Document:

xedar8kex_7312007.htm

     

    Exhibit
      10.1

    
              Xedar
        Corporation      

    

    
              Calendar
        2007 Management Incentive Plan      

    

     

    
 

    
      	
              1.

            	
              PURPOSE:  The
                Xedar Incentive Plan (the “Plan”) provides for the payment of cash and
                restricted stock unit (RSU) awards to key managers and executives
                of Xedar
                for achieving financial, operational, and strategic objectives during
                the
                fiscal year.  The Plan’s primary purpose is to focus
                participants’ efforts on activities considered critical to the success of
                Xedar.  The Plan is intended to assist in the retention of
                highly qualified management and executive talent by providing participants
                with the opportunity to earn annual cash compensation consistent
                with
                competitive market practices.

            

    

    

    
      	
              2.

            	
              DEFINITIONS:

            

    

    

    
      	
               

            	
              2.1

            	
              “Participant”
                refers to Mr. Hugh H. Williamson,III, an employee
                of the Company.

            

    

    

    
      	
               

            	
              2.2

            	
              “EBITDA”
                is the total annual profitability for the IT Security Consulting
                division,
                after accruing an amount for anticipated bonuses, before interest,
                taxes,
                depreciation and amortization, prior to any write-down of intangible
                assets not contemplated as of the date of this
                document.

            

    

    

    
      	
               

            	
              2.3

            	
              “Base
                Salary” refers to the total earned base compensation of a
                Participant for the year ended December 31,
                2007.

            

    

    

    
      	
              3.

            	
              PLAN
                DESCRIPTION:  The Plan provides for the payment of
                cash and restricted stock units based upon the company’s financial
                performance and the individual performance of the Participant during
                the
                fiscal year, as described in this
                Section.

            

    

    

    
      	
               

            	
              3.1

            	
              Target
                Award.  Each Participant shall be assigned a Target
                Award that is expressed as a percentage of the Participant’s Base
                Salary.  The Participant’s Base Salary and Target Award is shown
                below:

            

    

    

    Participant’s
      annual base salary:  $230,000, paid
      bi-monthly.  Terms                                     and
      Conditions: Retroactive beginning January 01, 2007,  back payments of
      cash compensation owed to Mr.  Williamson, will be calculated and
      accrue interest  at the current market prime  rate
      of  8.25%.

    

    A
      50%
      cash incentive bonus based on making three more acquisitions in 2007 for the
      IT
      Security Consulting division besides the Point One acquisition that has already
      been completed.  If one less acquisition is completed during 2007,
      then the cash incentive bonus shall be 60% of the target incentive
      bonus.  If two acquisitions or less are achieved during 2007, then
      there shall be no cash incentive bonus.

     

     

    
      
         

      

      
        -
          1
          -

        
          

        

      

      
         

      

    

     

    A
      33% RSU
      grant based on growing the combined entities by more than 15% during
      2007.  If growth is in the range of 13+% to 15%, then the RSU grant
      shall be 22%.  If the growth is in the range of 11% to 13%, then the
      RSU grant shall be 11%.  If growth is less than 11%, there will be no
      RSU grant.

     

    Neither
      component of this Target Award shall be earned or paid if
      the  divisions do not have positive EBITDA for the 2007 calendar
      year.

    

    
      	
               

            	
              3.2

            	
              Payment
                of Earned Awards. Awards earned under the Plan will be paid as
                soon as practicable following completion of the fiscal year, at the
                discretion of the Xedar Board of
                Directors.

            

    

    

    A
      Participant must be an employee of the Company in good standing as of the date
      awards are paid to be eligible to receive a payment under the
      Plan.  The Board of Directors may, in their sole discretion, approve
      an award, or partial award, for a former Participant whose employment terminated
      prior to the date of award for reasons of death, disability, or
      retirement.

    

    
      	
              4.

            	
              PLAN
                ADMINISTRATION.  The Plan shall be administered by
                the Board of Directors of Xedar, (the “Board”) who shall have the
                authority to interpret the provisions of the Plan, to correct any
                defect,
                supply any omission or reconcile any inconsistency in the Plan, and
                to
                make all determinations necessary for the effective operation of
                the
                Plan.  Any action taken or determination made by the Board in
                the administration of the Plan shall be conclusive and
                binding.

            

    

    

    
      	
              5.

            	
              AMENDMENT
                OR TERMINATION OF THE PLAN.  The Board may amend
                the Plan at any time, provided such action does not adversely affect
                the
                rights of Participants as of the date of the amendment, suspension
                or
                termination.  If during calendar year 2007 a substantial portion
                or all of the XeDAR holdings are sold, this incentive plan will become
                void, and a new plan will be put into place that anticipates the
                division’s performance through the end of the year as a result of such
                acquisition or divestiture.

            

    

    

    
      	
              6.

            	
              MISCELLANEOUS
                PROVISIONS.

            

    

    

    
      	
               

            	
              6.1

            	
              Unsecured
                Status of Claim.  Participants shall have no legal or
                equitable rights, interests or claims in any specific property or
                assets
                of the Company.  No assets of Xedar shall be held under any
                trust for the benefit of Participants, or held in any way as collateral
                security for the fulfillment of any obligations under the
                Plan.

            

    

    

    
      	
               

            	
              6.2

            	
              No
                Right of Employment.  Nothing contained in the Plan,
                nor any action taken in the administration of the Plan, shall be
                construed
                as a contract of employment or as conveying to a Participant any
                right to
                be retained in the service of
                Xedar.

            

    

     

     

     

    
      
         

      

      
        -
          2
          -

        
          

        

      

      
         

      

    

    
 

    
      	
               

            	
              6.3

            	
              Right
                of Offset.  If a Participant becomes entitled to a
                payment under the Plan and if at such time the Participant has any
                debt,
                obligation or other liability outstanding representing an amount
                owing to
                Xedar, then Xedar may offset such amount against the amount of the
                payment
                otherwise due the Participant under the
                Plan.

            

    

    

    
      	
               

            	
              6.4

            	
              No
                Right of Assignment.  No person shall have any right to
                commute, sell, assign, transfer, pledge, anticipate, mortgage or
                otherwise
                encumber, hypothecate or convey in advance of actual receipt any
                benefit
                payable under the Plan, or any part thereof, or any interest
                therein.  No portion of the amounts payable under the Plan
                shall, prior to actual payment, be subject to seizure, attachment,
                lien or
                sequestration for the payment of any debts, judgements, alimony or
                separate maintenance owed by a Participant or any other person, nor
                be
                transferable by operation of law in the event of a Participant’s or any
                other person’s bankruptcy or insolvency.  Any such transfer or
                attempted transfer in violation of the preceding provisions shall
                be
                considered null and void.

            

    

    

    
      	
               

            	
              6.5

            	
              Validity.  In
                the event that any provision of the Plan is held to be invalid, void,
                or
                unenforceable, the same shall not affect, in any way whatsoever,
                the
                validity of any other provision of the
                Plan.

            

    

    

    
      	
               

            	
              6.6

            	
              Withholding
                Tax.  Xedar shall withhold from all payments due under
                the Plan an amount sufficient to satisfy any federal, state, and
                local tax
                withholding requirements.

            

    

    

    
      	
               

            	
              6.7

            	
              Applicable
                Law.  The Plan shall be governed in accordance with the
                laws of the State of Colorado.

            

    

    

    
      	
               

            	
              6.8

            	
              Rights
                and Obligations.  The rights and obligations under the
                Plan shall be binding upon Xedar, its successors and assigns and
                the
                Participants.

