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Matthew GhikasDirect 604631 3191

Facsimile 604 632 3191mghikas @ van.fasken .com

August 27, 2007File No.: 252295.00089

BY COURIER

British Columbia Utilities CommissionSixth Floor, 900 Howe StreetVancouver, BC V6Z 2N3

Attention: Robert J. Pellatt, Commission Secretary

Dear Sirs/Mesdames:

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

We enclose for filing, on behalf of Trans Mountain (Jet Fuel) Inc., twenty copies of thefollowing:

1. A replacement response to 1 BCUC IR 13.1, with errata blacklined.

2. A replacement response to 1 BCUC IR 21, which contains a revised response to 1BCUC IR 21.1.2. (The responses to 21.1 and 21.1.1 are unchanged.)

3. A replacement response to 1 BCUC IR 24, which now contains a response to 1BCUC IR 24.3. (The responses to 24.1, 24.2 and 24.4 are unchanged.)

A supplemental response to 1 BCUC 12.1 is being filed concurrently on a confidentialbasis, leaving only the response to 1 BCUC 23 outstanding from round one. TMJ is stillattempting to locate the documents required to provide a response.

Yours truly,

FASKEN MARTINEAU DuMOULIN LLP

Matthew Ghikas

MTG/fxmEncscc: D. Scott Stoness, Vice President, Regulatory, Kinder Morgan Canada Inc.

DMJ/AN/252295-00089/6726612.1

Vancouver Calgary Toronto Montreal Quebec City New York London Johannesburg

B-6

13 Reference: Exhibit B-l, Application, Appendix B, p. 12-33

13.1 For the throughput forecasts contained in the Master Plan 2027, pleaseindicate the throughput that is attributed to the VAFFC and non-VAFFCcustomers.

Response:13.1 TMJ is not aware of the split between VAFFC and non-VAFFC

customers, and respectfully suggests that the VAFFC could better answerthis question.

That being said, TMJ did request 8MB fuel to review Chapter 12 of theYVR-MPTR, the chapter principally addresses fuel supply from the TMJpipeline and from trucks. In 8MB Fuels' opinion it is implied withinChapter 12 that the type of fuel supply referenced in text, tables andgraphs is only jet kerosene (versus Aviation Gas, or "AvGas" forturboprop/piston aircraft, or gasoline and diesel for ground equipment);i.e., cross-references to "jet" fuel supplies from the refinery at CherryPoint, WA.

It should be noted that aviation firms purchase AvGas from oil companiesand it is then shipped into YVR by rail, with likely storage also at theVAFFC tank farm.

From another perspective, airport fuel purchasing consortiums providemany tangible benefits for their airline or private aviation customers. Assuch, BMB believes that the amount of throughput attributed to purchasesby the VAFFC would represent the vast majority of total jet fuelthroughput.

Furthermore, as stated by David Bursey of Bull, Housser & Tupper LLP,counsel for the VAFFC, in Intervenor Exhibit C2-1 as found in theBCUC's Trans Mountain Jet Fuel Toll Application website, "VAFFCmember Airlines.. .account for almost all of the end-use customers servedby Trans Mountain's jet fuel line". Per an e-mail exchange BMB Fuel hadwith Mr. James Fee of FSM Group Inc., the VAFFC has 29-memberairlines that account for 99% of the jet fuel consumed at YVR. Upon ourexamination of this list it was concluded that the VAFFC membersrepresent virtually every domestic. U.S. and international carrier requiringjet fuel is represented on the VAFFC. The only exception seems to beFixed Base Operators (FBO) for executive aircraft.

Supporting information in Chapter 12, including both fuel consumptiongraphs listed as Figure 12-17 and Figure 12-18, were prepared for YVR byFSM Group Inc. The President of the VAFFC, Mr. James Fee, is also

represented by FSM Group Inc. and is listed by the BCUC as anIntervenor in TMJ's toll application with the BCUC. FSM Group Inc.clarified to BMB Fuel that specific references to "throughput" in Chapter12 of the YVR-MPTR were attributable only to jet fuel and that allforecasts and actual figures given were for total airport usage.

Finally, it should be noted that BMB Fuel is aware only of the shippers -companies that contract with TMJ to send jet fuel down the TMJ pipelineto YVR. Those shippers are Air Canada, Imperial, Shell, Petro Canadaand Chevron. While we know that the VAFFC is the principle customerof the throughput, BMB Fuel cannot confirm who the non-VAFFCcustomers are or their volumes. That information is privileged betweenthe shippers and the customers. Based upon the above analysis. BMBFuel concluded that the vast majority of TMJ throughput - likely at thehigh 90% level, is attributable to VAFFC customers.

