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1 Page 1 of 15 ACIG/IGUA-APGQ/QOGA - 1 Note : Les questions qui suivent s'adressent en premier lieu à 1'APGQ. Toutefois, veuillez considérer les questions qui portent sur la réalité spécifique des producteurs et/ou auxquelles APGQ ne peut répondre, comme étant adressées directement aux producteurs ayant collaboré à 1а préparation du rapport de 1'APGQ. Note: The following questions are first addressed to QOGA. However, please consider questions which relate to the specific reality of producers and/or to which QOGA is unable to respond, as being addressed directly to the producers who participated in preparing QOGA s report. SUJET 1:«Resource play risks» SUBJECT 1: Resource play risks Référence : (i) AGQ/QOGA evidence, p.8, А. 20, lignes 17 à 19 Reference: (i) QOGA evidence, p.8, A. 20, lines 17 to 19

2 Page 2 of 15 ACIG/IGUA-APGQ/QOGA - 1 Préambule : L'APGQ identifie trois (3) risques liés aux «resource plays»:«timing of development, mechanical issues that impact completion efficiencies and the ability to implement cost saving strategies.» Preamble: QOGA identifies three (3) risks related to "resource plays": "Timing of development, mechanical issues that impact completion efficiencies and the ability to implement cost saving strategies." Question : 1.1. Veuillez élaborer sur се que vous entendez par risque 1ié au «timing of development». 1.1 Please elaborate on what you mean by risks related to "timing of development". Due to the significant amount of upfront capital required in resource plays, the rate of return on investment is sensitive to how quickly cash flow is generated from those capital investments. Development timing can be influenced by a number of external factors such as the obtaining of satisfactory regulatory approvals, the availability of equipment and construction scheduling. Development operations in Quebec are currently challenging because of the lack of existing infrastructure and regulatory approval processes currently in place. Although timing of development does represent a risk, it is relatively small and by having proper upfront planning to work within the existing regulatory framework, the risk can be minimized.

3 Page 3 of 15 ACIG/IGUA-APGQ/QOGA Veuillez élaborer sur се que vous entendez par risque 1ié aux «mechanical issues that impact completion efficiencies». 1.2 Please elaborate on what you mean by risks related to "mechanical issues that impact completion efficiencies". Risks related to mechanical issues would typically be viewed as potential "engineering and operational" problems which are associated with the drilling, completing and producing the resource, rather than risks which are associated with "finding" the resource. Examples of mechanical issues which could impact on completion efficiencies include any type of operational issue such as drilling problems that affect the condition of the wellbore or the horizontal lengths and ineffective fracturing treatments associated with geologic heterogeneities and equipment malfunctions Outre les éléments mentionnés en préambule, la production de gaz de schiste n'est-e11e pas également exposée à un risque de marché (i.e. prix de la mоléсulе de gaz trop faible)? 1.3 Other than elements mentioned in the preamble, is the production of shale gas not also exposed to market risks (i.e. the price of the gas molecule being too low)?

4 Page 4 of 15 ACIG/IGUA-APGQ/QOGA - 1 Yes À quel niveau de prix de la mоléсulе de gaz naturel la production deviendrait-elle non rentable? 1.4. At what price level of the natural gas molecule does production become unprofitable? Generally, once a natural gas shale project commences production, the natural gas is economic to produce until such time as the variable operating costs of the project exceed the revenue received from the sale of the natural gas which is produced from that project. Variable costs include marketing costs, variable pipeline charges, fuel costs, compression costs, gathering and processing charges (if applicable), water disposal costs and royalties. Fixed costs such as pipeline demand charges do not factor into this determination as they are considered to be "sunk" costs. Even though the continued production of natural gas may be economic, there may be certain situations where a Producer would choose to shut-in production for a limited time e.g. an expectation that natural gas prices would rise in the future De quelle façon les producteurs réagiraient-i1s à un prix de mоléсulе qui serait non rentable à court terme? Qui serait non rentable à moyen terme? Qui serait non rentable à long terme?

5 Page 5 of 15 ACIG/IGUA-APGQ/QOGA In what way would producers react to a molecule price which is unprofitable in the short term? Unprofitable in the medium term? Unprofitable in the long term? Each Producer will have a different long term view on the level of commodity prices and will react in different ways. Due to the potentially large amount of natural gas resource associated with resource plays, the long term view on natural gas prices is the most important in assessing the viability of a project. Natural gas prices that are forecast to be too low to support continued investment in the long term (5-10 years) may cause Producers to slow activity or stop new capital spending until they anticipate that increased natural gas prices or a reduction in costs would allow a project to return to a profitable level. With respect to short and medium term natural gas price fluctuations, Producers typically would not significantly alter plans, although this may vary. One benefit of short to medium term reductions in the natural gas price, is that service costs may also be reduced as a result of lower activity levels. If drilling activity continues during these low pricing periods, it gives Producers an opportunity to reduce their finding and development costs and to be in a position to react quickly when prices recover. In addition to changes in natural gas prices, activity levels are dependent on many company specific factors such as land commitments, equipment contracts, underutilized facilities, status of program development, and alternative investment opportunities.

