ANNEX II

Zones for the Pipeline and the Dempster Line in Canada

Zone 3

Zone 4

Foothills Pipe Lines (North B.C.) Ltd.
Watson Lake to point of interconnection with
Westcoast's main pipeline near Fort Nelson.

Foothills Pipe Lines (North B.C.) Ltd.

Point of interconnection with Westcoast's main pipeline near Fort Nelson to the Alberta-B.C. border.

Zone 5

Foothills Pipe Lines (Alta.) Ltd.

Alberta-B.C. border to point of bifurcation near
Caroline, Alberta.

Zone 6

Foothills Pipe Lines (Alta.) Ltd.

Caroline, Alta. to Alberta-Saskatchewan border

near Empress.

Zone 7

ANNEX II

Foothills Pipe Lines (Alta.) Ltd.

Caroline to Alberta-B.C. border near Coleman.

Zone 8

Zone 9

Zone 10

Zone 11

Foothills Pipe Lines (South B.C.) Ltd.

Alberta-B.C. border near Coleman to B.C.-U.S. border near Kingsgate.

Foothills Pipe Lines (Sask.) Ltd.

Alberta-Saskatchewan border near Empress to

Saskatchewan-U.S. border near Monchy.

Foothills Pipe Lines (North Yukon) Ltd.
Mackenzie Delta Gas fields in the Mackenzie

Delta, N.W.T., to a point near the junction of
the Klondike and Dempster highways just west
of Dawson, Yukon Territory.

Foothills Pipe Lines (South Yukon) Ltd.

A point near the junction of the Klondike and Dempster highways near Dawson to the connecting point with the Pipeline at or near Whitehorse.

Cost Allocation in Zone 11

ANNEX III

The cost of service in Zone 11 shall be allocated to

total by dividing the actual capital costs by
the filed capital costs and multiplying by

100.
If actual capital costs are equal to or
less than 135% of filed capital costs, then
United States shippers will pay 100% of the
cost of service in Zone 11. If actual

9 are between 135%

capital costs in Zones 1
and 145% of filed capital costs, then the
percentage paid by United States shippers
will be adjusted between 100% and 66 2/3% on
a straight-line basis, except that in no case
will the portion of cost of service paid by
United States shippers be less than the pro-
portion of the contracted volumes of Alaskan gas
at the Alaska-Yukon border to the same volume of

Alaskan gas plus the contracted volume of

Northern Canadian gas. If the actual capital

ANNEX III

ii)

costs are equal to or exceed 145% of filed
capital costs, the portion of the cost of
service paid by United States shippers will
be not less than 66 2/3% or the proportion as
calculated above, whichever is the greater.
There will be calculated a percentage for the
cost-overrun on the Dawson to Whitehorse
lateral (Zone 11). After determining the

dollar value of the overrun, there will be
deducted from it:

(a) the dollar amount by which actual capital
costs in zones 1,7,8 and 9 (carrying U.S.
gas only) are less than 135% of filed

capital costs referred to in (iii) below; (b) in each of Zones 2, 3, 4, 5 and 6 the dollar amount by which actual capital costs are less than 135% of filed capital costs referred to in (iii) below,

multiplied by the proportion that the

U.S. contracted volume bears to the

total contracted volume in that zone.

ANNEX III

If the actual capital costs in Zone 11, after making this adjustment, are equal to or less than 135% of filed capital costs, then no adjustment is required to the percentage of the cost of service paid by United States shippers as calculated in (i) above.

If,

however, after making this adjustment, the actual capital cost in Zone 11 is greater

than 135% of the filed capital cost, then the proportion of the cost of service paid by United States shippers will be a fraction (not exceeding 1) of the percentage of the cost of service calculated in (i) above, where the numerator of the fraction is 135% of the filed capital cost and the denominator of the fraction is actual capital cost less the adjustments from (a) and (b) above. Notwithstanding the adjustments outlined above, in no case will the percentage of the actual cost of service borne by United States