the TMJ pipeline, and hence less profitable for Chevron?

I .2 If the jet fuel product will continue to be produced and barging is not expected to be "economical", why has Chevron thus far declined to enter into a long-term take or pay contract with TMJ to ensure the pipeline remains viable?

2.0 Reference: Exhibit CS-4, Evidence, Mr. Innis states:

"So long as the overall slate of products from the stream can be sold profitably, the Burnaby refinery will continue to operate and jet fuel will continue to be produced." (Q11)

Requests:

2.1 Please confirm that the attached amended application was filed by Chevron with the NEB on or about June 30,2005.

2.2 Please confirm that the contents, including paragraphs 6, 7, 13, 20 and 24 of the amended application are true and accurate.

2.3 Please confirm that the same concerns regarding the economic viability of the Chevron Burnaby Refinery as identified in Chevron's NEB application will arise any time the capacity on the Trans Mountain pipeline lags behind growing demand.

2.4 Please confirm that the attached response to NEB IR l.lO(a) filed by Chevron in the same NEB proceeding is true in stating:

"It is not possible to quantifL specifically the length of time or level of underutilization due to apportionment which would result in the economic viability of the Burnaby Refinery being chronically affected. Any level of underutilization affects the profitability of the refinery. The longer the apportionment and/or underutilization lasts, the greater the impact. Any impact on the profitability of the Refinery would affect its market value and the likelihood of it continuing to operate. If the return on capital employed at the Burnaby Refinery is lower than other opportunities, there would be serious questions about its long-term economic viability."

3.0 Reference: Exhibit Cl-4, Evidence, Mr. Johnson states at page 3:

"With respect to the acquisition of the land by the VAFFC, it is not surprising that VAFFC would seek to maintain options in the event that TMJ's proposals are accepted, in order to ensure continued supply of jet fuel to YVR."

Request:

Please confirrn the Williams Road property was acquired before TMJ filed its application, not afier.

4.0 Reference: Exhibit C1-4, Evidence of Mr. Johnson

Request:

Please confirm that Mr. Johnson was not involved in any of the proceedings or negotiated settlement processes in which the rate of return and capital structure for TMJ was determined.

5.0 Reference: Exhibit C1-4, Evidence, Mr. Johnson states at page 7:

"As with the proposed treatment of the accelerated depreciation there is no recognition in the TMJ application of the benefits of the tax deductions that will be available if or when the expenditures are made for the negative salvage/reclamation costs."

But in TMJ's responses to 1 BCUC 14 and 15, TMJ specifically noted the negative tax provision for each of the last year of the forecasts provided, years 2017 and 2012 respectively.

Request:

Is Mr. Johnson aware that TMJ included all reasonably forecast-able tax losses in the calculation of the tolls for the last year of operation such that TMJ shippers were provided the benefits of the known tax benefits available after the pipeline was dismantled (that is for tolling purposes TMJ modeled the impact of dismantling the pipeline as if it occurred in the last year of pipeline operation rather than after operations had ceased)?

NEB Information Request No. I To Chevron Canada Limited, Chevron Standard Limited

and Neste Canada Inc. (the Applicants)

NEB Hearing Order MH-2-2005 Response Issued August 24,2005

ECONOMICS

Question 1.10

Reference Direct evidence of R.C. Innis, page 4, A 12

Preamble Mr. Innis states that if the Burnaby Refinery falls short of its crude oil requirements, it has to reduce refinery runs. This negatively affects the refinery's economics and necessitates the purchase of refined products from third parties to meet Chevron's market requirements and commitments. He also states that "over time, and depending upon the level of refinery underutilization, this could chronically affect the econonlic viability of the refinery."

Request (a) Please explain the length of time and level of underutilization due to apportionment which would result in the economic viability of the refinery being chronically affected.

(b) What percentage of revenue from the processing of isooctane has been lost to date by the Burnaby Refinery as a result of apportionment in the years 2002 to 2005, on an annual basis?

(c) What percentage of revenue from the processing of crude oil has been lost to date by the Burnaby Refinery as a result of apportionment in the years 2002 to 2005, on an annual basis?

Response

1.10 (a) It is not possible to quantify specifically the length of time or level of under utilization due to apportionment which would result in the economic viability of the Burnaby Refinery being chronically effected. Any level of under utilization effects the profitability of the Refinery. The longer the apportionment andor under utilization lasts, the greater the impact. Any impact on the profitability of the Refinery would affect its market value and the likelihood of it continuing to operate. If the return on capital employed at the Burnaby Refinery is lower than other opportunities, there would be serious questions about its long-term economic viability.

(b) Zero.