21 Reference: Exhibit B-l, Application, Appendix B, pp. 12-29 and 12-34

"While there may be some reserve capacity in the pipeline obtainable by increasingpumping pressure, the size and age of the pipeline clearly impose limits tothroughput."

21.1 Please describe the possible increase in throughput capacity that could beachieved if:a) Additional pump capacity was added at the inlet of the pipeline to the

Vancouver Airportb) A new station is added at the mid point of the pipeline

21.1.1 What effect would these increases in throughput capacity have on tolls?

21.1.2 Has a hydrostatic pressure test been done on the jet fuel pipeline? If yes,what were the results of the hydrostatic pressure test? If a hydrostaticpressure test has not been performed, is such a test required on a periodicbasis?

Response:

21.1 a In 2004 TMJ developed a scenario for the expansion to the TMJ pipelinesimilar to this request. TMJ cautions that the work referenced in thisresponse is outdated and is based on the business and regulatorycircumstances ruling at this time.

This scenario includes significant upgrades to the aviation fuel pipe linepump facilities at the Chevron Refinery, and the construction of a newpump station near the Fraser River (approximately km 23 of the aviationfuel pipeline). This expansion scenario will increase the throughput on theaviation fuel pipeline from 204 m3/hr to 260 m3/hr. Annual throughputwill increase to approximately 2,278,000 m3. This will be accomplishedby constructing a new pump station on the pipeline, increasing the pumphorsepower at the Chevron and Shell refineries, and improving theperformance of the Burnaby boosters through the implementation of pumpimpellers. The estimated cost and a summary of high level material andconstruction requirements is as follows:

Work ItemChevron Refinery costs: pumps, valves, sump, piping, two 500 HPmotors, switch gear, transformer, cables, instrumentation, SCAD A,engineering and constructionFraser River Pump Station costs: pumps, valves, sump, piping, 1 ,000HP motor, switch gear, transformer, cables, instrumentation, SCAD A,land acquisition, engineering and constructionWestridge Terminal: piping and upgradesShell Refinery costs: 300 HP motor and upgradesBurnaby Terminal: pump impellers and upgrades

Estimated CostCAD $3,000,000

4,000,000

300,000300,000300,000

Other: engineering, design and construction costs

Total estimated costs

100,000

$8,000,000

Note: This expansion is in 2004 dollars and estimates are based uponpreliminary cost estimates and are subject to an approximate variance ofplus/minus 15-20%.

j--— ~

i rw5fw.fi:: HP

21.1.b This scenario includes significant upgrades to the aviation fuel pipelinepump facilities at the Chevron Refinery, and the construction of a newpump station, located in Burnaby - Hill Street Station (approximately km14 of the aviation fuel pipeline). This phase of the expansion will increasethe throughput on the aviation fuel pipeline from 260 m3/hr toapproximately 300 m3/hr. Annual throughput will increase toapproximately 2,628,000 m3. This will be accomplished by constructing a'new' pump station on the pipeline, and increasing the pump horsepowerat the Chevron and Westridge facilities. The estimated cost and a summaryof high level material and construction requirements is as follows. Theseamounts are in addition to, or modifications to, the requirements listed in21.1.a above:

4

Work Item Estimated CostChevron Refinery costs: upgrade motors to 600 HP, new transformer, softstarters and cablesHill Street Pump Station costs: pumps, valves, sump, piping, 1,000 HP motor,switch gear, transformer, cables, instrumentation, SCAD A, land acquisition,engineering and construction

CAD $600,00(

4,000,OOC

Westridge Terminal: two new 500 HP motors, soft starters, pump building 900,OOCEstimated Costs from, 21.1.a 3,000,OOC

Total estimated costs $13,500,000

Note: This expansion is in 2004 dollars and estimates are based uponpreliminary cost estimates and are subject to an approximate variance ofplus/minus 15-20%.

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21.1.1 At the time of the expansion plan estimates detailed in 21.1 a and 21.1 babove, expansion toll scenarios are based upon volume projectionsprovided by the airlines as outlined in the forecast below. Incrementaloperating costs have been included in calculating future tolls using thefollowing assumptions. Incremental operating costs equal to one percentof incremental capital. Power costs increase in proportion to throughputvolumes. Incremental property tax equal to two percent of incremental

capital. Estimated toll projections based upon the various expansionscenarios have been provided for 2007 and 2009.

Base Toll $2.92321. 1a

21.1b

Capital

Expenditures($000)

8,00013,500

IncrementalCosts

2007 | 2009($000)

281 | 305

446 | 470

Vs, , *

- ' „Estimated Tolls

2007

$3.149$3.726

2009

$2.764

$3.268

Throughput levels on the aviation fuel pipeline are based onaverage annual throughput levels over the calendar year. 2004levels are based on nine months data for the year. Forecastthroughput levels are based upon projections provided by theairlines. Annual increases of 7.0% (2005-06), 5.0% (2007-08) and7.0% (2009+) have been incorporated as provided.