6 Page 6 of 15 ACIG/IGUA-APGQ/QOGA - 2 SUJET 2: Étapes de 1'exploration et du développement d'un «resource play» SUBJECT 2: "Stages of exploration and development of a "resource play" Référence : (i) AGQ/QOGA evidence, р.8, А.21 Reference: (i) QOGA evidence, p.8, A.21 Préambule : À 1а référence (i), 1'APGQ identifie six (6) étapes normalement attendues dans le développement d'un «resource play». Preamble: In reference (i), the QOGA indentifies six (6) stages that are typically expected in the development of a "resource play".

7 Page 7 of 15 ACIG/IGUA-APGQ/QOGA - 2

8 Page 8 of 15 ACIG/IGUA-APGQ/QOGA - 2 Question : 2.1 Veuillez indiquer les investissements qui seraient requis de Gaz Мétто à chacune des étapes du développement. 2.1 Please indicate the investments that would be required of Gaz Métro for each of the stages of development. Investments by Gaz Métro would not be required for stages 1 through 3. In stage 4 (pilot production testing), investment by Gaz Métro could be required, depending on the location and scope of the pilot operation. Typically, Producers would directly fund all facilities required for small scale pilot production testing. Gaz Métro's involvement at the pilot production phase would only be required if the scope of the pilot production testing is such that it involves a pipeline that would be usable for commercial development. Generally, it would be Stage 5 (commercial development) that would involve investment by Gaz Métro. 2.2 Pour chacune des six (6) étapes, veuillez indiquer lesquels des risques mentionnés à 1а question 2.1 sont applicables (incluant le risque de marché le cas échéant). 2.2 For each of the six (6) stages, please indicate which of the risks mentioned in question 2.1 are applicable (including market risk, where appropriate). The risks associated with the project which are discussed in ACIG/IGUA-APGQ/QOGA IR represent overall risks which are associated with the ultimate commercial economic development of a resource play and are not specific to any individual phase.

9 Page 9 of 15 ACIG/IGUA-APGQ/QOGA Est-ce qu'un producteur réévalue 1а viabilité du projet à chacune des étapes? Si oui, sur quelles bases un producteur décide-t-i1 entre mettre fin au projet, interrompre temporairement le projet ou poursuivre le projet? 2.3 Does a producer re-evaluate the viability of the project at each of the stages? If yes, on which bases would a producer decide between putting an end to the project, temporarily interrupting the project or proceeding with the project? Producers would typically evaluate the viability of a resource play project many times over its early life. However, once a project has been de-risked and moves into commercial development, any variation in the level of additional capital spending usually represents changes in the pace of development as influenced by markets and available infrastructure, rather than a decision to interrupt or end development.

10 Page 10 of 15 ACIG/IGUA-APGQ/QOGA - 3 SUJET 3 : Structure corporative SUBJECT 3: Corporate Structure Référence : (i) Gaz Métro 1, document 2.11, question et réponse (ii) Gaz Métro 1, document 2.11, question et réponse (iii) Gaz Métro 1, document 2.12, question et réponse Reference: (i) Gaz Métro 1, document 2.11, question and response (ii) Gaz Métro 1, document 2.11, question and response (iii) Gaz Métro 1, document 2.12, question and response 12.3.

11 Page 11 of 15 ACIG/IGUA-APGQ/QOGA - 3 Préambule : Aux références (i) et (ii), Gaz Métro indique que le client-producteur n'a pas à produire 1ui-même le gaz naturel qu'i1 vend à Gaz Métro et qu'il peut 1'acheter d'une tierce partie au point de réception ou en aval de celui-ci. Л. 1а référence (iii), Gaz Métro indique qu'un client-producteur n'est pas tenu d'être propriétaire d'actifs de production. Preamble: In references (i) and (ii), Gaz Métro indicates that the producer-client does not have to be the party which produces the natural gas which it sells to Gaz Métro and that it may purchase it from a third party at the receipt point or upstream from that point. In reference (iii), Gaz Métro indicates that a producer-client is not required to own production facilities. Question : 3.1 Quelles sont les intentions des producteurs relativement á l'organisation de leur structure corporative? Envisagent-ils que les clients-producteurs soient propriétaires des actifs de production? Envisagent-i1s plutôt que les clients-producteurs soient des «marketing companies»? 3.1 What are the producers intentions with respect to the organization of their corporate structure? Do they expect that producer-clients will be owners of the production facilities? Do they instead expect that producer-clients will be "marketing companies"?

