BARRISTERS & SOLICITORS. March 21, 2012

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1 MURDY & McALLISTER C-1 BARRISTERS & SOLICITORS TELEPHONE (604) FAX (604) TWO BENTALL CENTRE BURRARD STREET P.O. BOX VANCOUVER, CANADA V7X 1C4 March 21, 2012 Via , Original by Courier British Columbia Utilities Commission 6 th Floor, 900 Howe Street Vancouver, B.C. V6Z 2M3 Attention: Alanna Gillis, Acting Commission Secretary Dear Ms. Gillis: Re: Fortis BC Energy Inc. ("FEI") Extension of Operating Agreement between the District of Coldstream and FEI Commission Order No. G Our File No Please find enclosed the comments of the District of Coldstream in the above noted matter. Yours truly, MURDY & McALLISTER JGY/ky Enclosures cc. Diane Roy, Fortis Gord Schoberg, Fortis Paul Craig, Fortis Kristine Bienert, BCUC Laurel Ross, BCUC Trevor Seibel, District of Coldstream Mike Stamhuis, District of Coldstream

2 In the Matter of the Utilities Commission Act R.S.B.C. 1996, c. 473 And An Application by FortisBC Energy Inc. For approval of Operating Terms Between the District of Coldstream and FEI Response of the District of Coldstream The following response is made on behalf of the District of Coldstream ("Coldstream" or the "District") to the application dated February 27,2012 (the "Application") by FortisBC Energy Inc. ("Fortis") to the British Columbia Utilities Commission (the "Commission" or "BCUC") under section 32 of the Utilities Commission Act (the "UCA") for approval of operating terms for the distribution of natural gas within the boundaries of the District. Background A certificate of public convenience and necessity ("CPCN") was issued in 1967 by the former British Columbia Public Utilities Commission to Inland Natural Gas Company Limited ("Inland"), a predecessor of Fortis, for "transmission and distribution facilities". A copy of the CPCN provided by Commission staff to counsel for the District is attached as Exhibit "A". The District's Council passed a bylaw in July 1968 granting a franchise (the "Franchise") to Inland under the former Municipal Act, and the District and Inland subsequently entered into an operating agreement dated August 30, 1968 with a term of 21 years (the "1968 Agreement"). The Franchise and 1968 Agreement were renewed and extended by a further District bylaw and by an agreement between the District and Inland's successor, BC Gas Inc., dated January 28, 1991 (the "1991 Agreemenf'). Copies of the 1968 Agreement and the 1991 Agreement are included as Exhibits "B" and "C". While the terms of the 1991 Agreement provided for it to expire on August 11, 1999, the 1991 Agreement also provided for it to continue and be renewed thereafter on a year to year basis so long as the 1991 Agreement did not continue for more than 21 years. 1

3 The District and Fortis have been negotiating the renewal of the 1991 Agreement since at least April During that period, the Commission has approved extensions to the 1991 Agreement as noted in the Application. The District understands that Fortis is no longer seeking an agreement", but instead "terms" as set out in Appendix A to the Application (the "Fortis Terms"). According to Fortis, the Fortis Terms are based on an agreement that was entered into by Terasen and several municipalities in 2006 (the "2006 Agreement"). However, as Fortis also notes in the Application, the Fortis Terms are not identical to the 2006 Agreement, and are different from the document provided by Fortis to the District during the discussions about renewal of the 1991 Agreement. The Response of the District The District understands Fortis' position to be that access to public places in the District's boundaries by Fortis is to be on a basis that is "substantially similar" to that which Fortis has negotiated with other municipalities, and with the 2006 Agreement in particular. Fortis has justified the approach it has taken in its negotiations with the District on grounds stated on pages 3-4 of the Application. The District will provide its response to the approach taken by Fortis in its final submission in this proceeding. The District wishes to correct one point that Fortis made in the Application as well as in its communications with the District during the negotiation process (e.g., see extracts at Exhibit D ); the 2006 Agreement was not "approved" by or otherwise negotiated with or on behalf of the Union of British Columbia Municipalities ("UBCM"). Instead, the UBCM provided resources for use by the municipalities involved in the 2006 Agreement; the UBCM did not and has never endorsed the 2006 Agreement, whether on its own behalf or on behalf on any of its member local governments (see UBCM materials at Exhibit E). The Application states that the District has sought 26 revisions to the 2006 Agreement, that Fortis agrees outright with four of the revisions, agrees with two others with some modification, considers that seven are unnecessary, and opposes 13 others. As the Application now seeks approval of the Fortis Terms, rather than the 2006 Agreement that was presented to the District during negotiations, the District's response is to the Fortis Terms as follows: Section Issue Response of the District 1(e) Definition of Fortis is seeking to expand the scope of works it "Company may place in public spaces beyond what was Facilities" provided for in the CPCN, in the 1968 Agreement, 2

4 the 1991 Agreement, and by all statutes applicable to Fortis. The District can understand the need for Fortis to have flexibility in the location and placement of its "distribution equipment", and notes that the Commission is given jurisdiction in section 32 of the UCA to set "terms" in that regard. However, the expanded definition of Company Facilities, when combined with section 5.1 of the Fortis Terms, removes Fortis from any oversight or control by local government in matters that go beyond distribution equipment. In its application, Fortis refers to a variety of structures, such as valve assemblies and reducing stations that it says have been customarily constructed on municipal property. To the extent that such structures come within a reasonable definition of "distribution equipment", then the definition of company facilities should be amended accordingly by including those types of works; however, the blanket inclusion of what appears to be all tangible Fortis assets has not been justified by Fortis. While Fortis notes the remedy available to the District under s of the Fortis Terms, it should be unnecessary for the District to seek relief from the Commission (which, together with arbitration, are the only remedies provided the District by the Fortis Terms) when dealing with a matter that is otherwise purely within the jurisdiction and expertise of the District to address. The District notes the inclusion of "transmission system" into the proposed definition of "Company Facilities". While that specific term is not defined in the Fortis Terms (although Transmission Pipeline is), Fortis has not justified why the District should abandon the rights it has over transmission pipelines pursuant to the Oil and Gas Activities Act. 1(0) Definition of "New The proposed definition is unnecessarily broad (appears to Work" because of the overly inclusive definition of be stated 3

5 as 1(n) in FEI Application) Company Facilities incorporated by reference 5.1 Compliance with Fortis is seeking an order from the Commission Local Government under which no enactment of the District is, to the Enactments extent of any conflict, applicable to the broad set of powers sought by Fortis in the Application. Together with s. 12 of the Fortis Terms, this appears to seek an exemption for Fortis from, for example, complying with building permit and Building Code requirements for any building that Fortis should construct in the District. The rationale or justification for such an exemption is not apparent to the District and has not been explained by Fortis. The District has no knowledge about the extent to which Fortis wishes to construct facilities on Public Places or the nature of those works. Fortis argues that the District's rights are protected by its ability to object to New Works, presumably under s of the Fortis Terms. Section requires that (1) the District's objection be made within 10 days, (2) that the objection be "reasonable" (which may be open to debate when dealing with a bylaw), and (3) if the objection is not resolved, the matter is to be addressed under the dispute resolution provisions of the Fortis Terms, which provide for referral to the BCUC or arbitration. The District believes that such a mechanism is poorly suited for dealing with the application of valid municipal bylaws. The administration of building permits is a matter that the District has significant experience in and is grounded in its role as local government. This is not a matter well suited for arbitration and should not impose the need to pursue a referral to the Commission Notice for New Fortis indicates it agrees to the provision. Work 4

6 6.1.3 District Approval of Fortis states that it agrees with some but not all of New Work the changes proposed by the District, with the main difference appearing to be the inclusion of a reference to new works conflicting with the District's Official Community Plan ("OCP"), and other District enactments. The OCP is a fundamental tool in guiding the future development of the District and, under the Local Government Act municipal bylaws must be consistent with the OCP. The District believes that it is fundamental to sound and orderly planning in the District that the District have a means to provide input (even if it is just making an objection) on proposed works by third parties, such as Fortis, that would conflict with the OCP. Fortis object to subsection 6.1.3(d) proposed by the District, saying that it would given the District "complete discretion over whether [Fortis] may carry out New Work". However, this misconstrues the effect of section generally, which is that if the District objects to New Work, Fortis may accept the objection and not proceed with the New Work, or, if Fortis does not accept the objection, the New Work not proceed until the parties resolve the objection or the objection is resolved under the dispute resolution provisions of the Fortis Terms. With respect to the of the inclusion words "provided such objections are reasonable", the District believes this places an unnecessary and poorly defined limit over the ability of the District to obtain any benefit from section Inclusion of the clause would allow Fortis to take the position that any objection by the District is not reasonable. 6.2 Notice for Service Fortis states in the Application that it agrees with Lines the change in number of days for notice, but not the notice provision itself, saying that it restricts operating flexibility and introduces inconsistency in its operations. Fortis instead wants to make it so that any inquiry Fortis makes to the District for the 5