            

    

    

    Plan
      Participation Agreed to
      By:                                                                                     COMPENSATION
      COMMITTEE

    

    

    /s/
      Hugh H.
      Williamson,III________                                                                                  
/s/ John P. Moreno_______________

    Mr.
      Hugh
      H.
      Williamson,III                                                   
                                            
Mr. John P. Moreno, Chair

    

    Title:
      XeDAR, Chairman &
CEO                                                                                         _____________

                             Date

    _____________

    Date

                           
      /s/ Trusten A. McArtor_______________

                                  Trusten
      A. McArtor

    

                                                         
      _____________

                                                          
Date

     

    
      
         

      

      
        -
          3
          -Exhibit 10.3

EXPEDITED TREATMENT REQUESTED

UNITED
STATES OF AMERICA

BEFORE
THE

FEDERAL ENERGY REGULATORY COMMISSION

	
  

  	
  )

  	
   

  
	
  Enbridge Energy, Limited Partnership

  	
  )

  	
  Docket No. OR06-___

  
	
   

  	
  )

  	
   

  

 

OFFER OF SETTLEMENT

Pursuant to 18 C.F.R. § 385.602 (2005), Enbridge Energy, Limited
Partnership (“Enbridge Energy”), a common carrier oil pipeline regulated by the
Commission, hereby submits this Offer of Settlement to supplement the
Facilities Surcharge approved by the Commission in Enbridge
Energy, Limited Partnership, 107 FERC ¶ 61,336 (June 30, 2004) (“Facilities Surcharge Order”).  With the support of the Canadian Association
of Petroleum Producers (“CAPP”), an association that represents the producers
of virtually all of the crude petroleum transported by Enbridge Energy,1 the settling parties seek
Commission approval to implement an additional component of the Facilities
Surcharge to permit recovery by Enbridge Energy of the costs of a planned
expansion of its mainline capacity (the “Southern Access Mainline Expansion”).

In the Facilities Surcharge Order, the
Commission approved the framework settlement that established the Facilities
Surcharge as a component of Enbridge Energy’s U.S. tariff rates.  The basic concept underlying the Facilities Surcharge
is to provide a flexible mechanism for Enbridge Energy to respond to shipper
requests for enhancements or modifications to the

1 CAPP producer members account for more than 98
percent of Canada’s oil and gas production. 
Approximately 97 percent of the crude petroleum transported on the
Enbridge System originates in Canada.

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pipeline
system, greater variety in the types of crudes handled, and increased access by
shippers to particular markets or crude types. 
As negotiated with CAPP, the Facilities Surcharge permits Enbridge
Energy to recover the costs associated with particular shipper-requested
projects through an incremental surcharge layered on top of its existing base
rates and other Commission-approved surcharges already in effect.

This Offer of Settlement contains the fifth specific agreement
submitted under the Facilities Surcharge framework.2 This new agreement relates to the Mainline
Expansion portion of the planned Southern Access Program (which is described in
more detail below and in Exhibit I hereto). 
A copy of the CAPP letter memorializing the Southern Access Mainline
Expansion settlement is attached hereto as Exhibit II.

As the Commission is aware from prior proceedings, Enbridge Energy
operates the U.S. portion of the Enbridge System, which is a major crude oil
pipeline system providing transportation of Western Canadian oil to the U.S.
Midwest and points in Eastern Canada and New York State.3  The Canadian portion of the
Enbridge System is operated by Enbridge Pipelines Inc. (“EPI”) and is regulated
by the National Energy Board (“NEB”) in Canada. 
The U.S. portion, which is commonly referred to as the “Lakehead
System,” is operated by Enbridge Energy subject to this Commission’s
jurisdiction.  This Offer of Settlement
pertains solely to the Lakehead System, and in particular to the recovery of
costs associated with the expansion of

2 The
first four agreements were submitted contemporaneously with the original Offer
of Settlement establishing the Facilities Surcharge framework.

3 A map of the Enbridge System, depicting the
various components of the System including the planned Mainline Expansion, is
attached hereto as Exhibit IV.

 - 2 -
 

mainline
capacity on that system.4  By
way of background, the discussion below will describe the overall Southern
Access Program, which involves a coordinated expansion of capacity on the
Enbridge System to accommodate a projected major increase in production from
the oil sands resources in Western Canada.

REQUEST FOR EXPEDITED TREATMENT

This Offer of Settlement is being filed now, in advance of a rate
filing or litigated proceeding, in order to give public notice of the addition
of the Southern Access Mainline Expansion component to the Facilities Surcharge
and to request approval to implement the new component when the Southern Access
Mainline Expansion facilities are placed in service.  Enbridge Energy respectfully requests that
the Commission provide expedited treatment of this Offer of Settlement to the
extent consistent with the Commission’s rules and policies.  The total cost of the U.S. portion of the
Mainline Expansion is estimated to be approximately $887 million (in 2005 U.S.
dollars).  Although Enbridge Energy has
already begun to incur some of the preliminary planning and engineering costs
for this project, it will need to begin making irreversible contractual
commitments for major capital items such as acquisition of pipe as early as the
end of the first quarter of 2006. 
Enbridge Energy will not be able to make those capital commitments in a
timely manner if it does not have reasonable assurance that the tariff
surcharge mechanism set forth in this Offer of Settlement will be accepted by
the Commission.  Any deferral of those
commitments threatens to delay the projected in-service date of the expansion
and thereby create unavoidable bottlenecks that may hamper access of increased
Canadian crude

4 EPI
will be making an application to the NEB with respect to approval of the
Canadian aspects of this project.  

 - 3 -
 

supplies
to the U.S. Midwest market.  Therefore,
Enbridge Energy requests that the Commission act on this Offer of Settlement as
soon as possible, but in any event by March 15, 2006.

ISSUE STATEMENT

Whether the Commission should accept this Offer of Settlement between
Enbridge Energy and CAPP in accordance with 18 C.F.R. § 385.602 (2005).

EXPLANATORY STATEMENT

I.                                         Overview of Facilities Surcharge
Framework

The Facilities Surcharge, as approved by the Commission in the Facilities Surcharge Order, allows Enbridge Energy to
recover the costs associated with particular shipper-requested projects through
an incremental surcharge layered on top of the existing base rates and other
Commission-approved surcharges already in effect.  The Facilities Surcharge is intended to be a
transparent, cost-of-service-based tariff mechanism that will be trued-up each
year to actual costs and throughput and that will therefore not be subject to
adjustment either upwards or downwards under indexing.  Id. P 2.

The particular projects to be included are determined as the result of
a negotiating process between Enbridge Energy and CAPP.  At the time of the establishment of the
Facilities Surcharge, Enbridge Energy and CAPP had identified four specific
projects for inclusion in the original surcharge.5  Id. P 3.  However, the Facilities Surcharge framework
was expressly designed to be open-ended, and the Commission accepted Enbridge
Energy’s proposal “to submit for Commission review and approval future
agreements resulting from negotiations with CAPP where the parties have agreed
that recovery of costs through the Facilities Surcharge is

5 The
first four projects were:  (1) the
Griffith Hartsdale Transfer Lines; (2) the Hartsdale Tank Charge; (3) the
Superior Manifold Modification Project; and (4) the Line 17 Expansion Project.

 - 4 -
 

desirable
and appropriate.”  Id.
P 1.  Thus, this supplemental Offer of
Settlement is consistent with the intent of the Facilities Surcharge framework
as previously approved by the Commission.

II.                                     The Southern Access Mainline
Expansion

As noted above, the proposed expansion of the Lakehead System in the
U.S. is a significant part of a larger project known as the Southern Access
Program.  This section will describe the
overall Southern Access Program in order to provide the Commission a context
for the U.S. portion of the Mainline Expansion, which is the subject of this
Offer of Settlement.  This information is
intended to aid the Commission in understanding the systemwide benefits of the
U.S. portion of the Mainline Expansion and should not be read to suggest that
the Commission is being asked to determine any regulatory issues relating to
the Canadian portion of this expansion project.

Based on the substantial capital investment currently being made in new
facilities to develop Western Canada’s abundant oil sands resources, as well as
the continuing development of Canadian heavy oil reserves, Enbridge Energy
anticipates a major increase in the supply of Canadian crude oil available for
export to U.S. markets.6  The
Southern Access Program is prompted in large part by the projected need for
significant infrastructure expansion in coming years to transport the expected
surge in Canadian crude oil imports to the U.S. (offsetting supplies otherwise
required from more volatile sources overseas).

The Southern Access Program as a whole involves a coordinated capacity
expansion and potential extension of the Enbridge System from Hardisty, Alberta
to points in the U.S. Midwest.

6 The
Commission has previously taken notice of this “expected significant increase
in Western Canadian crude oil production over the next decade” and the
associated benefits to domestic refiners of having access to this source of
refinery feedstock to offset declining domestic crude oil production in the
Mid-Continent area.  Enbridge
Energy Co., Inc., 110 FERC ¶ 61,211 at P 2 (2005).

 - 5 -
 

The
Mainline Expansion portion of Southern Access will occur both in Canada and the
U.S.  Specifically, when the project is
completed, EPI will be able to transport an additional 400,000 barrels per day
(b/d) between Hardisty, Alberta, and the international border near Neche, North
Dakota.  Similarly, Enbridge Energy will
be able to transport an additional 400,000 b/d from the international border to
the Chicago area (and points south).7  Further information regarding the
U.S.-portion of the Southern Access Program can be found in Exhibit I  hereto.

