<PAGE>
                                                                   Exhibit 10.2



                        NORTHERN BORDER PIPELINE COMPANY

                               OPERATING AGREEMENT

                                  APRIL 6, 2006

<PAGE>
                                                                               .
                                                                               .
                                                                               .

                        NORTHERN BORDER PIPELINE COMPANY

                               OPERATING AGREEMENT

                                  APRIL 6, 2006

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S>                                                                                     <C>
ARTICLE 1 - DEFINITIONS.........................................................         1

     1.1 DEFINITIONS............................................................         1

ARTICLE 2 - REPRESENTATIONS AND COVENANTS.......................................         3

     2.1 PARTNERSHIP'S REPRESENTATIONS AND COVENANTS............................         3
     2.2 OPERATOR'S REPRESENTATIONS.............................................         3

ARTICLE 3 - OBLIGATIONS OF OPERATOR.............................................         4

     3.1 OPERATOR'S RESPONSIBILITIES............................................         4
     3.2 CONTRACT EXECUTION.....................................................         8
     3.3 DAMAGES................................................................         8
     3.4 BOOKS AND RECORDS......................................................         8
     3.5 OPERATOR'S INDEMNITY...................................................         9
     3.6 PARTNERSHIP'S INDEMNITY................................................         9
     3.7 INSURANCE..............................................................        10

ARTICLE 4 - EMPLOYEES, CONTRACTORS, SUBCONTRACTORS AND CONSULTANTS..............        11

     4.1 OPERATOR'S EMPLOYEES...................................................        11
     4.2 STANDARDS FOR EMPLOYEES................................................        11
     4.3 NON-DISCRIMINATION.....................................................        11
     4.4 CONTRACTORS, CONSULTANTS AND SUBCONTRACTORS............................        12

ARTICLE 5 - FINANCIAL, ACCOUNTING, BILLING AND TAX PRACTICES....................        12

     5.1 ACCOUNTING AND COMPENSATION............................................        12
     5.2 BUDGETS................................................................        13
     5.3 DISPUTED CHARGES.......................................................        13
     5.4 AUDIT..................................................................        14
     5.5 CONSISTENT WITH GENERAL PARTNERSHIP AGREEMENT..........................        15

ARTICLE 6 - INDEPENDENT CONTRACTOR..............................................        15

     6.1 INDEPENDENT CONTRACTOR.................................................        15

ARTICLE 7 - INTELLECTUAL PROPERTY...............................................        15

     7.1 INVENTIONS AND COPYRIGHTS..............................................        15
     7.2 CONFIDENTIALITY........................................................        16

ARTICLE 8 - TERM................................................................        16

     8.1 TERM...................................................................        16
     8.2 UPON TERMINATION.......................................................        16

ARTICLE 9  - ARBITRATION........................................................        17

     9.1 ARBITRATION............................................................        17

ARTICLE 10 - FORCE MAJEURE......................................................        18
</TABLE>

                                       i

<PAGE>
<TABLE>
<S>                                                                                     <C>
     10.1 EFFECT OF FORCE MAJEURE...............................................        18
     10.2 NATURE OF FORCE MAJEURE...............................................        18
     10.3 NON-FORCE MAJEURE SITUATIONS..........................................        19
     10.4 RESUMPTION OF NORMAL PERFORMANCE......................................        19
     10.5 STRIKES AND LOCKOUTS..................................................        20

ARTICLE 11 - MISCELLANEOUS......................................................        20

     11.1 AMENDMENT.............................................................        20
     11.2 WAIVERS...............................................................        20
     11.3 SEVERABILITY..........................................................        20
     11.4 GOVERNMENTAL BODIES...................................................        20
     11.5 ENTIRETY..............................................................        21
     11.6 RECITALS..............................................................        21
     11.7 REMEDIES CUMULATIVE...................................................        21
     11.8 CONFLICTS.............................................................        21
     11.9 LAW OF THE CONTRACT...................................................        21
     11.9 OPERATOR'S OFFICE.....................................................        22
     11.11 ATTORNEYS' FEES......................................................        22
     11.12 COUNTERPART EXECUTION................................................        22

ARTICLE 12 - NOTICES............................................................        22

     12.1 NOTICES...............................................................        22

ARTICLE 13 - ASSIGNMENT.........................................................        23

     13.1 ASSIGNABILITY.........................................................        23
     13.2 SUCCESSORS AND ASSIGNS................................................        24
     13.3 EFFECTIVE DATE........................................................        24

EXHIBIT A - ACCOUNTING PROCEDURE................................................         1
</TABLE>

                                       ii

<PAGE>

                               OPERATING AGREEMENT

      THIS AGREEMENT dated this 6th day of April, 2006, by and between Northern
Border Pipeline Company, a general partnership ("Partnership"), and TransCan
Northwest Border Ltd. a Delaware Corporation ("Operator").

                                    RECITALS

      WHEREAS Partnership was formed pursuant to an agreement effective as of
March 9, 1978, as amended, supplemented or amended and restated on or before
April 6, 2006 (the "General Partnership Agreement"), as successor to all rights,
title and interests of Northern Border Pipeline Company as the Person designated
by the Presidential Report and related regulatory proceedings and orders to
construct and operate a natural Gas pipeline system in the contiguous States
pursuant to Section 7(a)(4)(B) of the Alaska Natural Gas Transportation Act of
1976; and

      WHEREAS Partnership desires to engage Operator to Operate the Line (as
defined herein) in accordance with the terms and conditions set forth in this
Agreement; and

      WHEREAS Operator is willing and able to Operate the Line in accordance
with the terms and conditions set forth below.

      NOW THEREFORE, in consideration of the representations, covenants and
premises hereinafter set forth the parties agree as follows:

                             ARTICLE 1 - DEFINITIONS

1.1   Definitions

      As used in this Agreement, the definitions used in the General Partnership
      Agreement shall, except as specifically provided herein, have the same
      meanings in this Agreement. The following words and terms shall have the
      meanings set forth herein:

                                       1

<PAGE>

      (a)   The word "Affiliate" means any Person which, directly or indirectly
            through one or more Persons, controls or is controlled by or is
            under common control with another Person. For greater clarity, TC
            PipeLines, LP is an Affiliate of Operator.