7 location of District utilities is to be deemed to be notice of Fortis' intent to "install, remove or repair SeNice Lines". The very language used in the proposed provision highlights the problem with the provision. Not only would the District be left, in effect, guessing as to whether a request for the location of District utilities is anything more than a request (which could be made for any number of reasons), but the provision then seeks to deem the request to be District approval to anyone of the removal, installation or repair of senice lines, without it even being told what will be occurring. The District does not believe that the provision of notice, whether by or otherwise, would be particularly onerous for Fortis. This matter is also discussed below in the discussion on section Specific Work The District does not agree with Fortis' views that Requirements the provision it seeks to add is covered elsewhere in the Fortis Terms: (a) As noted elsewhere in this Response, the District is concerned that Fortis is seeking to be exempt from District bylaws. (b) Carrying out work "with the due care and attention necessary to safeguard the interests of the public, [Fortis'] employees, and the [District's] employees", as provided by section 3, is not the same as carrying out work "in a good and workmanlike manner" in accordance with sound engineering practice." (c) Section does not speak to Fortis not interfering with municipal facilities. (d) Fortis notes in the Application that standards of work "are covered in some detail in section 6.4.2". While section does deal with work standards, it is standards applicable to 6

8 restoration work by Fortis. As Fortis has agreed in section to do restoration work "in accordance with the standards set out by the Municipality", the only reason Fortis has given for not agreeing with proposed s (d) is that it covered elsewhere in the Fortis Terms, the District does not see any basis for Fortis to object to the proposed provision. (e) Section does not, on its face, deal with interference with the public use and enjoyment of Public Places, whether undue or otherwise Ground Restoration The District is seeking a mechanism by which it can undertake restoration of work should Fortis fail to do that work in a timely or satisfactory way. Fortis' position on this point as stated in the Application is essentially that the District can trust Fortis to do the work. While the District is optimistic that this will be the case, the provision is not unusual in situations where third parties perform work on the property of another, is consistent with terms used elsewhere by the District, and provides a ready remedy to the District in situations where costs are likely to be minimal, and should not require invoking the dispute resolution mechanism of the Fortis Terms WCB Coverage As noted in the application, the District wishes to ensure that Fortis' contractors obtain Workers Compensation Board coverage. 6.7 Removal of works The District seeks a provision in the Fortis Terms that Fortis will remove abandoned above ground facilities. In response, Fortis says section already governs this situation. While the District interprets s to apply to instances where Fortis is undertaking activities of a limited scope and duration, such as during repairs, the District suggests that a reasonable alternative to proposed s. 6.7 would be to amend s to include in that 7

9 section a reference to removal and restoration of unused works as a further example of the scope of s (along with the example of pavement restoration already included). 7.1 Notice of Closure Fortis's summary of issues states Fortis is agreeable to the provision. However, Fortis has proposed language for s. 7.1 that the District has not accepted. Fortis proposes that the District be required to advise Fortis if Public Places are expropriated and Fortis is required to remove Company Facilities. Under the Expropriation Act, an expropriating authority is required to provide notice of its intent to expropriate to each "owner" of the land at issue. That Act defines "owner" in broad terms and, to the extent that Fortis was an occupant of the land, would include Fortis. As the District is not the only potential party that has the power to expropriate Public Places, the District is of the view that it is both more efficient and reasonable for the obligation to provide Fortis with notice of expropriations be in accordance with the Expropriation Act and rest with the specific expropriating authority. 8.1 Changes to District Fortis seeks in Section 8.1 to have the District Facilities Sought by agree to alter, change or relocate Municipal Fortis Facilities (which is broadly defined in the draft terms) as required by Fortis. The District does not presently know the nature or extent of changes that may be requested by Fortis. Section 884 of the Local Government Act provides that "all bylaws enacted or works undertaken" by a municipality must be consistent with an OCP. Thus, the District is not in a position to agree to a clause that, on its face, could require the District to undertake works in a manner inconsistent with its OCP, and thus contrary to the LGA. The wording proposed by the District for s. 8.1 seeks to have changes to Municipal Facilities comply with the 8

10 District's OCP and other bylaws. To the extent that any disputes may arise in future about Municipal Facilities, Fortis may seek relief under s. 33 or 36 of the VeA, which permit Fortis to apply to the Commission for an order concerning the use of municipal spaces for utility works. Fortis states in the Application that proposed s. 8.1 is reciprocal to s. 8.2, which deals with changes required to Fortis facilities by the District. However, the Fortis Terms attached to the Application include in s. 8.1 a statement that the Fortis Terms are deemed to be an agreement between the District and Fortis under section 76( 1)(c) of the Oil and Gas Activities Act. This addition to s. 8.1 has not been previously presented to the District by Fortis, Fortis has not explained to the District the reason for that change, nor proposed any equivalent provision to s. 76(1 )(c) to be applied to section 8.1 of the proposed terms. The District reserves its rights to further comment on this. 8.2 Changes to Fortis The wording of this provision contained in the Fortis Facilities Sought by Terms has been altered from what had been the District presented by Fortis to the District during negotiations. The provision now states that the Fortis Terms are deemed to be an agreement for the purposes of s. 76(1 )(c) of the Oil and Gas Activities Act. The District notes that Bill 30, the Energy and Mines Statutes Amendment Act, 2012 proposes to amend s. 76(1 )(c) of the Oil and Gas Activities Act. The District is providing information requests to Fortis concerning the application of the last sentence of proposed section 8.2. The District wishes to ensure that the proposed language in section 8.2 of the Fortis Terms that the District agree to pay for all costs for changes to affected Company Facilities be changed so that the District's responsibility for costs of changes be made subject to all applicable legislation, including 9

11 the Oil and Gas Activities Act and the Oil and Gas Activities Act General Regulation. 9.2 Communication Fortis states it is agreeable to the provision 10.3 Limitation on District Fortis indicates that it is opposed to proposed Liability language by the District that neither Fortis nor the District shall be liable to the other for indirect or consequential losses. However, the reason for Fortis' opposition is unclear to the District. The summary of Fortis' position on page 8 of the Application states that the matter is dealt with elsewhere in the Fortis Terms. However, the discussion about the issue at page 24 of the Application does not refer to that reason but instead states that the proposed wording is significantly different from other operating agreements entered into by Fortis. While the District wishes to reserve its rights of comment on this issue pending clarification of Fortis' position, the District does have concerns about the breadth of the mutual indemnities otherwise provided and believes that some limits on indirect or consequential loss are reasonable Insurance The District seeks the addition of a requirement that Fortis maintain CGL coverage in favour of the District with respect to Fortis' works and activities in the District. In response, Fortis states that the District should rely upon the indemnity and hold harmless provisions of s The District believes that it is more reasonable for the District to be protected by an independent insured against claims from third parties that will likely allege an error or omission by Fortis, than the promise of an indemnity by Fortis, and that it would not be onerous or unreasonable for Fortis to obtain such coverage. Fortis also notes in the Application that it carries insurance. As an alternative to the language proposed by the District, Fortis could agree to 10

12 name the District as an additional insured on Fortis' policy, and confirm that the amount of coverage is at least $5 million Environmental The District seeks the addition of a provision under Liabilities which Fortis assumes all environmental liability related to its use of Public Spaces. In response, Fortis states that it has already agreed to abide by all applicable laws and indemnify the District for its losses. However, that indemnity (s ) is limited on its face to claims for loss of life, personal injury or loss or damage to "property"; it does not include liability that may arise in other instances, such as legal or administrative sanctions for environmental offences, which do not necessarily (and often do not) involve loss of life, personal injury, or damage to property Timing of Fee Fortis proposes to pay an operating fee to the Payment District on the first day of November in the following year. The District understands that the operating fee is, in fact, collected by Fortis from its customers in the District. Thus, the operating fee would be paid to the District in the November of the year following its collection. The District is not aware of any justification for Fortis to retain the operating fee it collects from customers in the District for periods of up to 21 months, and instead believes that the fee should be paid on the first day of March in the year following its collection. Not only would this be consistent with other municipal operating agreements (as noted at p. 5 of the Application), but it would also be consistent with the 2006 Agreement presented to the District during negotiations. 12 Approvals, Permits This proposed provision is problematic for the and Licenses District because Fortis is seeking agreement by the District that Fortis be exempted from operation of District bylaws. The District does not have legal authority to agree to contract out of the application 11