(c) The effect of curtailment is very difficult to estimate with precision. Actual utilization at a refinery is the product of many factors. To determine the level of utilization that would have occurred absent curtailment requires a highly

NEB File 4775-T099-1-3 NEB IR 1 Question 10 19

NEB Information Request No. I To Chevron Canada Limited, Chevron Standard Limited

and Neste Canada Inc. (the Applicants)

NEB Hearing Order MH-2-2005 Res~onse Issued August 24,2005

subjective hypothetical analysis of all those others factors. The result would be highly unreliable.

Attachment NEB IR 1.10(c) compares the actual nominated capacity on the TPTM system after curtailment with the average capacity of the refinery. It is important to note that the attachment uses the average capacity of the Burnaby Refinery as distinct from its actual capacity in any month. Based on that comparison, the reduction in potential output from the refinery is approximately 490 m3.

While it is not possible to calculate a precise percentage of revenue from the processing of crude oil that has been lost to date by the Burnaby Refinery as a result of apportionment, the following observation can be made. If a refinery loses 5% or 10% of its feedstock, the refinery loses an amount greatly in excess of 5% or 10% of its profit. Any refinery has to refine a certain amount of product to cover its fixed and incremental costs. Above this amount, additional volumes refined can be processed at a much lower incremental cost only, with the remainder being profit. By losing a small percentage of refinery feedstock, a refinery can lose a much larger percentage of its profit.

NEB File 4775-T099-1-3 NEB IR 1 Question 10 20

71(1) of the N&mL Energy Board Act and the regulations made thereunder;

And in the Matter of an Application by Chevron Canada Limited for an order designating Chevron Canada Limited's Burnaby Refinery to be a priority destination- - on the pipeline system of Terasen Pipelines (Trans Mountain) Inc.

APPLICATION OF CHEVRON CANADA LIMITED

Application

1.

to the National Energy Board ("Board") for the following relief:

(a)

Chevron's refinery located at Burnaby, British Columbia (the "Burnaby

en") during such period of time as from Edmonton to the Burnaby Refinery

would otherwise be apportioned; and

(b) Pursuant to section 20 of the Act, such further or other related relief as to the Board may seem just and proper.

Background

2. Chevron owns and operates the Burnaby Refinery and is engaged in the refining of crude oil and the marketing of the resulting petroleum products including gasoline through its extensive network of service stations in British Columbia and commercial card locks, bulk plants and terminals in British Columbia and Alberta. For over 50 years Chevron and its predecessor company have been among the leading marketers of gasoline and petroleum products in British Columbia. Chevron is the largest supplier of jet fueI to the Vancouver International airport. This refinery enables consumers in the lower mainland

to access gasoline and diesel fuel supplies produced in the region, as an alternative to imports from Alberta and US refineries.

3. In its refining operations located in British Columbia, Chevron employs approximately 180 personnel and directly paid $27 million to the Federal, Provincial and municipal governments in 2003. Chevron and its employees spend tens of millions of dollars each year in the local economy.

Mhevron has made significant investment in its Bumaby Refinery to optimize the refining of crude oil specifically produced in Western Canad The refinery has an approximate processing capacity of configured to run primarily light sweet and synthetic crude oil, feedstocks that are readily available through third party and corporate affiliate purchases in Alberta and British Columbia. The refinery has limited ability to process sour or heavy crude oil streams.

& %The Burnaby Refinery is entirely dependent on the Terasen Pipeline for the deliveries of 100% of its crude oil feedstock requirements, which are obtained from Alberta and British Columbia producing fields. The refinery is designed to receive crude oil*

Z. &When the Bumaby Refinery falls short of its crude oil requirements, it has to reduce - refinery runs. This negatively affects the refinery's econo~nics and necessitates the purchase of refined products from third parties to meet Chevron's market requirements. Over time, and depending upon the level of refinery under-utilization, this could chronically affect the economic viability of the refinery. Further, the substitution of refined products from other sources does nothing to sustain the economic operation of the Bumaby Refinery.

& M n August 22, 2003 Chevron filed with the Board an application ("Initial Application"), Board File No. 4775-T099-1-2, r e q u e s t i n g g . . an order designating the Burnaby Refinery as a priority destination for the unapportioned delivery of crude oil on the Terasen Pipeline.

L$ &The Initial Application was filed due to the level of apportionment that was being experienced on the Terasen Pipeline and that was forecast to continue due to increased nominations destined for ship loading at Vancouver and the heavier composition of crude to be transported.

9;-Following the filing of the Initial Application, Terasen and its shippers developed and implemented a revised nomination and apportionment arrangement ("RNAA") that was intended to reduce apportionment for land-based crude and products by limiting ship loading to three cargoes per month. Chevron had participated in the discussions that lied to the RNAA. On September 25, 2003, and notwithstanding that there would be apportionment in October 2003, Chevron requested that the Board hold the Initial Application in abeyance pending the determination of the apportionment levels for November 2003.