      (b)   The word "day" shall mean a period of twenty-four (24) consecutive
            hours commencing at 8:00 a.m. Central Time, except that appropriate
            adjustments shall be made during the days when a time change is made
            from Standard Time to Daylight Savings Time and vice versa.

      (c)   The word "month" shall mean a period of time beginning on the first
            day of a calendar month and ending at the same time on the first day
            of the next succeeding calendar month.

      (d)   The term "calendar year" shall mean each twelve (12) month period
            beginning on the first day of a calendar year and ending on the
            first day of the next calendar year, provided that the first year
            hereunder shall begin on April 1, 2007, and shall end on December 31
            next following and further provided that the last calendar year
            shall end at the end of the term provided in Section 8.1, unless
            extended by mutual agreement between Partnership and Operator. The
            term "year" shall mean a period of 365 days, or 366 days if such
            period includes February 29 of a leap year.

      (e)   The term "Accounting Procedure" shall mean the accounting procedure
            set forth in Exhibit "A" hereto.

      (f)   The term "party" shall mean Partnership or Operator and "parties"
            shall mean both Partnership and Operator.

      (g)   The term "Partnership" shall mean Northern Border Pipeline Company
            and any successor entities thereto.

      (h)   The term "Line" shall mean the interstate Gas pipeline and related
            facilities owned by the Partnership, extending from the United
            States-

                                       2

<PAGE>

            Canada border near Port of Morgan, Montana to its terminus near
            North Hayden, Indiana, and any extensions, expansions, additions,
            improvements or replacements thereof.

      (i)   The term "Operation of the Line" or "Operate the Line" shall refer
            to the obligations or the performance by Operator of the obligations
            related to the Line as set forth in the General Partnership
            Agreement and this Agreement.

                    ARTICLE 2 - REPRESENTATIONS AND COVENANTS

2.1   Partnership's Representations and Covenants

      (a)   Partnership represents that Operator shall have all rights and
            obligations of Operator as set forth in Section 8 of the General
            Partnership Agreement.

      (b)   Partnership shall cooperate with Operator, including reimbursing
            Operator on a timely basis for all reasonable and proper costs and
            expenses, including overhead, administrative and general expenses
            incurred by Operator and overhead, administrative and general
            expenses incurred by Operator's Affiliates in rendering their
            services in order to facilitate the performance of the obligations
            set forth in the General Partnership Agreement and herein.

2.2   Operator's Representations

      (a)   Operator represents that in performing the responsibilities set
            forth in Article 3, it shall carry out such responsibilities or
            shall cause its Affiliates and all contractors, subcontractors and
            consultants selected to carry out such responsibilities with the
            same degree of diligence and care that Operator would exercise if
            operating its own property in a sound, workmanlike and prudent
            manner and it shall comply, and shall require its Affiliates and all
            contractors, subcontractors and consultants selected to carry out
            such responsibilities to comply, with all relevant laws, statutes,

                                       3

<PAGE>

            ordinances, safety codes, regulations and rules applicable to the
            Operation of the Line.

      (b)   Operator represents that it shall comply with the provisions of the
            General Partnership Agreement applicable hereto. Any reference in
            this Agreement to the General Partnership Agreement refers to the
            General Partnership Agreement as amended, supplemented or amended
            and restated on April 6, 2006. Any subsequent amendments or
            additions to the General Partnership Agreement after April 6, 2006
            affecting the rights and obligations of Operator shall not revise or
            amend the rights and obligations of Operator as set forth in this
            Agreement, unless and until Partnership and Operator, through good
            faith negotiations, mutually agree that such amendment or additions
            shall revise or amend the rights and obligations of Operator.

                       ARTICLE 3 - OBLIGATIONS OF OPERATOR

3.1   Operator's Responsibilities

      Operator, subject to budget authorizations and other specific
      authorizations by the Management Committee, shall have the general
      responsibility for the day-to-day management of the Line as described
      below:

      (a)   provide the day-to-day management supervision and operating,
            maintenance, administrative and related services to Partnership,
            including legal, accounting, procurement, emergency response, repair
            and overhaul, integrity management, replacement of plant,
            construction supervision, engineering, planning, budgeting,
            treasury, insurance administration, tax, industry relations,
            day-to-day public affairs and human resource support and support for
            general regulatory matters;

                                       4

<PAGE>

      (b)   make reports to and consult with the Management Committee or Partner
            in the form and at the times requested by the Management Committee
            or any Partner or its designated representatives;

      (c)   carry out any activities related to the marketing and administration
            of transportation or other services on the Line, including the
            discounting of such services from tariff rates;

      (d)   except as otherwise provided by applicable governmental regulations,
            retain all charts, records, books of account, Partnership tax
            returns, plans, designs, studies and reports and other documents
            related to the design, construction, operation, maintenance, repair,
            extension, expansion, addition, improvement or replacement of the
            Line, or any part thereof, for a period of at least three (3) years
            from the date of completion of the activity to which such records
            relate;

      (e)   purchase materials, equipment and supplies in the name of the
            Partnership necessary for the design, construction, operation,
            maintenance, repair, extension, expansion, addition, improvement or
            replacement of the Line, or any part thereof, and sell or exchange
            such materials, equipment and supplies. Operator may purchase such
            materials, equipment and supplies on a cooperative basis with
            Operator's Affiliates or from Operator's Affiliates, provided that
            the terms of such purchase are no less favourable to Partnership
            than those prevailing at the time for similar materials, equipment
            and supplies from unaffiliated third parties;

      (f)   manage any construction of repairs, extensions, additions,
            improvements or replacements of the Line, or any part thereof, as
            approved by the Management Committee, including retaining any
            contractors required for the design, project management and
            construction of such project;

      (g)   purchase, option or otherwise acquire rights-of-way, land in fee and
            permits in the name of Partnership necessary for construction,
            operation,

                                       5

<PAGE>

            maintenance, repair, extension, expansion, addition, improvement or
            replacement of the Line, or any part thereof; resist the perfection
            of any liens against Partnership property and, to the extent
            permitted by law, hold Partnership property free from all liens;