13 of its bylaws. Among other things, this opens the District to potential claims, whether by Fortis or by third parties alleging loss, resulting from the District failing to comply with its legally imposed obligations to ensure compliance with standards set by bylaw Municipal Work The wording found in sections 6.2 and 13.1 of the Fortis Terms highlight the District's concerns about what appears to be an unjustified asymmetry in the rights and obligations of the parties. Both sections deal with the obligations that arise when one party undertakes construction or maintenance of its works. However, while in s. 6.2, Fortis seeks to only have to give the District 2-3 days notice, and that the notice be deemed to have occurred by requesting the location of municipal utilities. Fortis seeks 10 days notice of such work by the District. Bearing in mind that many municipal maintenance activities are undertaken on a day to day basis (e.g., pavement patching), and that Fortis has not better defined what activities are "likely" to affect its facilities, the District believes that the burden Fortis seeks to impose is both unworkable and unreasonable. Instead, the District would support a 2-3 day notice period Municipal Work Fortis opposes the introduction of the word "directly" to s on the basis that the word does not add clarity to the provision, and that it would add inconsistency. As all municipal bylaws theoretically "affect" Fortis, the addition of the term "directly" reduces the obligation on the District to just provide notice of bylaws that are likely to have a practical impact on it. Because of the volume of material produced, the alternative would be cumbersome for the District and likely also for Fortis Recovery of Indirect The District believes that any liability facing the Costs District for cost of commodity should be subject to an obligation on the part of Fortis to act with 12

14 reasonable diligence in stopping the leak quickly, and in seeking coverage for the loss from its insurer Cost Verification The District proposes that a $50,000 threshold be applied to this provision. This, or a similar, threshold would be efficient and reasonable bearing in mind the transaction costs associated with the process proposed by Fortis. The District also wishes to have clarification that costs payable to Fortis be based on depreciated values of Fortis' works. 15.7(c) Continuity of Fee Fortis proposes that if the Fortis Terms expire without being renewed, Fortis continue to operate on the District's Public Places but that Fortis not be required to pay the operating fee to the District after the expiry. This would result in a situation in which Fortis obtains all of the benefits of the Fortis Terms (presumably including collection of the operating fee from its customers within District boundaries), while the District loses a significant benefit associated with its ownership of its Public Places. Fortis would obtain a windfall in the nature of an unjust enrichment; creating an incentive for Fortis not extending the Fortis Terms. 15.7(e) Reimbursement of Fortis opposes paying operating fees that would operating fee otherwise arise between the end of the Fortis Terms and the commencement of any new operating agreement. As with s. 15(7)(c), this would again provide Fortis with a windfall Continuity of Fortis states it is agreeable to the provision. Obligations 13

15 EXHIBIT "A" Certificate of Public Convenience and Necessity Dated October 10, 1967

16 ..., PROVINCE OF BRITISH COLUMBIA PUBLIC UTILITIES COMMISSION IN THE MATTER OF the "Publ ic Uti lities Act" and IN THE MATTER OF Inland Natural Gas Company Lim{ted Appl ication for Certificate of Public Convenience and Necessity J.F.K. ENGLISH L. WleKS E. vj. BASSETT Chairman Comm iss ioner Commissioner The loth day of October, A.D CERTIFICATE OF PUBLIC CONVENIENCE AND NECESSITY WHEREAS a Public Hearing was held by the Public Utilities Commission on June 28th and 29th, 1967 to consider an application of Inland Natural Gas Company Limited (Inland) which in part proposed construction of the fol lowing projects:- I. Vi Ilage of Princeton - Transmission and distribution facil ities 2. District of Coldstream - Transmission and distribution facil ities 3. District of Peachland (including Westbank) Transmission and distribution facil ities; AND WHEREAS Inland has submitted studies showing that these areas have considerable potential for the consumption of gas; AND WHEREAS it has been demonstrated that the supply of gas to these areas wil I in no way cause an increase in rates chargeable elsewhere or cause a decrease in services provided elsewhere; AND WHEREAS it is considered in the public interest that the. Vi I lage of Princeton, the District of Coldstream and the District of Peachland (.including Westbank) should be supplied with natural gas; THIS COMMISSION HEREBY CERTIFIES that public convenience and necessity require or wil I require the construction and operation by Inland Natural Gas Company Limited of transmission and distribution facilities to supply natural gas to the fol lowing areas:- I. Village of Princeton 2. District of Coldstream 3. District of Peachland (including Westbank); AND THIS COMMISSION ORDERS AND DECLARES that Inland Natural Gas Company Limited shall proceed in accordance with the "Pipe-Ilnes Act" insofar as that Act is applicable and this Certificate shal I not be effective until the Company shal I have filed a copy of this Certificate with the Minister of Commercial Transport and notified the Minister of any application which the Company proposes to make under the "Pipe-I ines Act" in compliance with the foregoing part of this condition.,,//-t"./1' ) ~ :/,., <1 ' j.,1.,i j/ i.-' >=-, -,~ J(~UK. Engl ish, Chairman, PUBLIC UTILITIES COMMISSION. /

17 EXHIBIT "B" District of Coldstream Bylaw 465 and Agreement Dated August 30, 1968

18 the ';~l1e fer th.~ nnle 2Jnd g=:j,g fo? a 1leri,~ "Jntering into l..."1 /''t~~ LJ<~':.~ iiiatributtor. of of 't't.~nty-on:a ~"""a. ~e l1it.h th(i..\ ~nt.a:ttsch.."'d to and famine ~ of tbil!! by-law. 2. 'r'ne Ka:'t"Or tjj'1d Clerlt: :?l'lo h.ereby nut~ to ~ the mdd.r~t en hem-!? ijt' thilt Distnct or Co~~ and the Clen;: to e fix the :5. '5.lda 'ily-lall may ~ cited, tor all ~n u tj'1'he Di.tl'tri::t of Col~trewri; Q-Wl ~'l15e ~'-hv t r'*': :...t"~ kj.io...:....;...~~ District of ColtlstNa."J':.t pu~t to Section 22 of' ijy-bw or " tb.i:s 12 August, 196'8. ~,~ J., "',..,... 'j 2th August fj

19 THIS AGREEMENT made this 30th day of August in the year of our Lord One Thousand Nine Hundred Sixty-eight. BETWEEN: THE CORPORATION OF THE DISTRICT OF COLDSTREAM, a municipal corporation incorporated under the laws of the Province of British Columbia (hereinafter called the "Municipality") OF THE FIRST PART AND: INLA1l'"D NATURAL GAS CO. LTD., a body corporate duly incorporated under the laws of the Province of British Columbia, and having its registered office in the City of Vancouver, in the said Province (hereinafter called the "Company") OF THE SECOND PART WHEREAS westcoast Transmission Company Limited, a pipeline company incorporated by Special Act of the Parliament of Canada which is authorized to engage in the business of transporting natural gas by pipeline from Northern Alberta and Northern British Columbia to Southern British Columbia, and has constructed such a pipeline, has entered into contracts with the Company for the provision to it, of natural gas for the purpose of making same available for distribution in British Columbia in accordance with the terms of such contracts: AND WHEREAS the Company was formed for the purpose of engaging in the business of transporting, supplying, distributing and selling gas for industrial, commercial, domestic

20 and other uses for power, heat and energy, and pursuant to the terms and conditions of its contracts with westcoast Tranmission Company Limited, has available for such uses supplies of natural gas for the purpose of making same available to the Municipality and to consumers or customers within, or in the environs of, the Municipality; AND WHEREAS the Company pursuant to the provisions of a certificate of Public convenience and Necessity dated the loth day of October, 1967, and granted to it by the Public Utilities Commission of British Columbia, will construct and operate all the necessary facilities, pipelines, mains and pipes for a supply of gas (which term as used in this Agreement shall include natural gas, liquefied petroleum gas, manufactured gas and/or other utility gases or any of them or any mixtures thereof) to the Municipality and/or such consumers or customers as are situated within the boundar~ limits thereof, and is willing to do so on the terms and conditions hereinafter set forthi AND WHEREAS it is to the mutual advantage of the Company and the Municipality to enter into a Franchise Agreement all in accordance with the terms and conditions as hereinafter provided; AND WHEREAS the Company will construct the necessary transmission and distribution facilities, all in accordance with governmental, municipal, or other regulatory

