Pembina Gets Green Light for Albertan Pipeline Projects

Pembina Pipeline has received approval from the Energy Resources Conservation Board (the "ERCB") to construct and operate two pipeline projects that will support Northern Alberta's heavy oil industry.

The Nipisi Pipeline, designed to initially transport 100,000 barrels per day (bbls/d) of diluted heavy oil, is proposed to originate north of Slave Lake and run south to Judy Creek. From there it would connect to an existing pipeline system that delivers products to the Edmonton area. The Nipisi Pipeline is designed such that it can ultimately be expanded to a capacity of approximately 200,000 bbls/d. The Mitsue Pipeline is being designed to transport approximately 20,000 bbls/d of condensate (a light hydrocarbon used to dilute the heavy oil) from Whitecourt, Alberta to producers operating north of Slave Lake. The Mitsue Pipeline is designed such that it can ultimately be expanded to a capacity of 45,000 bbls/d.

"Project planning is complete and reflects the needs of our customers and community neighbors," said Bob Michaleski, President and Chief Executive Officer. "Our next priorities are to fulfill the commitments we've made to our customers as well as those made during the consultation process and constructing the pipeline in a safe and environmentally responsible manner."

The approvals to proceed with construction of the pipeline projects were granted by the ERCB without a public hearing, as all stakeholder objections were resolved through the consultation process.

Both projects, which Pembina estimates to cost a combined total of $440 million, are scheduled to be placed into service in mid-2011. Pembina has executed long-term transportation services agreements which will govern operations on the Nipisi and Mitsue Pipelines once they have been completed. Founding customers, Canadian Natural Resources and Cenovus Energy have, subject to certain conditions, contracted 80 percent of the 100,000 bbls/d capacity on the Nipisi Pipeline and 50 percent of the 20,000 bbls/d capacity on the Mitsue Pipeline. Pembina Marketing, a subsidiary of Pembina Pipeline Corporation, has contracted for the balance of available capacity on these pipelines.

The agreements are designed to provide Pembina with a fixed return on invested capital and allow for the full recovery of operating expenses. Based on certain assumptions, as discussed in more detail below, Pembina's internal projections estimate the two projects combined will generate approximately $45 million per annum in net operating income.

Project construction is expected to proceed immediately. Piping fabrication for the pump stations will commence later in July and the pump station construction is expected to begin in August. Right-of-way clearing is anticipated to begin in September in preparation for pipeline construction which is planned to start in early December. Approximately 800 to 1,000 temporary positions are expected to be created during construction. All engineering, construction and procurement contracts have been awarded.