      (h)   review with and advise Partnership regarding engineering plans and
            outlines for all necessary design repairs, extensions, expansions,
            additions, improvements or replacements of the Line, or any part
            thereof;

      (i)   supervise and report to Partnership regarding readings of all
            measuring equipment required in connection with the Line;

      (j)   review the qualifications of and retain outside consultants,
            contractors (including the services of Operator's Affiliates or
            Partner's Affiliates, provided that the services of any such
            Affiliates are utilized on terms materially no less favourable to
            Partnership than those prevailing at the time for comparable
            services of unaffiliated independent Persons) and other services;

      (k)   carry out any activities related to the financing or refinancing of
            the Line;

      (l)   utilize, as Operator deems necessary, the services of its Affiliates
            or Partner's Affiliates, provided that such services are utilized on
            terms materially no less favourable to Partnership than those
            prevailing at the time for comparable services of unaffiliated
            independent Persons.

      (m)   prepare, file and prosecute applications for regulatory and
            governmental authority required by Partnership and make periodic
            filings required of Partnership by governmental or regulatory
            agencies having jurisdiction;

      (n)   prepare, file and prosecute any rate case application under Sections
            4 or 5 of the Natural Gas Act or any successor provision;

      (o)   prepare tax returns required of Partnership and pay taxes owing by
            Partnership;

                                       6

<PAGE>

      (p)   prepare and file all administrative forms or reports (including any
            regulatory filings, safety reports, operating reports and any other
            reports required) with governmental and other agencies in connection
            with the Operation of the Line; all reports in connection with
            emergency or unusual circumstances shall be made as expeditiously as
            reasonably possible;

      (q)   make immediate reports to Partnership of all unusual or significant
            occurrences in relation to the Line, regardless of whether or not
            such reports have been required pursuant to Section 3.1(b);

      (r)   make recommendations to Partnership as required by the General
            Partnership Agreement for the proposed budget required for the Line
            the Operation of the Line for the succeeding calendar year or
            portion thereof;

      (s)   provide an adequate number of qualified supervisory and professional
            and craft personnel to perform the obligations contemplated
            hereunder;

      (t)   require all contractors, vendors and suppliers to perform their
            services in accordance with sound, prudent and workmanlike industry
            practices;

      (u)   have or provide custody of funds, notes, drafts, acceptances,
            commercial paper and other securities belonging to Partnership; keep
            funds belonging to Partnership on deposit in one or more banking
            institutions as approved by the Management Committee; and, subject
            to direction by the Management Committee, invest available funds in
            the manner provided for by the Management Committee, disburse such
            funds, and keep appropriate records in connection with all the above
            transactions;-

      (v)   make and retain records and prepare all forms and reports in
            accordance with Article 5;

      (w)   maintain a system of internal accounting and audit controls
            consistent with regulatory requirements applicable to Partnership or
            any Partner;

                                       7

<PAGE>

      (x)   report to the Management Committee as provided in Section 8.4.8 of
            the General Partnership Agreement;

      (y)   review from time-to-time the rates and fees charged for
            transportation services and recommend to Partnership revision in
            such rates and fees as necessary to reflect increased or decreased
            costs or other changes in the conditions of service in order to
            assure that all costs are reflected in the tariffs of Partnership.

3.2   Contract Execution

      Contracts relating to Operator's responsibilities under this Agreement may
      be executed by Operator on behalf of Partnership.

3.3   Damages

      Notwithstanding any other provision of this Agreement, Operator shall not
      be responsible for any indirect or consequential damages, including loss
      of profit, revenues or pipeline transportation capacity.

3.4   Books and Records

      All of the books, records, charts and other documents prepared and
      retained by Operator in connection with the Operation of the Line shall,
      as provided in Section 5.4, be made available during normal business hours
      to Partnership or any Partner or their respective representatives to
      permit them to audit and verify the accuracy of any statement, billing,
      charge or computation made by Operator in connection with this Agreement.
      Operator shall obtain similar rights from contractors, subcontractors and
      consultants performing services in connection with the Operation of the
      Line and, to the extent reasonably possible, obtain similar rights for
      Partnership and Partners.

                                       8

<PAGE>

3.5   Operator's Indemnity

      Operator shall indemnify and hold Partnership, its employees or agents
      harmless from and against all actions, claims, demands, cost and
      liabilities to Partnership arising from:

      (a)   all actions (or failures to act) by Operator which are not in
            accordance with the terms of this Agreement or an express direction
            by Partnership, excluding actions (or failures to act) by Operator
            in good faith within the scope of its authority in the course of the
            Operation of the Line; or

      (b)   claims for non-payment of any and all contributions, withholding
            deductions or taxes measured by the wages, salaries or compensation
            paid to Persons employed by Operator in connection with the
            Operation of the Line.

3.6   Partnership's Indemnity

      (a)   Partnership shall indemnify and save harmless the Operator against
            all actions, claims, demands, costs and liabilities arising out of
            the acts (or failure to act) of Operator in good faith within the
            scope of its authority in the course of Operation of the Line
            including claims, demands, costs and liabilities arising from the
            negligence of Operator, its officers, agents, employees, or
            Affiliates, and Operator shall not be liable for any obligations,
            liabilities, or commitments incurred by or on behalf of the
            Partnership as a result of any such acts (or failure to act).
            Operator shall not be indemnified for its gross negligence or wilful
            misconduct.

      (b)   Any and all claims, damages or causes of action in favour of anyone
            other than Partnership arising out of the Operation of the Line
            which are not covered by insurance as per Section 3.7 shall be
            settled or litigated and defended by Operator in accordance with its
            best judgment and discretion when (i) the amount involved is less
            than a ceiling amount to be established by the Management Committee;
            (ii) no injunctive or similar

                                       9

<PAGE>

            relief is sought; and (iii) no criminal sanction is sought;
            otherwise, such decision shall be made by the Management Committee,
            and any settlement or defense thereof shall be controlled by the
            Management Committee.

