An event of Force Majeure occurred on Northern Border (NBPL) on July 13 at Station 8 resulting in curtailment of deliveries through Ventura from July13-18.  As a result, ENA was not able to take full delivery of firm volumes from EC at the Monchy upstream interconnect.

EC and ENA hold divergent views on how to implement the curtailment.  We need to reach a common understanding.

The view of EC is that a force majeure event, as defined by Article 5 of our master agreement with ENA (see Attachment) or superceded by amendments contained in individual confirmation letters, implies that all firm transactions must be curtailed "by the same percentage that the applicable transporter interrupts or curtails firm delivery service..." (language in parentheses was directly lifted from a Monchy confirmation letter dated November 1, 1997 signed by Julie Gomez).  

The view of ENA, as articulated by Martin and Lisa, is that Northern Border sends scheduled volumes back to Unify via EDI with a service agreeement pathed to a firm supply deal.  The pipeline scheduled volume for the path drives how much each individual  deal is curtailed  even if some supply deals are cut by a different percentage than others. My apologies if I have not expressed this properly.

In other words, we agree on the magnitude of the curtailment but not how to allocate cuts to individual deals.

Because we have desk to desk deals (since earlier this year), ENA and EC must agree on scheduled volumes.  In the past our deals were Physical Forward and if our volumes did not agree it was not discovered until invoicing, at which time the accountants would duke it out.  Now, Logistics quite properly has to deal with it within the month.  This has implications at all points where ENA transacts with EC such as Kingsgate, Empress, Eastern Canada.

EC  has reluctantly agreed to accept ENA's non-proportional scheduled volumes for this event so that the schedulers can move on but I would appreciate a policy resolution to this issue prior to the next downstream curtailment.

Kevin Heal
Enron Canada Corp.
403 974-6727

Attachment

Legal Opinion dated July 20, 2001

Kevin, further to your voice-mail, as indicated to you yesterday, our physical gas master agreement with ENA is in their form of Enfolio master agreement and not our form of master.  What that means is that, although the mechanics of declaring force majeure, etc. are the same, the definition of force majeure under our Enfolio master with ENA is not restricted to delivery point force majeure as it is in ECC's standard form, but is rather a broader based force majeure.  However, it must be kept in mind that, depending on the transaction, the definition of "force majeure" may be amended in the terms of the particular confirmation letter.  The application section (which is basically the same as in our form) is as follows:

This Article 5 is the sole and exclusive excuse of performance permitted under this Agreement, and all other excuses at law or in equity are waived to the extent permitted by law.  Except with regard to payment obligations, in the event either Party is rendered unable, wholly or in part, by Force Majeure to carry out its obligations hereunder, it is agreed that upon such Party's giving notice and full particulars of such Force Majeure to the other Party as soon as reasonably possible (such notice to be confirmed in writing), the obligations of the Party giving such notice, to the extent that they are affected by such event, shall be suspended from the inception and during the continuance of the Force Majeure for a period of up to 60 Days in the aggregate during any 12 Month period, but for no longer period.  The Party receiving notice of Force Majeure may immediately take such action as it deems necessary at its expense for the entire 60 Day period or any part thereof.  The Parties expressly agree that upon the expiration of the 60 Day period Force Majeure shall no longer apply to the obligations hereunder and both Buyer and Seller shall be obligated to perform...

I will send a copy of the agreement over to you which also contains the definition of Force Majeure, but again it must be remembered that such definition may be amended in the particular confirm.

Greg Johnston
Senior Counsel
Enron Canada Corp.
phone: 403-974-6745
greg.johnston@enron.com