&& XbOn March 31,2004, Chevron filed a letter with the Board to advise that Chevron was withdrawing the Initial Application in order to fully consider the efficacy of the RNAA.

a3, &As elaborated upon in the next section of this Application, the RNAA has not been successful in alleviating apportionment for land-based crude and products. Potential expansion capacity on the Terasen Pipeline is not expected any earlier than Consequently, it is reasonable to expect that apportionment will persist and that as result, Chevron bears the risk that the Burnaby Refinery's monthly crude oil

requirements will not be met and that the refinery will be under-utilized.

History of Apportionment

14; %At the time that Chevron filed its Initial Application, deliveries of crude oil from Edmonton to the Bwnaby Refinery for August 2003 were apportioned below the volume nominated by the refinery. As a result, the refinery ran at reduced rates in August 2003.

& %At the time that the Initial Application was filed, apportionment was being experienced on the Terasen Pipeline due to increased nominations at Edmonton, the heavier composition of crude and a reduction of total throughput capacity resulting from the temporary interruption of power to pumping stations caused by forest fires. Initial apportionment on the pipeline was set at 25% and increased by 13% due to the forest fire problem.

&The Terasen Pipeline's capacity, without the impact of power disruption, can vary between approximately 37,000 and 42,000 m3/day, depending on the composition of products shipped.

+In September 2003, apportionment was 50%.

1$ following the implementation of the RNAA, which became effective on October 1, 2003 for a three-month trial period, apportionment levels on the Terasen Pipeline were:

October 2003: Westridge - 40%; Land-based Volumes - 7%;

November 2003: Westridge - 7 1%; Land-based Volumes - 19%;

December 2003: Westridge - 0%; Land-based Volumes - 14%, and increased by 11% due to pumping constraints.

%The RNAA was initially extended for an additional three months, and has been continued. Apportionment has been:

January 2004: Westridge - 0%; Land-based Volumes - 7%;

February 2004: Westridge - 0%; Land-based Volumes - 0%;

March 2004: Westridge - 0%; Land-based Volumes - 10%;

April 2004: Westridge - 0%; Land-based Volumes - 0%;

May 2004: Westridge - 0%; Land-based Volumes - 10%;

June 2004: Westridge - 0%; Land-based Volumes - 0%;

July 2004: Westridge - 0%; Land-based Volumes - 8%;

August 2004: Westridge - 0%; Land-based Volumes - 20%;

September 2004: Westridge - 0%; Land-based Volumes - 27%;

October 2004: Westridge - 0%; Land-based Volumes - 15%, and increased by 9% due to operational issues;

November 2004: Westridge - 0%; Land-based Volumes - 14%;

December 2004: Westridge - 0%; Land-based Volumes - 0%.

;14, -%-As it is apparent that the RNAA has not resolved the apportionment problem for land-based crude and products, and without expansion capacity being available on the Terasen Pipelines until at least continued apportionment can be expected to be an ongoing problem that would result in crude supply shortfalls for the Burnaby Refinery and refinery under-utilization.

Basis for the Application Being Granted

%-Pursuant to

the National Energy Board Act, the Board has the authority to make orders designating a priority destination.

*There are no economic alternative for the ei&&bBurnaby Refinery.

W h e v r o n submits that the granting of this Application would be in the overall public interest of Canada, and in particular that of British Columbia. Curtailment of crude oil supplies to the Burnaby Refinery could have an adverse impact on the economic benefits currently generated from its operation including jobs, payment of taxes and investment in the local economy.

Further Communications

%A11 further communications respecting this Application should be directed to:

Chevron Canada Limited 355 North Willington Avenue Burnaby, British Columbia V5C 1x4

Attention: Robert C. Innis, Manager, Supply Phone: (604) 257-4920 Fax: (604) 257-4093 E-mail: RINN@chevrontexaco.com

Chevron Canada Limited 1500 - 1050 West Pender Street Vancouver, British Columbia V6E 3T4

Attention: Miriam Kresivo, General Counsel Phone: (604) 668-5312 Fax: (604) 668-5320 E-mail: MKREBchevrontexaco.com

And to Counsel for the Applicant:

Lawson Lundell LLP 1600 Cathedral Place 925 West Georgia Street Vancouver, British Columbia V6C 3L2

Attention: Chris W. Sanderson, Q.C. Phone: (604) 631-9183 Fax: (604) 669-1620 E-mail: csanderson @lawsonlundell.com

Attention: Keith Bergner Phone: (604) 631-9119 Fax: (W) 669-1620 E-mail: kbermer@lawsonlundell.com

tfully submitted this 7& day of January

Per: l e t

Counsel for Chevron Canada Limited