3.7   Insurance

      (a)   Operator shall, subject to the approval of the Management Committee,
            carry and maintain insurance for the benefit of Partnership and
            Operator and require contractors, subcontractors or consultants to
            carry and maintain insurance deemed adequate by Operator, as
            approved by the Management Committee, to protect the Partnership and
            satisfy any other requirements of the law.

      (b)   Insurance as approved by the Management Committee maintained by the
            Operator shall be a reimbursable cost pursuant to Section 5.1(b).

      (c)   Operator may carry and maintain such other insurance for its own
            account as he may deem necessary, but in the event other insurance
            is carried, Operator agrees to waive and agrees to have its insurers
            waive any rights of subrogation they may have against the
            Partnership and individual Partners thereof, or the Affiliates of
            any of them, and/or their directors, officers, employees, servants
            or agents.

      (d)   With respect to claims and losses for damage, injury or destruction
            of property which is a part of the Line, which property is covered
            by Insurance other than insurance provided for in paragraph (a) of
            this Section 3.7, it is agreed that neither Operator nor Partnership
            or any of its Partners shall have any rights of recovery against one
            another, nor against the Affiliates of each, nor the insurers of any
            of them, and their rights of recovery are mutually waived. All such
            policies of insurance purchased to cover the Line or any part
            thereof, or the Operation of the Line or any part thereof, or any
            Gas transported or handled therein, shall be endorsed properly to
            effectuate this waiver of recovery.

                                       10

<PAGE>

             ARTICLE 4 - EMPLOYEES, CONTRACTORS, SUBCONTRACTORS AND
                                  CONSULTANTS

4.1   Operator's Employees

      Operator shall employ or retain and have supervision over the persons
      required by Operator to Operate the Line in an efficient and economically
      prudent manner. Operator shall pay all reasonable costs and expenses in
      connection therewith, including compensation, salaries, wages, overhead
      and administrative and general expenses incurred by Operator's Affiliates,
      and, if applicable, social security taxes, workers' compensation
      insurance, retirement and insurance benefits and other such expenses.
      Subject to the provisions of the General Partnership Agreement, the
      compensation for Operator's employees shall be determined by Operator. All
      authorized costs and expenses paid by Operator pursuant to this Section
      4.1 shall be reimbursed to Operator by Partnership as provided in the
      Accounting Procedure.

4.2   Standards for Employees

      All employees engaged or directed by Operator in connection with the
      Operation of the Line shall be duly qualified and experienced to perform
      such obligations. Operator shall at all times enforce strict discipline
      and maintain good order among such employees, and shall require such
      employees to comply with all relevant laws, statutes, ordinances, safety
      codes, regulations and rules applicable to the Operation of the Line.

4.3   Non-Discrimination

      In performing under this Agreement, Operator will not discriminate against
      any employee or applicant for employment because of race, creed, color,
      religion, sex, national origin, age or handicap, and will comply with all
      provisions of Executive Order 11246, as amended; Section 503 of the
      Rehabilitation Act of 1983, as amended and the Vietnam Era Veterans'
      Readjustment Assistance Act of 1974, as amended.

                                       11
<PAGE>

4.4   Contractors, Consultants and Subcontractors

      The provisions of Sections 4.1, 4.2 and 4.3 shall be applicable to any
      contractors, subcontractors and/or consultants retained in connection with
      the Operation of the Line.

ARTICLE 5 - FINANCIAL, ACCOUNTING, BILLING AND TAX PRACTICES

5.1   Accounting and Compensation

      (a)   Operator shall keep a full and complete account of all costs and
            expenses incurred by it in connection with the Operation of the Line
            in the manner set forth in the Accounting Procedure.

      (b)   Operator shall be reimbursed, in the manner set forth in the
            Accounting Procedure, by Partnership for all costs and expenses
            authorized by the Management Committee and all reasonable and proper
            costs and expenses paid by it for Partnership in connection with the
            Operation of the Line; provided, however, that costs and expenses
            incurred by Operator under Section 3.5 shall not be reimbursed by
            Partnership. It is the intent of the parties that Operator shall
            Operate the Line on a fully reimbursed basis without profit or loss.
            To the extent that a deviation from this standard occurs,
            appropriate adjustments will promptly be made.

      (c)   Upon termination of this Agreement, Operator shall be reimbursed by
            Partnership for all reasonable and proper costs and expenses
            incurred by Operator in winding up its duties under this Agreement
            and transferring its duties to the succeeding operator. The parties
            agree to negotiate in good faith and reach mutual agreement
            regarding such costs and expenses prior to incurring such costs and
            expenses. If, following such negotiation, the parties are unable to
            reach agreement, Operator may incur such costs and expenses and the
            amount of reasonable and proper compensation shall be referred to
            binding arbitration in accordance with Article 9.

                                       12

<PAGE>

      (d)   To the extent that Operator enters into activities other than the
            Operation of the Line, Operator shall separately account for all
            such costs and expenses and Partnership shall not be billed for such
            costs or expenses.

5.2   Budgets

      On or before each October 1, Operator shall provide to the Management
      Committee an indicative estimate of capital expenditures and operating
      income and expenses which Operator anticipates for the ensuing calendar
      year. On or before each November 1 Operator shall prepare and submit for
      approval of the Management Committee a final budget including estimated
      capital expenditures and operating income and expenses. Except as the
      Management Committee may otherwise direct, the budget approved by
      Partnership and then in effect shall constitute authorization of Operator
      to incur the expenditures contained in such budget. The budget approved by
      the Partnership shall be adequate for Operator to meet its current
      responsibilities under this Agreement, including the performance standard
      set out in Section 2.2(a).