21 authorities having jurisdiction over same, for the supply of gas to and within the Municipality. NOW THEREFORE THIS INDENTURE WITNESSETH that in consideration of the premises and mutual covenants and agreements herein contained, the parties hereto agree as follows: 1. The Company agrees to obtain a supply of natural gas from Westcoast Transmission Company Limited, and, subject as hereinafter provided, to distribute and sell gas within the boundary limits of the Municipality, and, subject as hereinafter provided, the Municipality insofar as and to the extent that it is able and so empowered, hereby grants to, bestows and confers upon the Company the charter right, franchise, or privilege to supply gas to the Municipality and its inhabitants and to consumers or customers situated within its boundary limits for the term of Twenty-one (21) years from the date upon which the By-law of the Municipality authorizing this Agreement as amended and approved pursuant to Section 246 comes into force under the terms of the Municipal Act, being 1960 R.S.B.C., Chapter 255 and amendments. 2. The Company agrees that the gas supplied to the Municipality and its inhabitants and to consumers or customers situated within its boundary limits shall at all times be of a quality and standard conforming with the regulations for the

22 time being in force and from time to time formulated under the provisions of the Gas Inspection Act being Chapter 129 of the Revised Statutes of canada, 1952, and any amending statutes, and also conforming with any regulations or laws applicable thereto, whether such regulations or laws be made or issued by the Government of Canada or by the Province of British Columbia and whether now or hereafter brought in force and effect. 3. Subject as hereinafter provided, the Municipality hereby grants to the Company the authority, permission and right for the term of this Agreement as set out in Clause One (1) hereof to enter in, upon and under all public thorough- 'fares, highways, roads, streets, lanes, alleys, bridges, viaducts, subways, public places, squares and parks within the boundary limits of the Municipality and over which the Municipality has control and authority for such permission and right to give, and the same to use, break up, dig, trench, open up and excavate, and therein, thereon and thereunder place, construct, lay, operate, use, maintain, renew, alter, repair, extend, relay and/orremove a distribution system which term means mains, pipes, valves and facilities for the purpose of carrying, conveying, distributing, supplying and making available for use gas within the said boundary limits of the Municipality as and in the manner herein set out, but excludes any transmission or main pipeline and appurtenances which are an integral part of the natural gas transmission system bringing gas to the boundary limits of the Municipality or through the

23 Municipality for distribution to others or areas outside said boundary ldnits. 4. Before placing, constructing or laying down the distribution system, or any part thereof, the Company shall file with the Municipality, or such officer or official thereof as shall be designated from tdne to time for such purpose by the Municipality, detailed plans and specifications showing the size and dimensions of the mains and pipes thereof, the proposed depth thereof below the surface of the ground, and the proposed location thereof, and the same shall not be placed, constructed or laid down without the approval of the Municipality or of such designated officer or official, as the case may be, PROVIDED ALWAYS that such approval shall not be unreasonably withheld. In establishing location of mains, the Company shall endeavor to use lanes or alleys in preference to streets, where same are available and the ~e thereof is compatible with and conforms to the general economics and engineering of the distribution system or the relevant portion thereof. 5. The Company shall give written notice to the Municipality, or such officer or official thereof as shall be designated from tdne to time by the Municipality for the purposes in the next preceding clause set out, of its intention to break up, dig, trench, open up or excavate any, or in or on any, public 'thoroughfare, highway, road, street, lane, alley, bridge, Viaduct, subway, public place, square

24 or park within the boundary limits of the Municipality, not less than Three (3) clear days before the beginning of such work, except in such cases of repair, maintenance or the like that can reasonably be deemed to be emergencies or in the interests of the health or safety of the public, or of the safety of property by whomsoever owned, or any of them, in which cases no notice need be first given but shall be given as soon as practicable thereafter. The provisions of this clause shall apply notwithstanding the provisions of the next preceding clause and the grant of the approval or approvals therein referred to. 6. Should any of the public thoroughfares, highways, roads, streets, lanes, alleys, bridges, viaducts, subways, public places, squares or parks, under or on which any part of the distribution system of the Company lies' or is constructed, be legally closed as such or alienated by the ~dnicipality or by or under any other paramount authority, the Company agrees that with all reasonable speed and dispatch after receipt of written notice from the Municipality it will remove and (if possible or practicable) relocate that part o its distribution system so affected by such closure or alienation, the cost of such removal and/or relocation to be at the cost and expense of the Municipality, unless such removal and/or relocation has been enforced upon the Municipality by any such other paramount authority without the Municipality having applied therefor.

25 7. The Company agrees with the Municipality that it will create and cause as little damage as possible in the execution of the authorities, permissions and rights to it hereby granted and will use its best endeavors to cause as little obstruction or inconvenience or danger as possible during the progress of any of the work hereinbefore set out, and will place and maintain such warning signs, barricades, lights or flares on, at or near the site of any work in progress as will give reasonable warning thereof and protection therefrom to members of the public, and further agrees to restore without unreasonable delay the said public thoroughfares, highways, roads, streets, lanes, alleys, Viaducts, bridges, subways, public places, squares and parks so broken up, dug, trenched, opened up or excavated to a J state of repair or condition as nearly as possible as existed immediately before the commencement of such work. 8. The distribution system of the Company and the mains and pipes thereof shall be laid in such manner as not to interfere with any public or private sewer or any other pipe, conduit, duct, manhole or system belonging to the Municipality or which shall have been previously laid down and be then subsisting in any said public thoroughfare, highway, road, street, lane, alley, bridge, viaduct,. subway, public place, square or park by, or with the permission or approval of, the Municipality or by virtue of any charter or right granted by competent governmental or municipal authority.

26 9. The Company agrees with the Municipality that it will protect, indemnify and save harmless the Municipality from and against all actions, proceedings, claims and demands of any corporation, firm or person against the Municipality and will reimburse the Municipality for all damage and expenses caused to it, in respect of or by the execution by the Company of the authorities, permissions and rights hereby to it granted or by reason of the construction, maintenance or operation ~f the distribution system of the Company within the boundary limits of the Municipality, except where same is not caused by or contributed to by the negligence or default of the Company, or its servants or agents. 10. The Municipality agrees with the Company that before J it makes any additions, repairs or alterations to any of its public services within the boundary limits of the Municipality, and which said additions, repairs or alterations may in any way affect any part of the distribution system of the Company, or any equipment thereof, it will give to the Company at its main office, if any, within the boundary limits of the Municipality, or if not then at its main office in the City of Penticton not less than Three (3) clear days notice thereof, except in such cases of repair, maintenance or the like that can reasonably be deemed to be emergencies orin the interests of the health or safety of the public, or of the safety of property by whomsoever owned, or any of them, in which case no notice need be first given but shall be given as soon as practicable thereafter. The Company shall thereupon be

27 entitled to appoint a representative to supervise or advise in respect to such additions, repairs or alterations and so long as the directions, instructions or advice of such representative are.or is followed or complied with by the Municipality, the Municipality shall be relieved from all liability in connection with any damage done to the property of the Company by reason of such additions, repairs, or alterations. 11. SUbject to the next cla~se hereof, the company agrees with the Municipality that during the term of this Agreement as set out in Clause One (1) hereof and the charter, right, franchise and privilege herein granted, but commencing only after the construction and putting into service of facilities so to do, it will supply such reasonable quantities of gas as may be required for consumption or purchase by its customers or consumers within the boundary limits of the Municipality PROVIDED THAT such requirements are to be supplied to places or buildings lying or being on property fronting or lying alongside a main or pipe of the distribution system of the Company. The property line of such property shall be the place o delivery of all gas supplied by the Company, but the Company shall provide and install free of charge a meter suitably located on the property to be supplied with gas. a service pip~line The company shall also supply and install from the property line to the meter on and in accordance with the costs and terms set forth in the company s tariff and revisions thereto as filed with and

28 approved by the British columbia Public Utilities Commission, from time to time. The said meter and service pipeline shall be located and installed in a manner and at a location selected by the Company, and shall ramain the property of the Company. The expense and risk of utilizing and using such gas after delivery at the said property line shall be borne by the consumer or purchaser and not by the Company unless any loss or damage occasioned by such utilization or user is directly attributable to the negligence or carelessness of the Co~pany, its servants or agents. 12. NotWithstanding anything to the contrary in this Agreement contained, and in particular notwithstanding the provisions of Clauses One (1), Two (2) and Eleven (11) hereof, the obligations, duties and covenants of the Company herein contained, and on its part to be performed and carried out, and the performance of this Agreement, are subject from time to time to (a) fire, explosion, lightning, tempest, the elements, adverse weather or climatic conditions, acts of God, force majeure, actions or acts or restraints of enemies, foreign princes, and governments (whether foreign or domestic), strikes, lockouts, riots, shortage of labour or materials, civil insurrection, delays in or shortage of transportation, ~~possibility or difficulty of or in manufacturing, mixing, procuring, receiving, distributing or delivering gas, or impossibility, difficulty or delay in procuring, acquiring or receiving materials or equipment required or advisable for the placing, construction, maintenance, or operation of the distribution system or any pipeline or facility for