The first stage of the U.S. portion of the Mainline Expansion is
expected to add 44,000 b/d of capacity in 2007 and up to an additional 146,000
b/d by early 2008.  The first stage
includes 321 miles of new 30-inch pipeline between Superior and Delavan,
Wisconsin, along with pump station enhancements upstream and downstream of this
segment.  The cost of the first stage is
projected to be approximately $499 million for the U.S. portion and $43 million
for the Canadian portion.8  The expansion project’s second stage will add
additional upstream pumping capacity and a new 133-mile pipeline segment from
Delavan to Flanagan, Illinois, with completion expected in early 2009.  The second stage costs are estimated to be
approximately $388 million for the U.S. portion and $92 million for the
Canadian portion.  The schematic attached
hereto as Exhibit V shows the planned stages of the expansion project.

At Flanagan, the new line segment will interconnect with the Spearhead
Pipeline, which is currently being reversed to provide crude oil transportation
service from Chicago to Cushing,

7 An
additional aspect of the Southern Access Program is a possible extension of
service on the Lakehead System to Wood River or Patoka, Illinois (the “Mainline
Extension”).  Because the Mainline
Extension phase of the Program is still under development, it is not included
in this Offer of Settlement and will not be addressed further herein.   

8 All
dollar figures in this pleading are in 2005 U.S. dollars unless otherwise
specified.

 - 6 -
 

Illinois.9  Once the Southern Access
Mainline Expansion is complete to Flanagan, the portion of the Spearhead
Pipeline northeast of Flanagan will be re-reversed to provide access for
Canadian production to Chicago via Flanagan.10  The downstream portion of Spearhead will
continue to provide access to the trading hub at Cushing.

Completion of the total Southern Access Mainline Expansion will create
a new 454-mile pipeline with approximately 400,000 b/d of incremental
capacity.  This new pipeline will
substantially increase the capability of the Lakehead System to transport
Canadian crude oil production to Chicago, Cushing and other points in the
Midwest, avoiding what will otherwise be a bottleneck that would significantly
inhibit the access of Canadian crude to these important markets.  As noted earlier, the total cost of the U.S.
portion of the expansion is currently estimated to be approximately $887
million.

III.                                 The Mainline Expansion:  Benefits To Shippers And The Proposed
Surcharge Arrangement

The principal benefit of the Mainline Expansion will be increased
capacity.  As noted above, a significant
bottleneck is forecast to occur in the Enbridge System in the near future if
mainline capacity is not increased.  The
Southern Access Mainline Expansion will benefit all shippers by offering
sufficient capacity to relieve bottlenecks and avoid projected apportionment of
scarce capacity.  Enbridge Energy expects
that the U.S. portion of the Mainline Expansion will result in approximately
400,000 b/d of incremental capacity when the project is completed.

Among the other significant benefits of the Mainline Expansion are:

9 See Enbridge Energy Co., Inc., 110 FERC ¶ 61,211 (2005).

10 Enbridge Energy has committed to provide
service to Chicago via the Southern Access Mainline Expansion line to Flanagan
at the same total tariff rate at which service to Chicago is available on the
existing Lakehead System, so that shippers will be economically indifferent to
which specific line segment is used to transport their oil to Chicago. 

 - 7 -
 

·                  An expected reduction in
the tariff rates paid by shippers for transportation on the Canadian portion of
the Enbridge System.  Because of the
increased volumes made possible by the expansion, and the interaction of those
increased volumes with the incentive tolling mechanism that applies to EPI’s
Canadian tariff rates, heavy petroleum shippers on the Enbridge System will see
their Canadian rates decline by an estimated $0.09 per barrel when the
expansion is fully in service and fully utilized.  The result is that the net change in the
total rate for heavy service from Western Canada (Hardisty) to Chicago will be
a modest overall increase of approximately $0.13 per barrel (with smaller
increases for light crude types);

·                  addition of the first
increment of new Lakehead capacity at no capital cost to the shippers.  Enbridge Energy will add a new pump station
at Shorewood and related enhancements to Line 6A to create up to 44,000 b/d of
new capacity by 2007 without including a return on or return of the capital
invested in those assets in the surcharge;

·                  increased supply flexibility in the Great
Lakes area and beyond, benefiting regional refineries and consumers during
tight supply situations;

·                  improved product quality due to greater
separation among different crude types; and

·                  reduced transit times along the entire
system.  For example, at Chicago, the
delivery time improvement for heavy barrels using Line 4 is expected to be
approximately 4 days, a 19% reduction when the expansion facilities are fully
utilized.

Because the Mainline Expansion will enhance service to all shippers,
Enbridge Energy and CAPP have agreed that the cost associated with the
expansion should be borne by shippers to all delivery points on the Lakehead
System in accordance with Enbridge Energy’s existing distance-based rate
design.  This pricing mechanism is
consistent with Commission precedent for oil pipelines.  See, e.g., SFPP, L.P.,
104 FERC ¶ 61,163 at P 10-11 (2003).  As
a common carrier, Enbridge Energy is projected to experience capacity
constraints in the U.S. portion of its system that will affect shippers across
the board.  The Southern Access Mainline
Expansion will help relieve this constraint, thereby providing benefits to the
system as a whole.  Accordingly, CAPP and
Enbridge Energy have agreed to a surcharge component that will apply across the
system so that all shippers pay in accordance with their usage of the system.

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The specific terms of the surcharge calculation are set forth in
Exhibit III attached hereto.  In general,
Enbridge Energy will recover the cost of service of the U.S. portion of the
Southern Access Mainline Expansion through a surcharge, which will be included
in the Facilities Surcharge added to the indexed base rates and other existing
surcharges currently in effect for Enbridge Energy.  The surcharge will be calculated on a cost of
service basis and trued-up annually in the same manner as the existing surcharges
under the Facilities Surcharge framework. 
In particular, Enbridge Energy will file the new surcharge at such time
as the first Mainline Expansion facilities go into service, based on an
estimate of the first year’s projected costs and throughput volumes.  Thereafter, on April 1 of each succeeding
year, Enbridge Energy will adjust the surcharge to true-up the prior year’s
costs and throughput volumes to actual data and to reflect the projected costs
and throughput volumes for the then-current year.  The surcharge will remain in effect for the
projected depreciable life of the new facilities (30 years).

As
set forth in Exhibit III, the terms of the cost-of-service calculation
supporting the surcharge have been stipulated between CAPP and Enbridge Energy
as follows.  Enbridge Energy will use the
Commission’s Opinion No. 154-B methodology, but employing a stipulated capital
structure that will remain fixed at 55% equity, 45% debt, consistent with SEP
II surcharge.  The stipulated annual
depreciation rate will be fixed at 3.33%. 
The stipulated cost of debt for each year will be the weighted average
long-term cost of debt of Enbridge Energy Partners, L.P. at the end of the
prior calendar year.  The stipulated cost
of equity will be fixed at a 9% real rate of return plus inflation.  The inflation rate used will be the current
year CPI-U as determined from time to time in accordance with the Opinion 154-B
methodology.  The tax allowance component
of the cost of service will be determined each year in accordance with the
FERC’s tax allowance policy in effect in such year.  All incremental operating costs, property or

 - 9 -
 

similar taxes, and fuel and
power expenses associated with the Southern Access Mainline Expansion will be
included in the cost of service, including an adjustment for power costs that
is described in detail in paragraph 5 of Exhibit III.  As set forth in paragraph 6 of Exhibit III,
in calculating the annual surcharge, the revenue synergies on the U.S. portion
of the expansion will be split 50/50 between Enbridge Energy and the
shippers.  This agreed-upon allocation
apportions the revenue benefits of the increased capacity, part of which are
attributable to previously constructed facilities, and provides both the pipeline
and the shippers with benefits across a range of throughput outcomes.

The
net change in the overall rates from Hardisty to U.S. destinations is modest
since the Canadian rates of EPI are expected to decline in response to
increased volumes, partially offsetting the expected increase in the tariff
rates for the Lakehead System.  For
illustrative purposes, Exhibit VI sets forth an estimate of the surcharge
component for transportation of heavy crude petroleum from the international
border to Chicago as of 2009.  This
illustration is offered solely to provide an approximation of the magnitude of
the planned surcharge; the actual calculation will be made at the time of the
annual surcharge filings.   For context,
Exhibit VI also shows the net change in the total rate from Hardisty to
Chicago, which reflects the offsetting effects of expected rate reductions in
Canada.