5.3   Disputed Charges

      Partnership may, in the manner set forth in the Accounting Procedure, take
      written exception to any bill, statement or other accounting rendered by
      Operator for any expenditure or any part thereof, on the ground that the
      same was not a cost or expense authorized by the Management Committee or a
      reasonable and proper cost or expense incurred by Operator in connection
      with the Operation of the Line. Partnership shall nevertheless pay in full
      when due the amount of all bills, statements or accountings submitted by
      Operator. Such payment shall not be deemed a waiver of the right of
      Partnership to recoup any contested portion of any bill, statement or
      accounting. However, if the amount as to which such written exception is
      taken or any part thereof is ultimately determined in accordance with
      Article 9 not to be a cost or expense authorized by the Management
      Committee or a reasonable and proper expense incurred by Operator in
      connection with the Operation of the Line, such amount or portion thereof
      (as the case may be) shall

                                       13

<PAGE>

      be refunded by Operator to Partnership together with interest thereon at a
      rate (which in no event shall be higher than the maximum rate permitted by
      applicable law) equal to the prime rate charged by Citibank of New York,
      or its successor, from time to time to responsible commercial and
      industrial borrowers during the period from the date of payment by
      Partnership to the date of refund by Operator.

5.4   Audit

      In addition to the audit responsibilities assigned by the General
      Partnership Agreement to Operator and the Audit Committee, Partnership or
      its designated representatives (including representatives from each
      Partner) and any Partner or its designated representatives, after fifteen
      (15) days' prior written notice to Operator, shall have the right during
      normal business hours to audit, at its own expense, all books and records
      of Operator as well as the relevant books of account of Operator's
      contractors relating to the Operation of the Line, provided that neither
      this section nor Section 3.4 allows Partnership or a Partner to: (a)
      review any books and records of Operator's Affiliates which do not
      directly relate to the provision of services under this Agreement and the
      construction and Operation of the Line; or (b) challenge the basis of
      allocations made pursuant to the Allocation Policy (as defined below)
      unless there is a material increase in the total overhead costs from prior
      levels. Such audits shall not be commenced by the same party more often
      than once each calendar year. Partnership shall have two (2) years after
      the close of a calendar year in which to make an audit of Operator's
      records for such calendar year. Absent fraud or intentional concealment or
      misrepresentation by Operator or its employees, and except for any
      adjustments which may arise from Federal Energy Regulatory Commission
      ("FERC") compliance audits, Operator shall neither be required nor
      permitted to adjust any item unless a claim therefore is presented or
      adjustment is initiated within two (2) years after the close of the
      calendar year in which the bill, statement or accounting therefore is
      rendered, and in the absence of such timely claims or adjustments, the
      bills, statements and accountings rendered shall be conclusively
      established as correct.

                                       14

<PAGE>

5.5   Consistent with General Partnership Agreement

      The accounting and tax service provided by Operator shall be consistent
      with the applicable provisions of Section 7 of the General Partnership
      Agreement which are incorporated by reference herein as if set forth in
      full. Matters of tax policy for Partnership shall be the responsibility
      of, and ultimately determined by the Management Committee.

                       ARTICLE 6 - INDEPENDENT CONTRACTOR

6.1   Independent Contractor

      (a)   In performing services pursuant to this Agreement, Operator shall be
            an independent contractor and not an employee, agent or servant of
            Partnership and this Agreement does not create any partnership or
            joint venture between Partnership and Operator.

      (b)   Operator shall comply with all relevant laws, statutes, ordinances,
            safety codes, regulations and rules applicable to the Operation of
            the Line.

                        ARTICLE 7 - INTELLECTUAL PROPERTY

7.1   Inventions and Copyrights

      Any (i) inventions, whether patentable or not, developed or invented or
      (ii) copyrightable material (collectively, "Intellectual Property"),
      developed by Operator or its employees and used for the Operation of the
      Line shall remain the exclusive property of Operator; provided that, if
      the Partnership authorizes expenditure of funds to develop equipment or
      operating procedures specifically for the Line, such equipment or
      operating procedures are developed through resources and employees
      dedicated to the Line, and such equipment or operating procedures includes
      Intellectual Property, such Intellectual Property shall be the exclusive
      property of Partnership.

                                       15

<PAGE>

7.2   Confidentiality

      Because the information and knowledge gained during the performance of
      services hereunder may consist of valuable proprietary information, the
      misuse or disclosure of which could cause substantial damage to
      Partnership, any and all information obtained by Operator in performance
      of its obligations hereunder shall be held in strict confidence by
      Operator, its employees or agents except as needed to comply with the
      purposes of this Agreement. Any contracts entered into by Operator related
      to its obligations under this Agreement shall contain a provision which
      similarly restricts the use and disclosure of such information.

                                ARTICLE 8 - TERM

8.1   Term

      This agreement shall be effective as of April 6, 2006 and subject to the
      provisions of the General Partnership Agreement, shall continue until
      April 1, 2018, and thereafter on a year-to-year basis unless terminated on
      six (6) months' prior written notice by either party hereto, provided
      that, Operator shall not commence its responsibilities as Operator until
      April 1, 2007, provided that, if Operator is no longer an Affiliate of at
      least one Partner included in the Partnership ("Partnership Termination")
      this Agreement shall terminate six (6) months from the date of Partnership
      Termination.

8.2   Upon Termination

      Termination of this Agreement shall not relieve either party from paying
      amounts of money due hereunder which (a) were due prior to or (b) become
      due after or as a result of such termination.

                                       16

<PAGE>

                             ARTICLE 9 - ARBITRATION

9.1   Arbitration

      (a)   If a dispute arises between Operator and Partnership regarding the
            application or interpretation of any provision of this Agreement,
            the aggrieved party will promptly provide notice of the dispute to
            the other party. A meeting will be held promptly between the
            parties, attended by parties with management authority over the
            disputed matter, to attempt in good faith to negotiate a resolution
            of the dispute. If the parties do not succeed in negotiating a
            resolution of the dispute within thirty (30) days or within such
            further period agreed by the parties, one party may terminate the
            negotiation by giving Notice to the other party. Either party may
            thereafter upon written notice call for submission of such matter to
            arbitration. The party requesting arbitration shall set forth in
            such notice in adequate detail the issues to be arbitrated, and
            within ten (10) days from the receipt of such notice, the other
            party may set forth in adequate detail additional related issues to
            be arbitrated. If arbitration is invoked by either party, the
            decision of the arbitrators shall be final and binding upon all
            parties.