12 Page 12 of 15 ACIG/IGUA-APGQ/QOGA - 3 The manner in which any particular Producer will structure its corporate organization in respect of the ownership of production facilities or the marketing of natural gas is a decision which will be made by that particular Producer. However, in Western Canada, production facilities are generally owned and operated by the same entities which own and produce the oil and natural gas reserves. QOGA would expect that the same situation will occur in Quebec. QOGA also expects that it will be the owner of the natural gas reserves which will be entering into the receipt rate transportation contract with Gaz Métro. While "marketing companies" are sometimes involved in respect of natural gas transportation arrangements, such as acting as a Producer's agent for nomination purposes, marketing companies do not commonly take a direct transportation position on pipelines that receive gas from Producers by becoming a party to a natural gas transportation agreement with such pipelines. 3.2 Veuillez comparer les inconvénients pour le client-producteur de faire faillite selon qu'il possède ou ne possède pas d'actifs (e.g. actifs de production, permis). 3.2 Please compare the drawbacks for a producer-client in declaring bankruptcy depending on whether it possesses assets or not (e.g. production facilities, permits). QOGA is not sure if it fully understands the question which is being posed by IGUA. Obviously, whether or not any corporation, be it oil and gas producer or otherwise, declares bankruptcy is a complex question. The particular assets which the corporation has, its outstanding liabilities and obligations, the positions taken by that company's creditors and legislative requirements are just some of the factors which would factor into any decision to declare bankruptcy.

13 Page 13 of 15 ACIG/IGUA-APGQ/QOGA - 4 SUJET 4:«Category C rate» SUBJECT 4: "Category C rate" Référence : (i) APGQ/QOGA evidence, р.13, А.30 (ii) APGQ/QOGA evidence, р.16, А.38. Reference: (i) (ii) QOGA evidence, p.13, A.30. QOGA evidence, p. 16, A.38. Préambule : À 1а référence (i), 1'APGQ indique :«This reflects the toll principles of cost causation and avoidance of cross-subsidization.» À 1а référence (ii), 1'APGQ indique :«While a different and specific percentage might be developed for each project, QOGA does see some merit in selecting a uniform percentage for all projects. What may be lost in a precise cost allocation exercise is gained in toll stability and simplicity of application.» Preamble: In reference (i), QOGA indicates: "This reflects the toll principles of cost causation and avoidance of cross-subsidization." In reference (ii), QOGA indicates: "While a different and specific percentage might be developed for each project, QOGA does see some merit in selecting a uniform percentage for all projects. What may be lost in a precise cost allocation exercise is gained in toll stability and simplicity of application."

14 Page 14 of 15 ACIG/IGUA-APGQ/QOGA - 4 Question : 4.1. Relativement à 1а référence (ii), 1'ACIG comprend que l'utilisation d'un taux uniforme pourrait entrainer de 1'inter-financement entre les clients-producteurs ainsi qu'entre les clients-producteurs et les clients-consommateurs. L'APGQ partage-t-elle cette compréhension? Sinon, veuillez expliquer. 4.1 With respect to reference (ii), the IGUA understands that use of a uniform rate may lead to cross-subsidization between producer-clients, as well as between producer-clients and consumer-clients. Does QOGA share this understanding? If not, please explain QOGA would agree that the determination of the Category C rate based on a uniform percentage of the Category A original investment cost has the potential for either more or less than the actual costs attributable to that particular Producer being charged to that Producer. To the extent that either more or less than the actual attributable costs will be paid by a Producer there can be said to be a potential cross subsidization between that Producer and all other Gas Metro customers, including both other Producers and the Consumer Customers. What must be recognized however, is that there is no absolutely precise method of allocating the Category C costs to any individual customer. By their very nature the Category C costs are the costs of operating and administering the overall Gaz Métro system and some allocation method for these total costs must be established. No allocation method will be perfect. While cost causation and the avoidance of cross subsidization are very important elements of an appropriate toll design, they are not the only elements. Simplicity and stability of tolls are also important. QOGA believes that Gaz Métro has tried to strike a balance between simplicity and cost allocation precision. Accordingly, until more accurate data becomes available as a result of practical operating experience, QOGA is prepared to accept the 4% rate proposed by Gaz Métro.

15 Page 15 of 15 ACIG/IGUA-APGQ/QOGA Veuillez expliquer en quoi 1'évaluation des coûts de catégorie С sur la base d'un pourcentage des investissements améliore la stabilité tarifaire en comparaison à une méthode basée sur l'allocation de coûts. 4.2 Please explain how evaluating category C costs on the basis of a percentage of investments would improve the toll stability in comparison with a method based on cost allocation. QOGA understands that Gaz Métro is proposing that the Category C rate would be equal to 4% of the original Category A investment costs (QOGA-Gaz Métro-1 IR (Gaz Métro- 1, Document 2.35)). As the level of the original Category A investment cost will not change from year to year, the application of a fixed 4% means that the Category C rate would remain the same each year. This promotes overall toll stability. To the extent that the Category C rate was to be redetermined on some other basis, such as based on an annual cost allocation procedure, the Category C rate could change from year to year and lead to less toll stability. If the 4% rate was to be subject to change then that would also lead to less toll stability.

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