As with the original Offer of Settlement that resulted in the Facilities Surcharge Order, Enbridge Energy proposes that
the Commission follow its Rule 602 procedures for processing this Offer of
Settlement.  In particular, parties
seeking to comment on any aspect of the proposed settlement should be required
to do so within 20 days of the date of the filing of this Offer of Settlement
(Rule 602(f)(2)).  Reply comments would
then be due 10 days later.  Following

 - 10 -
 

receipt
of comments and reply comments, if any, the Commission should proceed
expeditiously to consider this Offer of Settlement, as requested above.11

CONCLUSION

For the reasons set forth above, Enbridge Energy respectfully requests
that the Commission approve this supplemental agreement under the Facilities
Surcharge framework pursuant to 18 C.F.R. § 385.602 and permit the Southern
Access Mainline Expansion component of the Facilities Surcharge to take effect
at such time as the relevant facilities are placed in service, as requested
herein.12 
Enbridge Energy further requests that the Commission provide expedited
treatment of this Offer of Settlement to the extent possible, to avoid any
unnecessary delays in the construction schedule for this important
infrastructure project.

	
   

  	
  Respectfully submitted,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Steven Reed

  	
   

  
	
   

  	
  Steven Reed

  
	
   

  	
  John Clopper

  
	
   

  	
  STEPTOE & JOHNSON LLP

  
	
   

  	
  1330 Connecticut Ave., N.W.

  
	
   

  	
  Washington, D.C. 20036

  
	
   

  	
   

  
	
   

  	
  Counsel for Enbridge Energy, Limited

  Partnership

  

 

December
21, 2005

11 For convenience, a form of Notice of
Settlement is attached as Exhibit VII.

12 Enbridge Energy requests that the Commission
waive the filing requirements under 18 C.F.R. §§ 342.1, 342.3(a), and 342.4 to
the extent necessary to facilitate the filing of this proposed surcharge.  The Commission’s approval of this Offer of
Settlement will not constitute approval of, or precedent regarding, any
principle or issue settled.

 - 11 -

Exhibit I

Below is an itemization
of the U.S. facilities for the Southern Access Expansion Project

Mainline Expansion

Stage 1 – Downstream of Superior

Ø    321 miles of 30-inch pipe, (Superior,
Wisconsin to Delavan, Wisconsin)

Ø    2 - 3,500  HP
pump and motor additions

Ø    29 pump modifications

Ø    4 pump stations (Delavan, Wisconsin to
Griffith, Indiana)

Ø    New power infrastructure at new locations,
and infrastructure upgrades and transformer modifications at existing stations
as required

Ø    New Line 14 station at Shorewood

Ø    Line 6A debottlenecking consisting of SCADA
modifications; installation of 2 VFD’s at existing facilities; PCV review and
tuning at 27 sites; installation of an in-line booster pump; and a transient
analysis

Stage 1 – Canada-U.S. Border to Superior

Ø    Pump modification at 7 sites

Ø    Station piping upgrades at 5 sites

Ø    Transformer upgrades

Stage 2 – Downstream of Superior

Ø    133 miles of 30-inch pipe, (Delavan Wisconsin
to Flanagan, Illinois)

Ø    A new pump station at Superior, Wisconsin

Ø    4 - Line 14 station tie-ins

Ø    Superior and Flanagan Terminal connections

Ø    6 new stations (4 of which are at existing
sites)

Ø    1 – 400,000 barrel breakout tank at Griffith
terminal

Ø    Reversal of Spearhead Pipeline to Chicago
consisting of a new pump station at Flanagan, Illinois, and refurbishment of 1
million barrels of tankage at Flanagan.

Stage 2 – Canada-U.S. border to Superior

Ø    Pump modifications at 4 sites

Ø    Upgrade motors from 2,500HP to 5,000HP at 7
sites

Ø    Electrical system upgrades to 4 sites

 

 

December 2l, 2005

Rick Sandahl

Vice President, Market Development

Enbridge Pipelines Inc.

3000, 425 - I Street S.W.

Calgary, Alberta T2P 3L8

Dear Mr. Sandahl:

Re: Enbridge Pipelines’ Southern Access Mainline Expansion                                                                                                 

This letter confirms the agreement of the Canadian
Association of Petroleum Producers (CAPP) to the use of the existing Facilities
Surcharge mechanism, as approved by the U.S. Federal Energy Regulatory
Commission (FERC) on June 30, 2004, to implement a surcharge for recovery of
costs incurred by Enbridge Energy, Limited Partnership (Enbridge) for an
expansion of Enbridge’s mainline capacity known as the Southern Access Mainline
Expansion. This agreement is limited to the expansion phase of the Southern
Access project (i.e., the expansion of capacity
from the Canada/U.S. border to Flanagan, Illinois, with further service to
Griffith, Indiana, via  a
segment of the Spearhead Pipeline to be utilized by Enbridge), and does not
apply to any aspect of the extension phase of the Southern Access project (i.e., the potential extension of service from Flanagan
southward to Patoka or Wood River, Illinois).

CAPP understands the expansion that is the subject of
this letter will proceed in stages. The first stage will provide an initial
increase in capacity of approximately 44,000 (barrels per day (b/d) scheduled
to be in place in 2007, with an additional 146,000 b/d scheduled to be in place
in 2008. The second stage will add a further 210,000 b/d, which is scheduled to
be in place in 2009. CAPP undertakes this agreement with the understanding
that, if requested in writing to do so by CAPP, on behalf of industry, Enbridge
will defer the development or completion of a stage until CAPP provides further
notice in writing that the stage should proceed (Enbridge would be entitled to
recover through the surcharge costs incurred prior to CAPP’s request for
deferral). CAPP has requested this flexibility to ensure additional pipeline
capacity is developed and completed in a timely manner in conjunction with the
growth in crude oil supply.

CAPP understands that Enbridge Energy will submit an
Offer of Settlement to the FERC seeking approval for the Southern Access
Mainline Expansion Surcharge and its inclusion in the Facilities Surcharge
mechanism. Exhibit III to the Offer of Settlement is a description of the terms
of the proposed Southern Access Mainline Expansion Surcharge, including the
calculation of power costs to be included in the surcharge. CAPP agrees that
the Southern Access Mainline Expansion

 

	
  

  	
  2100, 30 – 7th Ave. S.W.

  	
  905, 235 Water
  Street

  	
   

  
	
   

  	
  Calgary, Alberta

  	
  St. John’s,
  Newfoundland

  	
   

  
	
   

  	
  Canada T2P 3N9

  	
  Canada A1C 1B6

  	
   

  
	
   

  	
  Tel (403) 267-1100

  	
  Tel (709)
  724-4200

  	
   

  
	
   

  	
  Fax (403) 261-4622

  	
  Fax (709)
  724-4225

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Email:
  ommunication@capp.ca

  	
  Website:
  www.capp.ca

  	
   

  

 

 

Letter to Mr. Rick Sandahl

Re: Enbridge Pipelines’ Southern Access Mainline Expansion

Page 2

 

 

Surcharge is to be
calculated in accordance with the terms set out in Exhibit III to the Offer of
Settlement, for a period of 30 years (the projected depreciable life of the new
facilities), and that the surcharge is to be based on the underlying Enbridge
toll design where tolls vary by distance and crude type.

CAPP authorizes Enbridge to
submit this letter to the FERC in connection with the Offer of Settlement and
to convey to the FERC that CAPP is in agreement with the use of the Facilities
Surcharge mechanism for the Southern Access project.  CAPP is of the view that the proposed Southern
Access Mainline Expansion will enhance the capacity, efficiency and flexibility
of the Enbridge system and that the Facilities Surcharge is an appropriate
mechanism for recovery of the costs associated with the Southern Access
Mainline Expansion project.

Should further clarification
of this letter be required, please contact me at (403) 267-1137.

Sincerely,

	
  /s/ Onno DeVries

  	
   

  
	
  Onno DeVries

  
	
  General Manager,
  Oil Sands and Oil Markets

  

 

 

CAPP_EDMS-#96678

 2

EXHIBIT III

SOUTHERN ACCESS MAINLINE
EXPANSION SURCHARGE TERMS

1.                                       The
U.S. portion of the proposed Southern Access Mainline Expansion will consist
principally of construction of a new 30-inch pipeline from Superior, Wisconsin
to Flanagan, Illinois, along with certain system modifications upstream of
Superior.  This project is expected to
provide approximately 400,000 barrels per day of heavy crude petroleum capacity
from the Canada/U.S. border to Flanagan, and will also include utilization of a
segment of the Spearhead Pipeline to permit volumes to access Griffith,
Indiana, via Flanagan.