      (b)   Such binding arbitration shall be conducted by a person or entity
            knowledgeable and experienced in pipeline design, construction and
            operations matters. In the event the parties are unable to agree
            upon such person or entity, they shall then each select a person or
            entity having the qualifications set forth above, and such persons
            or entities selected shall mutually agree upon a similarly qualified
            third person or entity to complete the arbitration panel. In the
            event that the persons selected by the parties are unable to agree
            on a third member of the panel within sixty (60) days after their
            selection, such person shall be designated by the American
            Arbitration Association or such other person the parties mutually
            agree upon. Upon final selection of the entire panel, such panel

                                       17

<PAGE>

            shall, as expeditiously as possible, render a decision on the matter
            submitted for arbitration.

      (c)   Upon the determination of any such dispute, the arbitrators shall
            bill the costs attributable to such binding arbitration to the party
            whose position they determine is farthest away from the actual
            decision rendered; provided, however, that the arbitrators shall be
            empowered to apportion such costs between the parties if they deem
            it appropriate.

      (d)   It is the intent of the parties that the matters agreed upon to be
            arbitrated be decided as set forth herein and they shall not seek to
            have this Article 9 rendered unenforceable or to have such matter
            decided in any other way.

                           ARTICLE 10 - FORCE MAJEURE

10.1  Effect of Force Majeure

      In the event that either Partnership or Operator is rendered unable, by
      reason of an event of force majeure, to perform, wholly or in part, any
      obligation or commitment set forth in this contract, then upon such
      party's giving written notice and full particulars of such event as soon
      as practicable after the occurrence thereof, the obligations of both
      parties, except for unpaid financial obligations arising prior to such
      event of force majeure, shall be suspended to the extent and for the
      period of such force majeure condition.

10.2  Nature of Force Majeure

      The term "force majeure" as employed in this Agreement shall mean acts of
      God, strikes, lockouts or industrial disputes or disturbances, civil
      disturbances, arrests and restraint from rulers of people, interruptions
      by government or court orders, present and future valid orders, decisions
      or rulings of any governmental entity having proper jurisdiction, acts of
      the public enemy, wars, riots, blockades, insurrections, inability to
      secure labour or inability to secure materials, including inability to
      secure materials by reason of allocations promulgated by authorized

                                       18

<PAGE>

      governmental agencies, epidemics, landslides, lightning, earthquakes,
      fire, storms, floods, washouts, inclement weather which necessitates
      extraordinary measures and expense to construct facilities and/or maintain
      operations, explosions, breakage or accident to machinery or lines of
      pipe, freezing of wells or pipelines, inability to obtain or delays in
      obtaining easements or rights-of-way, the making of repairs or alterations
      to wells, pipelines or plants, partial or entire failure of gas supply or
      any other cause, whether of the kind herein enumerated or otherwise, not
      reasonably within the control of the party claiming force majeure.

10.3  Non-Force Majeure Situations

      Neither Operator nor Partnership shall be entitled to the benefit of the
      provisions of Section 10.1 under the following circumstances:

      (a)   To the extent that the failure was caused by the party claiming
            suspension having failed to remedy the condition by taking all
            reasonable acts, short of litigation, if such remedy requires
            litigation, and having failed to resume performance of such
            commitments or obligations with reasonable dispatch;

      (b)   If the failure was caused by lack of funds, or with respect to the
            payment of any amount or amounts then due hereunder;

      (c)   To the extent that the failure was caused or contributed to by the
            negligence of Operator or Partnership and such negligence was the
            cause of such failure.

10.4  Resumption of Normal Performance

      Should there be an event of force majeure affecting performance hereunder,
      such events shall be remedied with all reasonable dispatch to insure
      resumption of normal performance.

                                       19

<PAGE>

10.5  Strikes and Lockouts

      Settlement of strikes and lockouts shall be entirely within the discretion
      of the party affected, and the requirement in Section 10.4 that any event
      of force majeure shall be remedied with all reasonable dispatch shall not
      require the settlement of strikes or lockouts by acceding to the demands
      of the parties directly or indirectly involved in such strikes or lockouts
      when such course is inadvisable in the discretion of the party having such
      difficulty.

                           ARTICLE 11 - MISCELLANEOUS

11.1  Amendment

      This Agreement shall only be amended by an instrument in writing executed
      by both parties.

11.2  Waivers

      A waiver by a party at any time of its rights with respect to a default
      under this Agreement, or with respect to any other matter in connection
      with this Agreement, shall not be deemed a waiver with respect to any
      other or subsequent default or matter.

11.3  Severability

      If any provision of this Agreement shall be invalid or unenforceable to
      any extent, the remainder of this Agreement shall not be affected thereby
      and shall be enforced to the greatest extent permitted by law.

11.4  Governmental Bodies

      This Agreement is subject to all valid orders, rules and regulations of
      any governmental body having jurisdiction over the parties hereto, or this
      Agreement.

                                       20

<PAGE>

11.5  Entirety

      In addition to the obligations of the Operator set forth in Article 3,
      this Agreement is also intended to include as an obligation of the
      Operator any duty, responsibility, or requirement assigned to the Operator
      by the terms of the General Partnership Agreement, including Section 8.4
      thereof, not specifically detailed in Article 3 herein. This Agreement and
      the General Partnership Agreement contain the entire agreement between the
      parties and except as stated herein there are no oral promises, agreements
      or warranties affecting it.

11.6  Recitals

      For the purpose of interpreting this Agreement, the Recitals shall be
      considered incorporated herein as if set forth in full.

11.7  Remedies Cumulative

      Remedies provided under the provisions of this Agreement shall be
      cumulative and, except as to the agreement for binding arbitration
      contained in Article 9 hereof, shall be in addition to the remedies
      provided by law or in equity.

11.8  Conflicts

      In the event there is any conflict between this Agreement and any schedule
      or subsequent agreement referred to herein, the provisions hereof shall be
      deemed controlling, except in the event of a conflict with the General
      Partnership Agreement, in which event the General Partnership Agreement
      shall be deemed controlling.

11.9  Law of the Contract

      This Agreement and all other agreements relating thereto shall be
      construed and interpreted under the laws of the State of Texas.

                                       21

<PAGE>

11.10 Operator's Office

      Operator may select the location of its office or offices to perform its
      obligation hereunder.