29 bringing gas to the boundary l~its of the Municipality, and generally all shortage of supply or delays in delivery caused or resulting directly or indirectly from causes beyond the reasonable control of the Company, and (b) the construction and operation of the proposed natural gas pipeline of Westcoast Transmission Company Limited from Northern Alberta and/or Northern British Columbia to Southern British Columbia, and (c) the construction and operation of the transmission or main pipeline and appurtenances required to bring gas from such proposed natural gas pipeline to the boundary limits of the Municipality. 13. Subject as hereinafter provided, the Municipality agrees with the Company that it will not during the term of this Agreement as set out in Clause One (1) hereof, itself construct, operate or maintain a distribution system for the supplying of gas to the Municipality and/or its inhabitants and/or consumers or customers within its boundary limits, or to use the public thoroughfares, highways, roads, streets, lanes, alleys, bridges, viaducts, subways, public places, squares or parks under its control or owned by it, or any part of them, for such purposes. 14. The Company agrees that the rates which the Company will charge for gas sold to the Municipality or other consumers or customers taking delivery in the manner aforesaid within the boundary limits of' the Municipality shall be not greater than the applicable rates filed with and approved by the British Columbia Public Utilities Commission. Subject to

30 revision pursuant to the Public Utilities Act, the rules and regulations and maximum rates under which the company will sell gas within the boundary limits of the Municipality shall be as set out in the Company1s tariff as filed with and approved by the said British Columbia Public Utilities Commission. PROVIDED ALWAYS THAT, subject to the approval or order of the said Public utilities Commission the Company may sell gas as aforesaid at lower rates than in the said tariff set out where the quantity of consumption load factor and/or off peak demand warrant it so doing. 15. Either party hereto shall have the right at any time prior to Six (6) months before the expiration of the term of Twenty-one (21) years hereinbefore in Clause One (1) set out to give to the other party notice in writing of its desire to renew this Agreement and the charter, right, franchise and privilege hereunder for a further term of Twenty-one (21) or lesser number of years, and upon such terms and conditions as may be mutually agreed upon. As soon as possible after giving of such notice the parties shall, in the interest of both of them, enter into negotiations looking towards such renewal and shall use their best endeavours to bring such negotiations to a mutually satisfactory conclusion before the expiration of the said first mentioned term of Twenty-one (21) years. 16. In the event'that prior to Six (6) months before the expiration of the term of Twenty-one (21) years hereinbefore referred to neither party shall have given to the other

31 party the notice in writing of its desire for renewal as in the next preceding clause set out, or, in the event that such a notice in writing shall have been duly given but the parties shall not have agreed on all the terms and conditions of such renewal by the expiration of the said term of Twenty-one (21) years, then, and in either of such events, the Municipality shall have the right to purchase from the Company its whole business and undertaking within the boundary limits of the Municipality and being its distribution system and all its lands, buildings, plants, equipment, apparatus, vehicles, supply lines, supplies, stocks, tools and machinery and generally every and all its property and assets forming part of, or actually used or available for use exclusively in, its undertaking or business of manufacturing, treating, processing, supplying and distributing gas to consumers or purchasers within such boundary limits of the Municipality. PROVIDED THAT the Municipality shall not be entitled to purchase and the right of purchase hereinbefore given shall not cover any part of the business, undertaking or transmission or main pipelines (With appurtenances) of the company situate either inside or outside the boundary limits of the Municipality which are an integral part of the transmission system bringing natural gas to or through the Municipality or which the Company considers necessary to it in the manufacture, mixing, transportation, storage, distribution,' supply or sale of gas to other areas, corporations or persons not covered by this Agreement. In the event that the Municipality' shall acquire and desire to

32 exercise the said right to purchase it shall exercise the said right by notice in writing given to the Company not later than Three (3) days after the expiration of the said term of Twenty-one (21) years, and a sale and purchase made under this clause shall become, and be deemed to have become, effective at midnight of the last day of the said term of Twenty-one (21) years. 17. In the event of a sale and purchase by the Municipality under the provisions of the next preceding clause, the purchase price payable by the Municipality to the Company for the said business and undertaking (which price-is hereinafter referred to as lithe price") shall be such as may be agreed in writing between the parties not later than One (1) month after the said effective t~e of the sale and purchase, or within such further t~e as the parties may decide upon in writing PROVIDED THAT in the event of failure so to agree, or in the event of failure to agree as to whether or not any item or items of property is or are parts of the undertaking being sold and purchased, the matter in dispute shall be referred to arbitration held under the provisions of the Arbitration Act of the Province of British Columbia, wherein each party hereto shall appoint one arbitrator, and the said arbitrators so appointed shall. appoint a third. In determining the price, whether by negotiation or by arbitration, same shall be the fair value of the business and undertaking as a going concern at the said effective time of the sale and purchase, but it shall not include anything for any charter, franchise, right

33 or privilege granted to the Company under this Agreement, nor shall the so-called "scrap-iron" rule be applied in determining such fair value. the company within Ninety (90) The price shall be paid to days after the determination thereof and shall carry interest at the rate of Three (3%) percent per annum from the effective time of sale and purchase to payment of the price. In the event that after the price is determined the laws of British Columbia require the consent of the Lieutenant-Governor in Council to the sale and purchase or to any by-law that enabling, or require the assent of the citizens, rate payers or electors of the Municipality to the sale and purchase or the raising of money therefor, and such consent or assent is refused then -/ the Company and the Municipality shall be released from all obligations to complete such sale and purchase pursuant to such notice, but the Municipality shall pay all expenses or costs of the Company incurred in any arbitration held, and the Company shall be entitled to retain or be re~ursed for all profits made in the operation of the undertaking from the said effective time of sale. 18. In the event of a sale and purchase by the Municipality under the provisions of Clause Sixteen (16) hereof, the authorities, permissions, charters, privileges,rights and franchises given to the Company by Clauses One (1) and Three (3) hereof, and the duties and obligations of the Company referred to in Clauses One (1), Two (2) and Eleven (11) hereof, shall terminate and cease at the said effective time of sale and purchase.

34 19. The Company agrees with the Municipality that in the event that it should enter into any contract or franchise agrea~ent similar to this Agreement with The Corporation of the City of Kamloops, or The Corporation of the City of Vernon, or The Corporation of the City of Kelowna, or the Corporation of the City of Salmon Arm, or The Corporation of the District of S~~erland, or the City of Armstrong (any one of which is in this clause hereinafter referred to as a "Municipality") for the exclusive provision, distribution and sale of gas within such Municipality for a term of years wherein such Municipality is given an absolute right to purchase the distribution system of the Company situate therein on a date prior to the first day of september, 1975, then the Municipality, by not less than One (1) year's notice in writing to the Company, shall be entitled to declare that this Agreement shall expire at midnight of such prior date (or if there be more than one such prior date, of the earliest) and thereupon this Agreement shall thenceforth be read and construed as if the date of the expiration of the term of Twenty-one (21) years from the date hereof as set out in Clause One (1) hereof were the said declared earlier date of expiry, and the term.of this Agreement as set out in said Clause One (1) hereof were therein set out as the period from the date hereof to and including the said earlier date of expiry, and all relevant provisions hereof shall apply and have reference to such earlier date of expiry, mutatis mutandis, accordingly.

35 20. If at any time during the term of this Agreement as set out in Clause One (1) hereof, any dispute, difference or question shall arise between the parties hereto touchihg the construction, meaning or effect of this Agreement, or any clause thereof, or as to the extent or limit of any authority, permission, right, duty, obligation, benefit or liability of the parties hereto, then every such dispute, difference or question shall be referred to a single arbitrator appointed by the parties hereto or, in default of Agrea~ent, by and under the provisions of the Arbitration Act of the Province of British Columbia, and the said arbitration shall be held under the provisions of that Statute. 21. The award, determination or decision made under any arbitration held pursuant to the terms of this Agreement shall be final and binding upon the parties hereto, save as in the Arbitration Act of the Province of British Columbia otherwise provided. 22. Subject always to the provisions of Clause Twelve (12) and Clause Twenty (20) hereof, in the events of the Company making an authorized assignment or ~aving a receiving order made against it under the Bankruptcy Act and during bankruptcy failing to comply with any of the terms or conditions of this Agreement on its part to be observed or performed, or, the Company not having made an authorized assignment 'or having a receiving order made against it under the Bankruptcy Act, upon any wilful failure or neglect by the Company to comply with any of the major