2.                                       Enbridge
Energy, Limited Partnership (“Enbridge Energy”) proposes to recover the cost of
service of the U.S. portion of the Southern Access Mainline Expansion through a
surcharge (the “Southern Access Mainline Expansion Surcharge” or “Surcharge”)
to be included in the systemwide rates of Enbridge Energy in accordance with
Enbridge Energy’s overall rate design. 
The Surcharge would be included in the existing Facilities Surcharge
that is added to the indexed base rates and other existing surcharges currently
in effect in Enbridge Energy’s rates, and would not itself be subject to
indexing.

3.                                       The
Surcharge would be calculated on a cost of service basis and trued-up annually in
the same manner as the existing SEP II surcharge in Enbridge Energy’s
rates.  In particular, Enbridge Energy
proposes to file the Southern Access Mainline Expansion Surcharge at such time
as the relevant facilities go into service, based on an estimate of the first
year’s projected costs and throughput volumes. 
Thereafter, on April 1 of each succeeding year, Enbridge Energy will
adjust the Surcharge to true-up the prior year’s estimated costs and throughput
volumes to actual data and to reflect the projected costs and throughput
volumes for

the then-current year. 
The Surcharge will remain in effect for 30 years (the projected
depreciable life of the new facilities).  
Enbridge Energy shall perform a final true-up within three months after
the expiration of the 30 year-period.  If
the final true-up discloses a difference between the estimated costs and
throughput volumes and the actual data, such difference (negative or positive)
shall be recovered or credited on throughput volumes over the following twelve
month-period.

4.                                       For
purposes of the cost of service calculation, Enbridge Energy will use the
FERC’s Opinion No. 154-B methodology, but employing a stipulated capital
structure that will remain fixed at 55% equity, 45% debt, consistent with SEP
II.  The stipulated annual depreciation
rate will be fixed at 3.33%.  The
stipulated cost of debt for each year will be the weighted average long-term
cost of debt of Enbridge Energy Partners, L.P. at the end of the prior calendar
year.  The stipulated cost of equity will
be fixed at a 9% real rate of return plus inflation.  The inflation rate used will be the current
year CPI-U as determined from time to time in accordance with the Opinion 154-B
methodology.  The tax allowance component
of the cost of service will be determined each year in accordance with the
FERC’s tax allowance policy in effect in such year.  All incremental operating costs, property or
similar taxes, and fuel and power expenses associated with the Southern Access
Mainline Expansion will be included in the cost of service, including the
adjustment described in paragraph 5 hereof (the “Power Cost Adjustment”).

5.                                       The
Power Cost Adjustment to be included in the Surcharge will reflect the
incremental variable costs (positive or negative) resulting from the Southern
Access Mainline Expansion.  The Power
Cost Adjustment will be calculated in the following manner:

 2
 

a.                                       The
costs or cost savings to be included in the Power Cost Adjustment are those
incremental costs or cost savings associated with drag reducing agent, natural
gas, diesel and other fuels, electrical power, utility ratchet charges, and any
and all other energy charges incurred to transport commodities through the
Southern Access Mainline Expansion (“Power Costs”).

b.                                      As
with other components of the Southern Access Mainline Expansion Surcharge, the
Power Cost Adjustment will be forecast for each calendar year and the forecast
will be used in calculating the Surcharge to be effective on April 1 of that
year.  The forecast will take account of
volume and mill-rate projections and will be based on the principles set forth
in this paragraph 5.  During the calendar
year, Enbridge Energy will calculate the Power Cost Adjustment (positive or
negative) for each month based on the volume transported, crude slate and Power
Costs for that month.  The monthly
amounts so calculated will be summed (taking into account both positive and
negative amounts) and the resulting total for the year will be deemed the final
Power Cost Adjustment for that year. 
Enbridge Energy will true-up the forecasted Power Cost Adjustment to the
final Power Cost Adjustment for the calendar year, and the difference (positive
or negative) will be included in the calculation of the Surcharge to take
effect on April 1 of the year following the calendar year in which the
applicable Power Costs were incurred, up to and including April 1 of the
thirtieth calendar year of the Surcharge.

c.                                       The
monthly calculation of the final Power Cost Adjustment will be performed
separately for:  (1) the lines
immediately downstream of Superior, Wisconsin, other than line 5 (i.e., Lines 6a, 14 and the new Southern Access line) (the
“Ex-Superior Lines”); (2) the lines between the Canada/US border and Superior (i.e., Lines 2, 3, 4 and 13) (the “Border to Superior
Lines”); and (3) the portion of the Spearhead Pipeline between Flanagan,
Illinois, and

 3
 

Griffith, Indiana, which Enbridge Energy plans to
reconfigure to permit deliveries from Flanagan to Griffith (the “Spearhead
Line”).  The total Power Cost Adjustment
for each month will be the sum of the individual components (positive or
negative) for each of these three segments.

d.                                      The
Power Cost Adjustment component for the Ex-Superior Lines will be determined by
comparing the actual Power Costs incurred for operation of the Ex-Superior
Lines during a given month (the “Ex-Superior Actual Power Costs”) with a
calculation of the Power Costs that would have been incurred to operate Lines
6a and 14 during that month without the expansion facilities (i.e., without the Southern Access line and without the
Shorewood pump station on line 14) (the “Ex-Superior Base Power Costs”),
assuming that throughput on the Ex-Superior Lines is equal to the greater of
(i)  the throughput actually transported
on the Ex-Superior Lines during a given month (the “Actual Ex-Superior
Throughput”) or (ii) the Pre-Expansion Capacity of Lines 6a and 14 during that
month and applying the following adjustments and procedures:

(1)                                  For
all purposes under this paragraph 5, Pre-Expansion Capacity means the capacity
of the pre-expansion facilities in a given month assuming the same crude slate
as the crude slate actually transported through the expanded facilities during
that month (i.e., all else being equal, a relatively
heavier crude slate will reduce the Pre-Expansion Capacity and a relatively
lighter crude slate will increase the Pre-Expansion Capacity in accordance with
the hydraulic model employed by Enbridge Energy).  The Pre-Expansion Capacity of Line 6a is
assumed to be 100,000 m3/d with an all-heavy petroleum crude slate and using
the heater at

 4
 

Superior.1 
The Pre-Expansion Capacity of Line 14 can vary from 39,000 m3/d to
51,500 m3/d, depending upon the crude slate transported.

(2)                                  To
the extent Actual Ex-Superior Throughput exceeds the Pre-Expansion Capacity of
Lines 6a and 14, the Actual Ex-Superior Throughput will be prorated such that
the Pre-Expansion Capacity of Lines 6a and 14 is not exceeded (resulting in
“Prorated Ex-Superior Throughput”).  The
difference between Actual Ex-Superior Throughput and Prorated Ex-Superior
Throughput constitutes the Qualifying Volumes for purposes of paragraphs
5(e)(1) and 6 below.

(3)                                  Once
the Prorated Ex-Superior Throughput is determined, Enbridge Energy’s standard
hydraulic model will be used to calculate the Power Costs that would have been
incurred to operate Lines 6a and 14 at their Pre-Expansion Capacity in that
month assuming the Prorated Ex-Superior Throughput.  The Power Costs so calculated will be the
Ex-Superior Base Power Costs for that month.

(4)                                  The
difference between the Ex-Superior Actual Power Costs and the Ex-Superior Base
Power Costs for any month (positive or negative) will be the Power Cost
Adjustment component for the Ex-Superior Lines for that month.

(5)                                  Illustrative
examples of the calculation of the monthly Power Cost Adjustment component for
the Ex-Superior Lines are set forth in Exhibit A hereto.

e.                                       The
Power Cost Adjustment component for the Border to Superior Lines will be
determined by comparing the actual Power Costs incurred to operate the Border
to Superior Lines during a given month (the “BTS Actual Power Costs”) with a
calculation of the Power Costs that would have been incurred to operate the
Border to Superior Lines during that

1 The
term “m3/d” means cubic meters per day. 
A cubic meter of crude oil is approximately 6.29 barrels.

 5
 

month without the expansion Ex-Superior facilities
described in paragraph 5(d) and without the expansion of capacity on Lines 3
and 4 (the “BTS Base Power Costs”), and applying the following adjustments to
determine BTS Base Power Costs:

(1)                                  As
step (1), the actual throughput transported through the Border to Superior
Lines during the month will first be reduced by subtracting the Qualifying
Volumes for that month calculated under paragraph 5(d)(2) above.