21.1.2 The following tests where conducted at the time of commissioning of eachpipeline section. All test results met the applicable CSA standards. TheCSA standards do not prescribe periodic repeat hvdrotests.

Chevron to Airport

Shell to Burnabv

Hydrotest completed in 1969 in accordance withCSA Z183-1967 at the time the line wascommissioned. The test completed to 12,375 kPawith no test failures.The last Hvdrotest completed in 1998 in accordancewith CSA Z662. The test was completed to 12.575kPa with no test failures. This line wascommissioned in 1972, when a previous hydro testhad been completed.

Westridge to. M/L Tee

Petrocan

_ Hydrotest completed in 1986 in accordancewith CSA Z662 at the time the line wascommissioned (a certificate was issued from the BCMinistry of Transportation & Highways). The testwas completed to 13.800 kPa with no test failures.Hvdrotest completed in 1996 in accordance withCSA Z662 at the time the line was commissioned.The test completed to 6.940 kPa with no testfailures.

24 Reference: Exhibit B-l, Application, Appendix E, p. El

"...a 'Notice of Intent' is required to be filed with OGC as described in the'Pipelines and facilities manual' (version 8.3 January 2007)."

24.1 Please file a copy of the OGC "Notice of Intent" filing requirements.

24.2 Please compare the maintenance requirements and annual costs of the pipeabandonment compared to pipeline deactivation.

24.3 Does TMJ own the Right of Way ("ROW")? What are the encroachmentsconcerns on a cut and grout? If the pipe is removed can the ROW be sold,are there any restrictions that limit its use to ROW only?

24.4 Has the Airport required that TMJ dismantle the Jet Fuel System at theAirport? If yes, please provide a copy of the direction from the Airport thatrequires this dismantling.

Response:

24.1 A copy of the "Notice of Intent" section from the Oil ad Gas Commission"Pipeline and Facilities Manual" is attached as Appendix D.

24.2 According to OGC section 17.4.10 for pipelines that have not beenremoved in their entirety and the land restored, the owner is required tosubmit notice of intent to deactivate a pipeline and follow directionsregarding deactivation.

Also in accordance with CSA Z662-03 section 10.13.1.2 deactivation ofpiping requires that operating companies shall:

a) maintain external and internal corrosion control in accordancewith Clause 9;

b) where considered appropriate, perform other maintenanceactivities in accordance with the requirements of Clause 10

c) maintain records in accordance with the requirements of Clauses9.5 and 10.3; and

d) for piping that is deactivated for more than 18 months, annuallyconfirm the suitability of deactivation methods used, thecorrosion control, and other maintenance activities.

Also in accordance with CSA Z662-03 Abandonment of piping section10.14.1 "the decision to abandon a section of piping, in place or throughremoval, shall be made on the basis of an assessment that includesconsideration of current and future land use and the potential for safetyhazards and environmental damage to be created by ground subsidence,

soil contamination, ground water contamination, erosion, and the creationof water conduits."

CSAZ662-03 section 10.14.2a) Piping that is abandoned in place shall be:b) emptied of service fluids;c) purged or appropriately cleaned or both;d) physically separated for any in-service piping; and capped,

plugged, or otherwise effectively sealed;

It appears that the OGC and CSA are in conflict, since CSA allows anowner to abandon a pipeline in place provided it follows the requirementsof section 10.14.2. If the OGC permits TMJ to abandon the pipelinefollowing CSA Z662-03 section 10.14.2 then the maintenance costs forabandonment will much less as opposed to deactivation. If TMJ has todeactivate the pipeline as per OGC 17.4.10 then maintenance will berequired as per CSA Z662-03 section 10.13.1.2.

At this point in time the costs for the maintenance as per CSA section10.13.1.2 are unknown.

24.3 As a normal course of business TMJ does not own ROW along thepipeline route and consequently could not sell any of the properties onwhich a ROW has been granted. Once the pipeline has been abandoned,TMJ can release it's ROW charge against the properties as it will nolonger be required by TMJ. TMJ expects that the Cities will enforce anyland use restrictions that the Cities bylaws place on the properties releasedfrom the TMJ ROW obligation. The value of private property where aROW has been released will increase as restrictions on land use will beremoved.

The "cut and grout" renders the pipeline safe and as the ROW will nolonger be required or enforced, TMJ has not identified any encroachmentconcerns.

24.4 TMJ will only be dismantling its own facilities.