36 terms or conditions of this Agreement and on its part to be observed or performed which continues for Thirty (30) days after the receipt of written demand by the Municipality for the observance or performance of such terms or conditions, the Municipality shall have the right by written notice to the Company to terminate this Agreement. The rights of the Municipality under this clause are and shall be in addition to or without prejudice to any other rights at law or in equity which it may have against the Company for or by reason of any breach by the Company of this Agreement or any part thereof. 23. Upon the termination of this Agreement at the expiration of the said term of Twenty-one (21) years as set out in Clause One (1) hereof or at such earlier date as provided in Clause Nineteen (19) hereof without a sale and purchase of the business and undertaking of the company taking place under the provisions of Clauses Sixteen (16) to Eighteen (18) inclusive hereof or upon the termination of this Agreement by cancellation notice from the Municipality under the provisions of Clause Twenty-two (22) or of Clause Twenty-three (23) hereof, the distribution system of the Company or that part of it then completed shall be and be deemed always to have been and to remain its own property and as such may be used by it in its business or removed in whole or in part as it shall see fit, and for such purposes, or either of them, said distribution system may remain i.n, on or under all the public thoroughfares, highways, roads, streets,

37 lanes, alleys, bridges, viaducts, subways, public places, squares and parks within the boundary limits of the Municipality and the Company may enter in, upon and under the same and the same to use, break up, dig, trench, open up and excavate for the purpose of the maintenance, renewal, repair, removal or operation of such distribution system, or any part thereof, but not for the extension thereof, PROVIDED THAT the Company shall in so doing comply with and be bound by the provisions of Clauses Two (2), Five (5), Six (6), Seven (7) and Nine (9) hereof, mutatis mutandis, notwithstanding the termination of this Agreement. 24. As compensation for the use by the Company of the public thoroughfares, highways, roads, streets, lanes, alleys, bridges, viaducts, subways, public places, squares and parks as provided in Clause Three (3) hereof, and for the charter, right, franchise or privilege to supply gas as provided in Clause One (1) hereof, the Company shall pay to the Municipality on the first day of November in each of the years 1969 to and including 1989 or such earlier year in which this Agreement may expire under the provisions of Clause Nineteen (19) hereof a s~~ equal to Three (3%) percent of the amount received in each immediately preceding calendar year by the Company for gas consumed within the boundary limits of the Municipality, but such amount shall not include revenues from gas supplied for re-sale, and, within Ninety (90) days after the twenty-first anniversary of the date of this Agreement or after such earlier date on which this Agreement may expire under the said provisions of Clause Nineteen (19)

38 hereof the Company shall pay to the Municipality a Slli~ equal to Three (3%) per'cent of the amount received by the Company for gas consumed, save as aforesaid, within the boundary limits of the Municipality during the period from the commencement of the calendar year in which such anniversary or earlier date falls to such anniversary or earlier date, as the case may be. The amount received by the Company in any particular period for gas so consumed, and upon which the aforesaid percentage compensation is based, shall be that amount for the equivalent period upon which the percentage tax provided under Section 333 of the Municipal Act, 1960 Revised Statutes of British Columbia, Chapter 255 as now enacted would be payable and as if said percentage compensation herein provided were a tax provided for under said section. AND such compensation shall not be or be deemed to be a tax or in lieu of any taxes, rates or licence fees otherwise properly payable to the Municipality. In the event that during the currency of this Agreement, the Company should enter into any contract or franchise agreement similar to this Agreement with a Municipality nw~ed and set out in Clause Nineteen (19) hereof wherein under a similar clause to this Clause Twenty-four (24) the,company shall agree to pay to such Municipality, as compensation for the use by the Company of the pbulic thoroughfares, highways, roads, streets, lanes, alleys, bridges, viaducts, subways, public places, squares and parks for like purposes as in Clause Three (3) hereof set out, a greater percentage compensation than Three (3%) percent of revenues

39 as herein provided, then such greater percentage shall be and be deemed to be substituted for the Three (3%) percent in this clause provided, but only applicable to the amounts received by the Company for gas consumed within the boundary limits of the Municipality, save as aforesaid, from the effective date of such other contract or franchise agreement until the expiration of the term of this Agreement as provided in Clause One (1) hereof or until the sooner termination hereof as hereinbefore provided. 25. Any notice, demand or request required or desired to be given or made under or in respect to this Agreauent shall be deemed to have been sufficiently given to or made upon the party to whom it is addressed if it is mailed at Vernon, British Columbia, in a prepaid registered envelope addressed respectively as follows: (a) (b) If given to or made upon the Municipality: lithe Municipal Clerk, R.R. 2 Vernon, B. C."; If given to or made upon the Company: lithe Manager, Inland Natural Gas Co. Ltd., and any notice, demand or request so given or made shall be deemed to have been received and given or made on the day after the mailing thereof. 26. Notwithstanding anything to the contrary in this Agreement contained, this Agreauent shall be subject to the provisions of the Pipe-lines Act, the Gas Utilities Act and the Public Utilities Act of the Province of British Columbia and the proper authorities and powers of the Public Utilities

40 to exclude, the application of the provisions of said Acts or any jurisdiction thereof or of the said Public Utilities Commission. 27. The company covenants and agrees with the Municipality that in the construction of its said distribution system, and that in the construction of any extension or extensions of its distribution system which may be made from time to time, it will insofar as it considers it practicable, and provided that the Company shall not consider in so doing that it will or might in any way be penalized in either cost or efficiency, employ labourers, workmen and artisans who reside in the Municipality and purchase in the Municipality such materials as are required for the said construction work as are available in the Municipality. The Municipality acknowledges that the construction and installation of a gas distribution syst~~ is a specialized construction project calling for the services of artisans and technicians with special skills and experience, and that in the performance by the Company of the covenant and agreement hereinbefore "in this paragraph set out, the Company shall not be deemed to be in default in performance thereof by its employing artisans or technicians who reside elsewhere than in the Municipality for any work requiring specialized skill or experience, even although there may be artisans or technicians residing in the Municipality and available who might be able to do such specialized work satisfactorily. In the event that the said distribution syst~~ or any part of parts thereo~, or any extension or extensions thereof,

41 are constructed or installed by any contractor or contractors to the Company, then the company covenants and agrees that it will endeavour to procure a similar covenant on the pa~~ of such contractor or contractors that any such contractor or contractors carry out and perform the covenant and agreement hereinbefore set out in this paragraph in the s~~e manner and to the same extent as if the Company itself were carrying out the work. 28. This Agrea~ent shall be assignable by the company to a subsidiary without consent of the Municipality but otherwise shall only be assignable by the Company with the consent in writing of the Municipality first had and obtained, such consent not to be unreasonably withheld. Subject to the foregoing, this Agreement shall enure to the benefit of and be binding on the parties hereto and their respective successors and assigns. IN WITNESS WHEREOF the parties hereto have hereunto caused their respective corporate seals to be affixed, attested to by the signatures of their officers in that behalf, the day and year first above written. The Corporate Seal of THE CORPORATION ) OF THE DISTRICT OF COLDSTREAM was here-) unto affixed in the presence of: ) ~:J~ ) t,,/ V ) ;; ~~ ) ) ) ) The Corporate Seal of INLA...~D N2\TURAL ) GAS CO. LTD. was hereunto affixed in ) the presence of: )

42 EXHIBIT"C" District of Coldstream Bylaw 1047 and Agreement Dated January 28, 1991

43 THE CORPORATION OF THE DISTRICT OF COLDSTREili~ BYLAH NO A bylaw to amend Bylaw No. 465 to authorize the extension of the agreement with Inland Natural Gas Company Ltd. (now B.C. Gas Incorporated) for the sale and distribution of natural gas within the District of Coldstream" WHEREAS the Council of the Corporation of the District deems it expedient to extend the term of the agreement for the sale and distribution of natural gas within the ant to Bylaw No. 465; of Coldstream with B.C. Gas District pursu- The Council of the Corporation of the District of Coldstream in open meeting assembled enacts as follows; 1. Citation This bylaw may be cited for all purposes as "District of Coldstream Natural Gas Franchise Bylaw No. 1047, 1991" ~TheMayor-and CJerk are hereby authorized to execute the agreement which would extend the franchise for the sale and distribution of natural gas within the District for a further period of 21 years pursuant to Section 646 of the Municipal Act.. READ A FIRST THill ON the 11th day of March, READ A SECOND TIME ON the nth day of March, READ A THIRD TIrffi ON the 11th day of March, Approval from the Minister of Municipal Affairs, Recreation and Culture received on the 7th day of May RECONSIDERED, PASSED AND FINALLY ADOPTED on the 27th day of May Hayor Clerk > Certified at third reading on March 11th, 1991.