(2)                                  As
step (2), to the extent the throughput volume remaining after step 1 would
require use of capacity in Line 3 or Line 4 in excess of the Pre-Expansion
Capacity of either of those lines, the throughput volume will be further
reduced by eliminating volumes transported from the Border to Superior until
the assumed volume transported through Lines 3 and 4 does not exceed the
Pre-Expansion Capacity of those lines. 
The Pre-Expansion Capacity of Line 3 is assumed to be 71,000 m3/d with
an all-heavy petroleum crude slate.  The
Pre-Expansion Capacity of Line 4 is assumed to be 106,500 m3/d with an
all-heavy petroleum crude slate.

(3)                                  After
steps (1) and (2), Enbridge Energy’s standard hydraulic model will be used to
calculate the Power Costs that would have been incurred during the month in
question to operate the Border to Superior Lines at the throughput volume
remaining after the reductions to actual throughput provided for in steps (1)
and (2).    The amount so calculated will
be the BTS Base Power Costs for that month.

(4)                                  The
difference between the BTS Actual Power Costs and the BTS Base Power Costs for
any month will be the Power Cost Adjustment component for the Border to
Superior Lines for that month.

 6
 

(5)                                  Illustrative
examples of the calculation of the monthly Power Cost Adjustment component for
the Border to Superior Lines are set forth in Exhibit B hereto.

f.                                         The
Power Cost Adjustment component for the Spearhead Line will consist of all
Power Costs incurred for movements from Flanagan to Griffith during the month
in question.

6.                                       In
recognition of the previously constructed Terrace capacity that will be
utilized as part of this expansion, the cost of service for the Surcharge will
be credited with revenue associated with the new capacity available downstream
from Superior, Wisconsin by multiplying the Qualifying Volumes determined under
paragraph 5(d)(2) hereof by 50% of the applicable Enbridge Energy tariff rates
from the Canada/US Border to Chicago (exclusive of the Facilities Surcharge and
the Southern Access Mainline Expansion Surcharge).

 7

Exhibit A

Power Cost Adjustment

Ex-Superior Lines

(Actual
ex-Superior Throughput is less than Pre-Expansion Capacity)

Examples of Power Cost
Adjustment

Example 1

	
  Assume:

  	
  For month of October 2010

  
	
   

  	
   

  
	
   

  	
  The ex-Superior Actual Power Costs to operate Lines
  6A, 14 and SA ex-Superior, WI is US$2.6 million.

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported through the
  ex-Superior Lines (L6A, 14 and SA) during the month is 129,500 m3/d.

  
	
   

  	
   

  
	
   

  	
  The Pre-Expansion Capacity of the combined Line 6A
  and Line 14 is 149,500 m3/d (with L14’s actual SA linefill of 60% light, 40%
  heavy).

  
	
   

  	
   

  
	
   

  	
  The standard Enbridge hydraulic model derives an
  ex-Superior Base Power Cost of US$4.3 million associated with the throughputs
  of 149,500 m3/d on L6A (all heavy) and L14 (60% light, 40% heavy).

  
	
   

  	
   

  
	
   

  	
   

  
	
  Thus:

  	
  The Power Cost Adjustment component for October 2010
  will be the ex-Superior Actual Power Costs less the ex-Superior Base Power
  Cost = (US$2.6 million – US$4.3 million) = -US$1.7 million.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Therefore:

  	
  The Power Cost Adjustment of -US$1.7 million for
  October 2010 will be summed together with the Power Cost Adjustments
  calculated for the other 11 months in the 2010 calendar year and together
  will be recovered as part of the 2011 Southern Access Mainline Expansion
  Surcharge.

  

 

* These Power Cost
Adjustments are used for illustrative purposes and do not constitute or imply
that they will be the actual or anticipated Power Cost Adjustments for October
2010 or any other Month.

Exhibit A (cont’d)

Power Cost Adjustment

Ex-Superior
Lines

(Actual
ex-Superior Throughput is equal or greater than Pre-Expansion Capacity)

Examples of Power Cost
Adjustment

Example 2A

	
  Assume:

  	
  For month of October 2010

  
	
   

  	
   

  
	
   

  	
  The ex-Superior Actual Power Costs to operate Lines
  6A, 14 and SA ex-Superior, WI is US$6.2 million.

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported through the
  ex-Superior Lines (L6A, 14 and SA) during the month is 189,500 m3/d. (Actual
  Line 14 crude slate is 60% light, 40% heavy).

  
	
   

  	
   

  
	
   

  	
  The Pre-Expansion Capacity of the combined Line 6A
  and Line 14 is 149,500 m3/d (with L14’s actual SA linefill of 60% light, 40%
  heavy).

  
	
   

  	
   

  
	
   

  	
  The standard Enbridge hydraulic model derives an
  ex-Superior Base Power Cost of US$6.3 million associated with the throughputs
  of 149,500 m3/d on L6A (all heavy) and L14 (60% light, 40% heavy).

  
	
   

  	
   

  
	
   

  	
   

  
	
  Thus:

  	
  The Power Cost Adjustment component for October 2010
  will be the ex-Superior Actual Power Costs less the ex-Superior Base Power
  Cost = (US$6.2 million – US$6.3 million) = -US$0.1 million.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Therefore:

  	
  The Power Cost Adjustment of -US$0.1 million for
  October 2010 will be summed together with the Power Cost Adjustments
  calculated for the other 11 months in the 2010 calendar year and together
  will be recovered as part of the 2011 Southern Access Mainline Expansion
  Surcharge.

  

 

* These Power Cost
Adjustments are used for illustrative purposes and do not constitute or imply
that they will be the actual or anticipated Power Cost Adjustments for October
2010 or any other Month.

 2
 

Exhibit A (cont’d)

Power
Cost Adjustment

Ex-Superior
Lines

(lighter Line 14
crude slate resulting in higher Pre-Expansion Capacity)

Examples of Power Cost
Adjustment

Example 2B

	
  Assume:

  	
  For month of October 2010

  
	
   

  	
   

  
	
   

  	
  The ex-Superior Actual Power Costs to operate Lines
  6A, 14 and SA ex-Superior, WI is US$6.0 million.

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported through the
  ex-Superior Lines (L6A, 14 and SA) during the month is 189,500 m3/d. (Actual
  Line 14 crude slate is 75% light, 25% heavy).

  
	
   

  	
   

  
	
   

  	
  The Pre-Expansion Capacity of the combined Line 6A
  and Line 14 is 151,500 m3/d (with L14’s actual SA linefill of 75% light, 25%
  heavy).

  
	
   

  	
   

  
	
   

  	
  The standard Enbridge hydraulic model derives an
  ex-Superior Base Power Cost of US$6.2 million associated with the throughputs
  of 151,500 m3/d on L6A (all heavy) and L14 (75% light, 25% heavy).

  
	
   

  	
   

  
	
  Thus:

  	
  The Power Cost Adjustment component for October 2010
  will be the ex-Superior Actual Power Costs less the ex-Superior Base Power
  Cost = (US$6.0 million – US$6.2 million) = -US$0.2 million.

  
	
   

  	
   

  
	
  Therefore:

  	
  The Power Cost Adjustment of -US$0.2 million for
  October 2010 will be summed together with the Power Cost Adjustments
  calculated for the other 11 months in the 2010 calendar year and together
  will be recovered as part of the 2011 Southern Access Mainline Expansion
  Surcharge.

  

 

* These Power Cost
Adjustments are used for illustrative purposes and do not constitute or imply
that they will be the actual or anticipated Power Cost Adjustments for October
2010 or any other Month.

 3
 

Exhibit A (cont’d)

Power
Cost Adjustment

Ex-Superior
Lines

(heavier Line 14
crude slate resulting in lower Pre-Expansion Capacity)

Examples of Power Cost
Adjustment

Example 2C

	
  Assume:

  	
  For month of October 2010

  
	
   

  	
   

  
	
   

  	
  The ex-Superior Actual Power Costs to operate Lines
  6A, 14 and SA ex-Superior, WI is US$6.7 million.

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported through the
  ex-Superior Lines (L6A, 14 and SA) during the month is 189,500 m3/d. (Actual
  Line 14 crude slate is 50% light, 50% heavy).