11.11 Attorneys' Fees

      Should any litigation be commenced between the parties concerning any
      provision of this Agreement or the rights and duties hereunder, the party
      prevailing in such litigation shall be entitled, in addition to such other
      relief as may be granted in such proceeding, to a reasonable sum as and
      for their attorneys' fees in such litigation, which sum shall be
      determined in such litigation or in a separate action for such purpose.

11.12 Counterpart Execution

      This Agreement may be executed in one or more counterparts, each of which
      shall be deemed an original, but all of which together constitute one and
      the same instrument.

                              ARTICLE 12 - NOTICES

12.1  Notices

      Unless otherwise specifically provided in this Agreement, any written
      notice or other communication shall be sufficiently given or shall be
      deemed given on the fifth business day following the date on which the
      same is mailed by registered or certified mail, postage prepaid, or on the
      next business day following the date on which the same is sent via a
      nationally recognized courier service or by telecommunication, in each
      case addressed:

      If to Operator, to:

      TransCan Northwest Border Ltd.
      450, 1st Street, S.W.
      Calgary, Alberta, Canada

                                       22

<PAGE>

      T2P 5H1
      Fax: (403) 920.2460
      Attention: Secretary

      or such other person or address as may be designated from time to time by
      written notice to Operator.

      If to Partnership, to:

      Northern Border Pipeline Company
      13710 FNB Parkway
      Omaha, NE 68154
      Fax: (402) 492-7315
      Attention: Vice-President and General Counsel

      or such other person or address as may be designated from time to time by
      written notice to Partnership.

                             ARTICLE 13 - ASSIGNMENT

13.1  Assignability

      As to the assignment of this Agreement:

      (a)   This Agreement shall not be assigned by either Partnership or
            Operator without the written consent of the other except that
            Operator may assign this agreement to its Affiliate without such
            consent, and such assignment shall not release Operator from its
            obligations under this Agreement.

      (b)   Consent to assignment hereunder shall not be unreasonably withheld
            by either party hereto.

                                       23

<PAGE>

      (c)   Successors and Assigns

      This Agreement and all of the obligations and rights herein established
      shall extend to and be binding upon and shall inure to the benefit of the
      respective successors and assigns of the respective parties hereto.

13.2  Effective Date

      Any assignment hereunder shall be effective on the first day of the month
      following the month during which the assignment is completed.

      IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
      and year first written.

TRANSCAN NORTHWEST BORDER LTD.

Per: /s/ Paul E. Miller
    -----------------------------
Name: Paul E. Miller
Title: President

Per: /s/  Donald R. Marchand
    -----------------------------
Name: Donald R. Marchand
Title: Vice-President and Treasurer

                                       24

<PAGE>

NORTHERN BORDER PIPELINE
COMPANY
a Texas general partnership

<TABLE>
<CAPTION>
<S>                                                     <C>
By:  NORTHERN BORDER                                    By: TC PIPELINES INTERMEDIATE
INTERMEDIATE                                            LIMITED PARTNERSHIP, General Partner
LIMITED PARTNERSHIP, General Partner                    By: TC PIPELINES GP, INC., ITS GENERAL
                                                        PARTNER

Per: /s/  Jerry L. Peters                               Per: /s/  Donald R. Marchand
    -----------------------------                            -----------------------------
Name: Jerry L. Peters                                   Name: Donald R. Marchand
Title: Chief Financial and Accounting Officer           Title: Vice-President and Treasurer

                                                        Per: /s/  Amy Leong
                                                             -----------------------------
                                                        Name: Amy Leong
                                                        Title: Controller
</TABLE>

                                       25
<PAGE>
                                    EXHIBIT A

                                       TO

                               OPERATING AGREEMENT

                              ACCOUNTING PROCEDURE

                         ARTICLE I. GENERAL PROVISIONS

1.01  Statements and Billings. Operator may submit a bill, statement or
      otherwise provide an accounting to Partnership on the first day of each
      month for the estimated costs and expenses for the month and any
      adjustment which may be necessary to correct prior estimated billings to
      actual. Such bills, statements or accountings will be summarized by
      appropriate classifications indicative of the nature thereof.

1.02  Payment by Partnership. Partnership shall pay all bills, statements or
      accountings presented pursuant to the terms and conditions of the
      Operating Agreement on or before the 15th day after the billing date. If
      payment is not made within such time, the unpaid balance shall bear
      interest until paid at a rate (which in no event shall be higher than the
      maximum rate or rates permitted by applicable law) equal to the prime rate
      charged by the Citibank of New York, or its successor, from time to time
      to responsible commercial and industrial borrowers; provided, however,
      that if employees of Operator are responsible for processing Partnership's
      payments and Partnership has sufficient funds to make payment no interest
      charge shall be imposed for late payment. Payment by or on behalf of
      Partnership shall not be deemed a waiver of the right to recoup any amount
      in question.

1.03  Adjustments. Payment of any such bills, statements or accountings shall
      not prejudice the right of Partnership to protest or question the
      correctness thereof; provided however, all bills, statements and
      accountings rendered to Partnership by

                                       1

<PAGE>

      Operator during any calendar year shall conclusively be presumed to be
      true and correct after 24 months following the end of any such calendar
      year, unless prior to the end of said 24-month period Partnership takes
      written exception thereto and makes claim on Operator for adjustment. No
      adjustment favourable to Operator shall be made unless it is made within
      the same prescribed period. None of the time limits set out in this
      Section 1.03 shall apply to adjustments resulting from FERC Compliance
      Audits.

1.04  Financial Records. Operator shall maintain accurate books and records in
      accordance with the FERC Uniform System of Accounts for Class A and B
      natural gas companies or any successor system thereto covering all of
      Operator's actions under this Operating Agreement.