44 STANDARD FORM FRANCHISE AGREEMENT THIS AGREEMENT made this 28th day of January 11991~ Between: BC Gas Inc West Hastings Street Vancouver, Sf His"eotumbiar Canada, V6E 3G3 And: Municipality of Coldstream 9901 Kalamalka Road Coldstream, British Columbia Canada, V1 B 1L6

45 BC GAS INC. STANDARD FORM FRANCHISE AGREEMENT 28th THIS FRANCHISE AGREEMENT made this day of January, 1991 _ BETWEEN: Municipality of Coldstream, a municipality Incorporated under the laws of the Province of British Columbia (hereinafter called the "Municipality") OF THE FIRST PART AND: BC Gas Inc. a body corporate duly incorporated under the laws of the Province of British Columbia. and having its registered office in the City of Vancouver, in the Province of British Columbia (hereinafter called the "Company") OF THE SECOND PART WHEREAS the Company has entered into gas purchase contracts for the supply of gas by pipeline for the purposes of making same available for distribution in British Columbia in accordance with the terms of such contracts. AND WHEREAS the Company was formed for the purpose of engaging in the business of transponing. supplying, distributing and seiling gas for industrial. commercial, domestic and other uses for power. heat and energy, and pursuant to the terms and conditions of its contracts with its suppliers. has available for such uses supplies of gas for the purpose of making same available to the Municipality and to consumers within, or in the environs of. the Municipality. AND WHEREAS the Company has constructed and is operating all the necessary facilities. pipelines. mains and pipes for a supply of gas (which term as used in this Agreement shall include natural gas, manufactured gas. mixed gas, liquefied petroleum gas, synthetic natural gas. liquefied natural gas, and/or other utility gases or any of them or any mixtures thereof) to the Municipality and such consumers or customers as are situated within the boundary limits thereof and is willing to continue to do so on the terms and conditions hereinafter set forth. AND WHEREAS it is to the mutual advantage of the Company and the Municipality to enter into this Agreement AND WHEREAS the Company has constructed the necessary transmission and distribution facilities. all in accordance with governmental, municipal, or other regulatory authorities having jurisdiction over same for the supply of gasto and within the Municipality. NOW THEREFORE THIS INDENTURE WITNESSETH that in consideration of the premises and mutual covenants and agreements herein contained. the panies hereto agree as follows:

46 - 2 - I. GRANT OF FRANCHISE The Municipality hereby grants to the Company. its successors and assigns. subject to the tenns. conditions and provisions hereinafter contained. the full power. right and libeny to place, construct, renew. alter. repair. maintain. operate and use its pipes and other equipment and appliances (which pipes and other equipment and appliances are hereinafter sometimes called "the gas system"). for mixing. transmitting. distributing. delivering. furnishing. selling and taking delivery of gas upon, along. across. over or under any public thoroughfare. highway. road. street-lane. alley. square, park. public place. bridge, viaduct. subway or watercourse in the Municipality (all or any of which are hereinafter sometimes called "public places") as may be necessary or convenient for the purposes of supplying and conducting gas to the consumers thereof. and the Company by its officers. employees, contractors and licensees as to that end authorized to enter upon any and all public places and to break at its own expense the surface and to make the necessary excavation thereon when and where the same may be required for the aforesaid purpose. and to do all other things reasonably necessary or convenient for the purpose of supplying gas to the inhabitants of the Municipality. and placing. constructing. renewing, altering, repairing. maintaining. operating and using the gas system doing as little damage as may be in the execution of the powers hereby granted. and causing as little obstruction as possible during the progress of the work. and at all other times. and restoring without unreasonable delay the public places in the Municipality to a state of repair or conditions as nearly as reasonably possible as existed immediately before the commencement of such work. and the Company shall at all times. while any public place shall be broken up. cause safeguards. to be set up and maintained during which same shall be broken up, and a proper guard during the day to the satisfaction of the Municipal Clerk or such other officer as may be appomted by the Municipality for that purpose. ") NOT TO INTERFERE WITH EXISTING FACILITIES The gas system shall be placed and constructed in such manner as not to interfere with any public or private sewer or any other pipe. conduit. duct. manhole or system belonging to the Municipality or which shall have been previously laid down and be then subsisting in any public place by. or with the pennission or approval of the Municipality, or by vinue of any charter or right granted by competent government or municipal authority. 3. COMPANY TO INDEMNIFY MUNICIPALITY The Company agrees with the Municipality that it shall protect. indemnify and save hannless the Municipality from and against all actions, proceedings. claims and demands of any corporation. finn or person against the Municipality and will reimburse the Municipality for all damage and expenses caused to it in respect of or by the execution by the Company of the authorities. pennissions and rights hereby granted to it or by reason of the construction. maintenance or operation of the gas system of the Company within the boundary limits of the Municipality. except where caused by or contributed to by the negligence or default of the Municipality or its servants or agents. The Company funher agrees that it shall protect and indemnify the Municipality from and against all claims. demands and actions by third persons in respect of damages sustained by reason of any operations of the Company in connection with the execution of the powers hereby granted, or by reason of any operations of the Company in relation to its gas system.

47 WRITTEN NOTICE EXCEPT IN EMERGENCIES The Company shall give notice in writing to the Municipality or such officer or official thereof as shall be designated from time to time by the Municipality for the purposes set out in Clause Five (5). of its intention to break up, dig, trench, open up or excavate any, or in or on any, public place. not less than three (3) clear days before the beginning of such work. except in such cases of repair. maintenance or the like that can reasonably be deemed to be emergencies or in the interests of the health or safety of the public. or of the safety of propeny by whomsoever owned, or any of them. in which cases no notice need be first given but shall be given as soon as practicable thereafter. S. APPROVAL OF GAS SYSTEM PLANS A plan showing the proposed location of the gas system to be placed or constructed from time to time shall be first submitted to and approved by such officer or official as shall be designated from time to time by the Municipality for that purpose, and the gas system shall not be placed or constructed without such approval. provided always it shall not be unreasonably withheld. 6. NOTICE TO COMPANY OF MUNICIPAL WORKS The Municipality agrees with the Company that before it makes any additions. repairs or alterations to any of its public services within the boundary limits of the Municipality. and which additions, repairs or alterations may in any way affect any pan of the gas system of the Company, it shall give to the Company at its main office in the British Columbia or such other office as the Company may advise the Municipality in writing from time to time not less than three (3) clear days notice thereof. except in such cases of repair. maintenance or the like that can reasonably be deemed to be emergencies or in the interests of the health or safety of the public, or of the safety of property by whomsoever owned, or any of them. in which case no notice need be first given but shall be given as soon as practicable thereafter. The Company shall be entitled to appoint a representative to supervise or advise in respect to such additions. repairs or alterations. The provisions of this clause shall not relieve the Municipality of its responsibilities under regulations pursuant to the Gas Safety Act, R.S.B.C Chapter 149 and any amendments thereto. 7. CLOSURE OF PUBLIC PLACES BY MUNICIPALITY Should any of the public places under or on which any part of the gas system of the Company lies or is constructed, be legally closed or alienated by the Municipality or by or under any other paramount authority. the Municipality shall notify the Company fonhwith. and the Company agrees that with all reasonable speed and dispatch after receipt of written notice from the Municipality, it shall remove and (if possible and practicable) relocate, subject as aforesaid to the approval of the Municipality, that part of its gas system so affected by such closure or alienation, the cost of such removal or relocation to be at the cost and expense of the Municipality, unless such removal or relocation has been enforced upon the Municipality by any such other paramount authority without the Municipality having applied therefor. 8. ALTERAnONS TO WORKS Notwithstanding anything hereinbefore contained, if either pany shall request the other pany to make some change in such other pany's pipes, equipment. plant or appliances installed on, over. under or adjacent to. public propeny in order to facilitate the installation or construction of new pipes, equipment. plant or appliances by the requesting