  
	
   

  	
   

  
	
   

  	
  The Pre-Expansion Capacity of the combined Line 6A
  and Line 14 is 145,000 m3/d (with L14’s actual SA linefill of 50% light, 50%
  heavy).

  
	
   

  	
   

  
	
   

  	
  The standard Enbridge hydraulic model derives an
  ex-Superior Base Power Cost of US$6.1 million associated with the throughputs
  of 145,000 m3/d on L6A (all heavy) and L14 (50% light, 50% heavy).

  
	
   

  	
   

  
	
  Thus:

  	
  The Power Cost Adjustment component for October 2010
  will be the ex-Superior Actual Power Costs less the ex-Superior Base Power
  Cost = (US$6.7 million – US$6.1 million) = US$0.6 million.

  
	
   

  	
   

  
	
  Therefore:

  	
  The Power Cost Adjustment of US$0.6 million for
  October 2010 will be summed together with the Power Cost Adjustments
  calculated for the other 11 months in the 2010 calendar year and together
  will be recovered as part of the 2011 Southern Access Mainline Expansion
  Surcharge.

  

 

* These Power Cost
Adjustments are used for illustrative purposes and do not constitute or imply
that they will be the actual or anticipated Power Cost Adjustments for October
2010 or any other Month.

 4

Exhibit B

Power
Cost Adjustment

Border
to Superior

(Actual
ex-Superior throughput is greater than pre Southern Access ex-Superior
throughput, Line 3 and 4 less than Terrace III capacity)

Examples of Power Cost
Adjustment

Example 1

	
  Assume:

  	
  For month of October 2010

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported ex-Superior on
  Line 6A, Line 14 and the Southern Access line is 159,500 m3/d. The crude
  slate is 20% light, 80% heavy which when allocated pre-Southern Access yields
  a Line 14 crude slate of 60% light, and 40% heavy.

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported on the combined
  Line 3 and Line 4 is 180,000 m3/d of crude.

  
	
   

  	
   

  
	
   

  	
  The Pre-Expansion Capacity of the combined Line 3
  and Line 4 is 177,300 m3/d.

  
	
   

  	
   

  
	
   

  	
  The Pre-Expansion Capacity of the combined Line 6A
  and Line 14 is 149,500 m3/d (with L14’s actual SA linefill of 60% light, 40%
  heavy).

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported through the Border
  to Superior Lines during the month is 280,000 m3/d.

  
	
   

  	
   

  
	
   

  	
  The BTS Actual Power Costs to operate Lines 1, 2, 3,
  4, and 13 between the Canada/US international border and Superior, WI is
  US$4.0 million.

  
	
   

  	
   

  
	
   

  	
  The standard Enbridge hydraulic model derives a BTS
  Base Power Cost of US$3.5 million associated with a volume of 270,000 m3/d.

  
	
   

  	
   

  
	
  Thus:

  	
   

  
	
   

  	
   

  
	
   

  	
  The pre-Southern
  Access Line 14 capacity is 49,500 m3/d for total Pre-Expansion Capacity of
  149,500 m3/d ex-Superior.

  
	
   

  	
   

  
	
   

  	
  The Qualifying
  Volume = actual throughput ex-Superior less the Pre-Expansion Capacity =
  (159,500 m3/d – 149,500 m3/d) = 10,000 m3/d.

  

 

 

	
  Therefore:

  	
   

  
	
   

  	
   

  
	
   

  	
  Step 1:

  
	
   

  	
   

  
	
   

  	
  Actual
  throughput on Line 3 and Line 4 less Qualifying Volumes = (180,000 m3/d –
  10,000 m3/d) = 170,000 m3/d.

  
	
   

  	
   

  
	
   

  	
  Step 2:

  
	
   

  	
   

  
	
   

  	
  Does not apply
  since adjusted Line 3 and Line 4 throughput does not exceed the Pre-Expansion
  Capacity of Line 3 and Line 4.

  
	
   

  	
   

  
	
  And:

  	
   

  
	
   

  	
   

  
	
   

  	
  The Pro-Rated BTS throughput used to determine the
  BTS Base Power Costs are the Actual throughput adjusted for Steps 1 and 2
  above = (280,000 m3/d – 10,000 m3/d) = 270,000 m3/d.

  
	
   

  	
   

  
	
  Thus:

  	
  The Power Cost Adjustment component for October 2010
  will be the BTS Actual Power Costs less the BTS Base Power Cost = (US$4
  million – US$3.5 million) = US$0.5 million.

  
	
   

  	
   

  
	
  Therefore:

  	
  The Power Cost Adjustment of US$0.5 million for
  October 2010 will be summed together with the Power Cost Adjustments
  calculated for the other 11 months in the 2010 calendar year and together
  will be recovered as part of the 2011 Southern Access Mainline Expansion
  Surcharge.

  

 

* These Power Cost
Adjustments are used for illustrative purposes and do not constitute or imply
that they will be the actual or anticipated Power Cost Adjustments for October
2010 or any other Month.

 -2-
 

Exhibit B (cont’d)

Power
Cost Adjustment

Border
to Superior

(Actual
ex-Superior throughput is greater than pre Southern Access ex-Superior
throughput, Line 3 and 4 greater than Terrace III capacity)

Examples of Power Cost
Adjustment

Example 2

	
  Assume:

  	
  For month of October 2010

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported ex-Superior on
  Line 6A, Line 14 and the Southern Access line is 159,500 m3/d. The crude
  slate is 20% light, 80% heavy which when allocated pre-Southern Access yields
  a Line 14 crude slate of 60% light, and 40% heavy.

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported on the combined
  Line 3 and Line 4 is 196,000 m3/d of crude.

  
	
   

  	
   

  
	
   

  	
  The Pre-Expansion Capacity of the combined Line 3
  and Line 4 is 177,300 m3/d.

  
	
   

  	
   

  
	
   

  	
  The Pre-Expansion Capacity of the combined Line 6A
  and Line 14 is 149,500 m3/d (with L14’s actual SA linefill of 60% light, 40%
  heavy).

  
	
   

  	
   

  
	
   

  	
  The actual throughput transported through the Border
  to Superior Lines during the month is 289,000 m3/d.

  
	
   

  	
   

  
	
   

  	
  The BTS Actual Power Costs to operate Lines 1, 2, 3,
  4, and 13 between the Canada/US international border and Superior, WI is
  US$4.5 million.

  
	
   

  	
   

  
	
   

  	
  The standard Enbridge hydraulic model derives a BTS
  Base Power Cost of US$3.5 million associated with a volume of 270,300 m3/d.

  
	
   

  	
   

  
	
  Thus:

  	
   

  
	
   

  	
   

  
	
   

  	
  The pre-Southern Access Line 14 capacity is 49,500
  m3/d for total Pre-Expansion Capacity of 149,500 m3/d ex-Superior.

  

 

 -3-
 

 

	
  

  	
  The Qualifying Volume = actual throughput
  ex-Superior less the Pre-Expansion Capacity = (159,500 m3/d – 149,500 m3/d) =
  10,000 m3/d.

  
	
   

  	
   

  
	
  Therefore:

  	
   

  
	
   

  	
   

  
	
   

  	
  Step 1:

  
	
   

  	
   

  
	
   

  	
  Actual throughput on Line 3 and Line 4 less
  Qualifying Volumes = (196,000 m3/d – 10,000 m3/d) = 186,000 m3/d

  
	
   

  	
   

  
	
   

  	
  Step 2:

  
	
   

  	
   

  
	
   

  	
  Adjusted actual combined Line 3 and Line 4
  throughput from Step 1 less the Pre-Expansion Capacity = (186,000 m3/d –
  177,300 m3/d) = 8,700 m3/d.

  
	
   

  	
   

  
	
  And:

  	
   

  
	
   

  	
   

  
	
   

  	
  The Pro-Rated BTS throughput used to determine the
  BTS Base Power Costs is the Actual throughput adjusted for Steps 1 and 2
  above = (289,000 m3/d – 10,000 m3/d – 8,700 m3/d) = 270,300 m3/d.

  
	
   

  	
   

  
	
  Thus:

  	
  The Power Cost Adjustment component for October 2010
  will be the BTS Actual Power Costs less the BTS Base Power Cost = (US$4.5
  million – US$3.5 million) = US$1.0 million.