                           ARTICLE II. CAPITAL ITEMS

      Except for real or personal property (i) included in a previously approved
budget or (ii) costing less than the ceiling amount established by the
Management Committee, Operator shall prepare and submit to Partnership a
forecast of the cost of such property it proposes to acquire in the name of
Partnership which, under any applicable accounting rules and regulations, might
be capitalized. Upon approval of such forecast by Partnership, Operator shall
have authority to purchase such property in Partnership's name without further
approval or action by Partnership. To the extent that (i) Operator owns property
necessary or desirable for the operation and maintenance of the Line which under
any applicable accounting rules and regulations, might be capitalized, (ii)
Operator in its sole discretion is willing to transfer such property for
consideration to Partnership, (iii) such property can be transferred by Operator
to Partnership free and clear of all prior liens and encumbrances, and (iv)
Partnership approves of such transfer Operator may so transfer such property to
Partnership and charge Partnership the fair market value thereof on the date of
transfer.

                                       2

<PAGE>

                 ARTICLE III. COSTS, EXPENSES AND EXPENDITURES

      Subject to the limitations hereinafter prescribed and the provisions of
the Operating Agreement to which this Accounting Procedure is an exhibit,
Operator shall charge Partnership for all reasonable and proper costs and
expenses incurred by Operator (except those costs incurred under Section 3.5 of
the Operating Agreement) in connection with the Operation of the Line, including
but not limited to the following items:

3.01  Rentals. All rentals paid by Operator.

3.02  Labour Costs.

  (a) Salaries, wages and related benefits of Operator's employees or its
      Affiliates employees directly engaged in connection with the Operation of
      the Line and, in addition, amounts paid as salaries and wages of others
      temporarily employed in connection therewith. Related benefits include
      Operator's cost of holiday, vacation, sickness, jury service and other
      fringe benefits and customary allowances paid to persons whose salaries
      and wages are chargeable under this paragraph (a).

  (b) Expenditures or contributions made pursuant to assessments imposed by
      governmental authority which are applicable to salaries, wages and costs
      chargeable under paragraph (a) above. The reasonable cost of plans for
      employees' group life insurance, hospitalization, disability, pension,
      retirement, savings and other benefit plans, applicable to labour costs
      chargeable under paragraph (a) above.

  (c) Amounts billed to Partnership for services performed by Operator's
      Affiliates in connection with the Operation of the Line will include an
      amount to cover the overhead costs of that Affiliate. The method of
      allocating the overhead charge shall be consistent with the TransCanada
      PipeLines Limited Operating Cost Allocation Policy ("Allocation Policy")
      attached hereto as Schedule 1, unless such method is found to be
      inconsistent with FERC rules and regulations. If the cost allocation
      methodology is found to be inconsistent with FERC rules and

                                       3

<PAGE>

      regulations following a FERC regulatory decision which is applicable to
      the Partnership, Operator will revise the method of allocation with
      respect to the Line accordingly and such revised method of allocation
      shall be used prospectively. Changes and amendments to the Allocation
      Policy shall apply to charges under this section, provided such changes or
      amendments do not result in a material change in costs allocated under
      this Agreement unless otherwise approved by the Management Committee.

3.03  Reimbursable Expenses of Employees. Reasonable personal expenses of
      employees whose salaries and wages are chargeable under Section 3.02(a)
      hereof. As used herein, the term "personal expenses" shall mean the usual
      out-of-pocket expenditures incurred by employees in the performance of
      their duties and for which such employees are reimbursed. Operator shall
      maintain documentation for such expenses in accordance with the standards
      of the Internal Revenue Service.

3.04  Material, Equipment and Supplies. It is contemplated that all material,
      equipment and supplies will be owned by Partnership and purchased or
      furnished for its account. So far as is reasonably practical and
      consistent with efficient and economical operation, only such material
      shall be obtained for the Line as may be required for immediate use, and
      the accumulation of surplus stock shall be avoided. To the extent
      reasonably possible, Operator shall take advantage of discounts available
      by early payments and pass such benefits on to Partnership. Material,
      equipment and supplies furnished by Operator, if any, shall be priced at
      cost plus carrying costs to be established by Operator based on actual
      experience.

3.05  Transportation. Transportation of employees, equipment and material and
      supplies necessary for the Operation of the Line. It is anticipated that
      all transportation equipment will be owned by Partnership; provided,
      however, any automobiles, airplanes and trucks owned or obtained from
      Operator's Affiliates by Operator and approved for use for the Operation
      of the Line will be billed to Partnership at reasonable rates based on
      Operator's actual costs.

                                       4

<PAGE>

3.06  Services

 (a)  The cost of contract services and utilities procured from outside sources.

 (b)  Use and services of vehicles, equipment and facilities furnished by
      Operator as provided in Section 3.05 hereof.

3.07  Legal Expenses and Claims. All costs and expenses of handling,
      investigating and settling litigation or claims arising by reason of the
      Operation of the Line or necessary to protect or recover any Line
      property, including, but not limited to, attorney's fees, court cost, cost
      of investigation or procuring evidence and any judgements paid or amounts
      paid in settlement or satisfaction of any such litigation or claims.
      Operator shall credit Partnership for judgements received or amounts
      received in settlement of litigation, with respect to any claim asserted
      on behalf of Partnership.

3.08  Taxes. All taxes (except those measured by income) of every kind and
      nature assessed or levied upon or incurred in connection with the
      Operation of the Line or on the Line or other property of Partnership and
      which taxes have been paid by the Operator for the benefit of Partnership,
      including charges for late payment arising from extensions of the time for
      filing which is caused by Partnership.

3.09  Insurance. Net of any returns, refunds, or dividends, all premiums paid
      and expenses incurred for insurance required to be carried under the
      Operating Agreement for the benefit of Operator and Partnership.

3.10  Permits, Licenses and Bond. Cost of permits, licenses and bond premiums
      required for the Operation of the Line.

3.11  Overhead, Administrative and General Expense. All administrative and
      general expenditures, including salaries and related benefits and expenses
      of personnel other than those referred to in Section 3.02, who render
      services to Operator, including, but not limited to, Accounting,
      Administrative, Public Relations, Personnel, Purchasing, Legal and
      Treasury, will be charged on the basis of costs

                                       5

<PAGE>

      incurred. Overhead costs related to the provision of such services shall
      be charged pursuant to the Allocation Policy. Operator shall, subject to
      the provisions of the General Partnership Agreement, also bill such
      administrative and general expenditures incurred by its Affiliates in
      connection with the Operation of the Line.

                                       6