48 - 4 - party. such other party shall, if it reasonably can. carry out the change or alteration requested and shall charge the requesting party with the entire cost thereof. Such costs shall include without limiting the generality of the foregoing, such overhead charges on labour and materials as may be from time to time be charged by the non-requesting party. as well as all expenses and disbursements incurred by the non-requesting party in carrying out such change or alteration. 9. DAMAGE TO GAS SYSTEM If the Municipality shall destroy or damage any part of the gas system on. over. or under, public property which was installed before or after the date hereof the Municipality shall bear the cost of repairing the damaged gas system in such manner as to restore the damaged gas system to as good a state of repair as had existed prior to the occurrence of such damage or destruction and to the reasonable satisfaction of the Company. 10. GAS RATES CHARGED TO CONSUMERS The Company agrees that the rates which the Company shall charge for gas sold to the Municipality or other consumers or customers taking delivery in the manner aforesaid within the boundary limits of the Municipality shall be the applicable rates filed with and approved by the British Columbia Utilities Commission or its successor. 11. ALLOCATION OF GAS If the Company shall at any time not have a sufficient supply of gas to supply all the requirements of connected customers, the Company shall have the fight to prescnbe reasonable rules and regulations for allocating the available supply of gas for such requirements to domestic. commercial and industrial customers or consumers in that order or priority. or as approved by the British Columbia Utilities Commission or its successor. 12. EXTENSION OF SERVICES Subject to the elements, acts of God and of the Queen's enemies, and generally all shortages of supply or delays in delivery caused or resulting directly or indirectly from causes beyond the reasonable control of the Company. but commencing only after the construction and putting into service of facilities so to do. the Company shall supply such reasonable quantities of gas as may be required for consumption or purchase by its customers or consumers within the boundary limits of the Municipality, provided that such requirements are to be supplied to places or buildings lying or being on propeny fronting or lying alongside a main or pipe of the gas system of the Company. The property line of such propeny shall be the place of delivery of all gas supplied by the Company. The Company shall also supply and install a meter suitably located on the property and a service pipe line from the property line to the meter in accordance with the costs and terms set forth in the Company's tariff and revisions thereto as filed with and approved by the British Columbia Utilities Commission or its successor. from time to time. The said meter and'service pipe line shall be located and installed in a manner and at a location selected by the Company. and shah remain the property of the Company. The expense and risk of utilizing and using such gas after delivery at the said property line shall be borne by the customer or consumer and not by the Company unless any loss or damage occasioned by such utilization or user is directly attributed to the negligence or carelessness of the Company, its servants or agents.

49 COMPLIANCE WITH GAS SAFETY LEGISLATION The Company agrees that the gas supplied to the Municipality and its inhabitants and to consumers or customers situated within its boundary limits shall at all times be of a quality and standard conforming with the regulations for the time being in force and from time to time formulated under the provisions of the Electricity and Gas Inspection Act being Chapter 86 of the Statutes of Canada, and any amending statutes, and also conforming with any regulations or laws applicable thereto, whether such regulations or laws be made or issued by the Government of Canada or by the Province of British Columbia and whether now or hereafter brought in force and effect. 14. FEE FOR FRANCHISE RIGHTS As compensation for the use by the Company of the public places. as provided in Clause one (I) hereof. and for the exclusive charter. right, franchise. or privilege to supply gas granted herein. the Company shall pay to the Municipality on the first day of November in each year during the term of this Agreement a sum equal to three (3%) percent of the amount received in each immediately preceding calendar year by the Company for gas consumed within the boundary limits of the Municipality. but such amounts shall not include any percentage for or based upon any revenues received by the Company from gas supplied for resale. On the last day of March on the year immediately following the expiry or termination ofthis Agreement, the Company shall pay to the Municipality a sum equal to three (3%) percent of the amount received by the Company for gas consumed within the boundary limits of the Municipality during the period from the commencement of the preceding calendar year to the expiry or termination of this Agreement. Such compensation shall not be or be deemed to be in lieu of any taxes, rates. or licence fees otherwise properly payable to the Municipality. 15. DURATION AND EXCLUSIVITY OF FRANCHISE Subject as hereinafter provided the Municipality hereby covenants and agrees with the Company that the powers hereby granted to the Company for the purpose aforesaid are and shall be granted to the Company exclusively for a period of ten (10) years commencing the 12tb.day of August 19-S9.- and expiring on the -11thday of August (the "Primary Term") and continuing from year to year after the expiry of the Primary Term until terminated by either party upon twelve (12) months written notice of termination received one year prior to the expiry of the Primary Term or any anniversary thereafter. Notwithstanding the foregoing. the term of this Agreement shall not continue longer than twenty-one (21) years. During the Primary Term or any extension of the term of this Agreement thereafter the Municipality shall not itself supply gas to any of its inhabitants. or use or allow or consent to any other person. firm. or corporation to supply or distribute gas to any of its inhabitants. or to use the said public places. or any of them. for the purpose of laying gas mains or pipes along, through or under the same; for the purpose of supplying or distributing gas within the boundary limits of the Municipality. 16. RENEWAL Either party hereto shall have the right at any time prior to six (6) months before the expiration of the term of this Agreement, hereinbefore in Clause Fifteen (15) set out, to give to the other party notice in writing of its desire for a new agreement with powers as hereunder for a term of twenty-one (21) or lesser number of years. and upon such terms and conditions as may be mutually agreed upon. As soon as possible after giving of such notice. the parties shall, in the interest of both of them. enter into negotiations looking

50 - 6 - towards such a new agreement and shall use their best endeavours to bring such negotiations to a mutually satisfactory conclusion before the expiration of this Agreement. 17. OWNERSHIP OF THE GAS SYSTEM Upon the termination of this Agreement. the gas system of the Company shall be and remain the Company's property and as such may be used by it in its business or removed in whole or in part as it may see fit. and for any of such purposes. but subject to the conditions of Clause One (I). the Company may enter in. upon and under all the public places in the Municipality and otherwise for the purpose of the maintenance. renewals. repair. removal or operation of the gas system or any pan thereof; provided that the Company shall not leave any part of its gas system in such a state as to constitute a nuisance or a danger to the public through neglect. non-use and want of repair. 18. ASSIGNMENT This Agreement shall be assignable by the Company to a subsidiary. or to its successor. without the consent of the Municipality but otherwise shall only be assignable by the Company with the consent in writing of the Municipality first had and obtained. such consent not to be unreasonably withheld. Subject to the foregoing. this Agreement shall enure to the benefit of and be binding on the parties hereto and their respective successors and assigns. 19. AGREEMENT SUBJECT TO LAW This Agreement and everything herein contained shall be subject to the provisions of any statutory provision of the Government of Canada or of the Province of British Columbia relative thereto. and of the proper authorities and powers of the British Columbia Utilities Commission of the Province and nothing herein contained shall be deemed to exclude the application of the provisions of such statutory provisions or any jurisdiction thereof or thereunder. or of the British Columbia Utilities Commission or shall be deemed to be a waiver or abandonment by the Company of any right, privilege. or benefit conferred upon it by such statutory provisions. 20. RESOLUTION OF DISPUTES If at any time during the term of this Agreement any dispute. difference or question shall arise between the parties hereto touching the construction. meaning or effect of this Agreement or concerning any clause or thing contained herein or the rights or liabilities of the panies respectively under this Agreement. or if the parties are unable to agree with respect to any matter or thing hereof. then every such dispute. difference or question. if within the jurisdiction of the British Columbia Utilities Commission shall be determined by the British Columbia Utilities Commission and if not within such jurisdiction. shall be referred to arbitration pursuant to the Commercial Arbitration Act (B.C.). 21. BOUNDARY LIMITS In this Agreement the words "boundary limits" or "limits" of the Municipality or like terms. shall mean the boundary limits or limits of the Municipality as exists from time to time and over which the Municipality has control and authority.

51 7-22. NOTICE Any notice. demand or request required or desired to be given under the terms or in respect of this Agreement shall be deemed to have been well and sufficiently given if mailed prepaid registered post. and addressed respectively as follows: (a) if given to the Municipality: Municipality of Coldstream 9901 Kalamalka Road Coldstream, British Columbia Canada, Vl B 1L6 (b) if given to the Company: BC Gas Inc West,Hastings Street Vancouver. British Columbia Canada, V6E 3G3 Attention: Corporate Secretary or at such other address as may from time to time be specified in writing by a party hereto. and shall be deemed to have been given three (3) days after the mailing thereof. non postal delivery days excepted. 23. AGREEMENT TO ENURE Subject to the terms hereof this Agreement shall enure to the benefit of and be binding upon the Municipality. its successors and assigns. and upon the Company. its successors and assigns. 24. AGREEMENT NOT BINDING UNTIL APPROVED This Agreement shall not be binding upon the parties unless and until it has been approved or assented to as required by law and is subject to the approval of the British Columbia Utilities Commission. and shall not be binding upon the Municipality until it has been authorized or adopted by By-law of the Municipality. which By-law shall before coming into force be subject to the approval of the Minister. This Agreement will be null and void if the conditions set out in this clause are not all met within five (5) months of the date first above written.

52 - 8 - IN WITNESS WHEREOF the parties hereto have hereunto caused their respective corporate seals to be affixed. attested to by the signatures of their officers in that behalf. the day and year first above written. The Municipal Seal of the Municipality of Coldstream ), was hereunto affixed in the presence of: AUlh~ Authorized SignatoryC/..G?Kj/lj)JJ;!'i;5~ The Corrrtnon Seal of BC Gas Inc. was hereunto affixed in the presence of: // / /, / ;'!/i:?!:t4::ed~c;~ J., t onze 19natory...,..." ~~ /..,. -...=:::::== Authorize~ J~~~.-

53 EXHIBIT "0" Excerpts