  
	
   

  	
   

  
	
  Therefore:

  	
  The Power Cost Adjustment of US$1.0 million for
  October 2010 will be summed together with the Power Cost Adjustments
  calculated for the other 11 months in the 2010 calendar year and together
  will be recovered as part of the 2011 Southern Access Mainline Expansion
  Surcharge.

  

 

* These Power Cost
Adjustments are used for illustrative purposes and do not constitute or imply
that they will be the actual or anticipated Power Cost Adjustments for October
2010 or any other Month.

 -4-

Exhibit IV

 

 

Exhibit V

Exhibit V

 

 

Exhibit
VI

Enbridge Energy, Limited Partnership

Southern
Access Project Illustrative Heavy Rates

Assumes
Full Utilization of Southern Access Capacity

 

	
  

  	
   

  	
  2007

  	
   

  	
  2008

  	
   

  	
  2009

  	
   

  	
  2010

  	
   

  
	
  From Hardisty, Alberta to
  Griffith, Indiana ($US/bbl)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base Toll

  	
   

  	
  0.70

  	
   

  	
  0.71

  	
   

  	
  0.73

  	
   

  	
  0.74

  	
   

  
	
  TRV

  	
   

  	
  0.17

  	
   

  	
  0.08

  	
   

  	
  0.02

  	
   

  	
  0.00

  	
   

  
	
  Terrace Surcharge

  	
   

  	
  0.03

  	
   

  	
  0.03

  	
   

  	
  0.03

  	
   

  	
  0.02

  	
   

  
	
  Spearhead Surcharge

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  
	
  Exxon Mobil Surcharge

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  
	
  Southern Access
  Surcharge

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  (0.02

  	
  )

  	
  (0.01

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Enbridge
  Pipelines Inc. - CANADA

  	
   

  	
  0.94

  	
   

  	
  0.85

  	
   

  	
  0.80

  	
   

  	
  0.78

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Index Rate

  	
   

  	
  0.75

  	
   

  	
  0.76

  	
   

  	
  0.78

  	
   

  	
  0.80

  	
   

  
	
  SEP II Surcharge

  	
   

  	
  0.13

  	
   

  	
  0.12

  	
   

  	
  0.11

  	
   

  	
  0.11

  	
   

  
	
  Terrace Surcharge

  	
   

  	
  0.06

  	
   

  	
  0.04

  	
   

  	
  0.01

  	
   

  	
  0.02

  	
   

  
	
  Facilities Surcharge

  	
   

  	
  0.01

  	
   

  	
  0.01

  	
   

  	
  0.01

  	
   

  	
  0.01

  	
   

  
	
  Southern Access
  Surcharge

  	
   

  	
  0.01

  	
   

  	
  0.17

  	
   

  	
  0.22

  	
   

  	
  0.22

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Enbridge Energy,
  Limited Partnership - US

  	
   

  	
  0.95

  	
   

  	
  1.09

  	
   

  	
  1.13

  	
   

  	
  1.14

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Rate from
  Hardisty, Alberta to Griffith, Indiana

  	
   

  	
  1.88

  	
   

  	
  1.94

  	
   

  	
  1.93

  	
   

  	
  1.93

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  From Hardisty, Alberta to
  Clearbrook, Minnesota ($US/bbl)

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Base Toll

  	
   

  	
  0.70

  	
   

  	
  0.71

  	
   

  	
  0.73

  	
   

  	
  0.74

  	
   

  
	
  TRV

  	
   

  	
  0.17

  	
   

  	
  0.08

  	
   

  	
  0.02

  	
   

  	
  0.00

  	
   

  
	
  Terrace Surcharge

  	
   

  	
  0.03

  	
   

  	
  0.03

  	
   

  	
  0.03

  	
   

  	
  0.02

  	
   

  
	
  Spearhead Surcharge

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  
	
  Exxon Mobil Surcharge

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  
	
  Southern Access
  Surcharge

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  (0.02

  	
  )

  	
  (0.01

  	
  )

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Enbridge
  Pipelines Inc. - CANADA

  	
   

  	
  0.94

  	
   

  	
  0.85

  	
   

  	
  0.80

  	
   

  	
  0.78

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Index Rate

  	
   

  	
  0.19

  	
   

  	
  0.19

  	
   

  	
  0.20

  	
   

  	
  0.20

  	
   

  
	
  SEP II Surcharge

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  	
  0.02

  	
   

  
	
  Terrace Surcharge

  	
   

  	
  0.01

  	
   

  	
  0.01

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  Facilities Surcharge

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  	
  0.00

  	
   

  
	
  Southern Access
  Surcharge

  	
   

  	
  0.00

  	
   

  	
  0.03

  	
   

  	
  0.04

  	
   

  	
  0.04

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Enbridge Energy,
  Limited Partnership - US

  	
   

  	
  0.22

  	
   

  	
  0.25

  	
   

  	
  0.26

  	
   

  	
  0.26

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Total Rate from Hardisty, Alberta to Clearbrook, Minnesota

  	
   

  	
  1.16

  	
   

  	
  1.10

  	
   

  	
  1.06

  	
   

  	
  1.05

  	
   

  

 

EXPEDITED
TREATMENT REQUESTED

UNITED STATES OF AMERICA

BEFORE THE

FEDERAL
ENERGY REGULATORY COMMISSION

	
  

  	
  )

  	
   

  
	
  Enbridge Energy, Limited Partnership

  	
  )

  	
  Docket No. OR06-___

  
	
   

  	
  )

  	
   

  

 

NOTICE
OF SETTLEMENT FILING

Take notice that on December 21, 2005, Enbridge
Energy, Limited Partnership (“Enbridge Energy”), with the support of the
Canadian Association of Petroleum 
Producers (“CAPP”), submitted an Offer of Settlement under Rule 602 of
the Commission’s Rules of Practice and Procedure, 18 C.F.R. § 385.602,
regarding a supplement to the Facilities Surcharge approved by the Commission
in Enbridge Energy, Limited Partnership, 107
FERC ¶ 61,336 (June 30, 2004) (“Facilities
Surcharge Order”).

Enbridge Energy is a common carrier oil pipeline
regulated by the Commission. CAPP is a trade association representing 98
percent of the producers of natural gas, crude oil, oil sands, and elemental
sulphur exploration, development and production in Canada. As described in the Facilities Surcharge Order, the Facilities
Surcharge is designed to recover the annualized cost of certain projects
undertaken by Enbridge Energy at shipper
request and approved by CAPP for recovery through the surcharge mechanism. This
Offer of Settlement proposes to include an additional project in the Facilities
Surcharge---a major planned expansion of Enbridge Energy’s mainline capacity.

Through the Offer of Settlement, Enbridge Energy and
CAPP specifically request approval for the inclusion in the Facilities
Surcharge of the project described in the Offer of

Settlement, in accordance with the CAPP letter
memorializing the settlement attached to the Offer of Settlement.

In accordance with Rule 602(0 of the Commission’s
Rules of Practice and Procedure, 18 C.F.R § 385.602(f), any person desiring to
comment on this Offer of Settlement should file its comments with the Federal
Energy Regulatory Commission, 888 First Street, NE, Washington, DC 20426, no
later than 20 days after the date of filing of the Offer of Settlement (i.e.,
by January 10, 2006). Reply comments will be due no later than 30 days after
the date of filing of the Offer of Settlement (i.e., by January 20, 2006).
Comments and reply comments must be filed on or before the dates specified
herein. This filing is available for review at the Commission in the Public
Reference Room or may be viewed on the Commission’s website at http:/www.ferc.gov
using the “eLibrary” link. Enter the docket number excluding the last three digits
in the docket number field to access the document. For assistance, please
contact FERC Online Support at FERCOnlineSupport~fere.gov or toll-free at (866)
208-3676, or for TrY, contact (202) 502-8659. Comments and reply comments may
be filed electronically via the Internet in lieu of paper, see 18 C.F.R. §
385.2001(aX1Xiii) and the instructions on the Commission’s web site under the “e-Filing”
link. The Commission strongly encourages electronic filings.

Comment
Date:                                    January
10, 2006

Reply
Comment Date:                         January
20, 2006

 - 2 -
 

CERTIFICATE OF SERVICE

I,
John D. Clopper, certify that on December 21, 2005, I caused copies of the foregoing
Offer of Settlement and attachments to be served on the Canadian Association of
Petroleum Producers and on all current shippers and tariff subscribers of
Enbridge Energy, Limited Partnership.

	
  Dated:  December 21, 2005

  	
  /s/ John D. Clopper

  	
   

  
	
   

  	
  John D. Clopper

  

 

 - 3 -

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