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## ENERGY TRANSPORTATION 

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The Energy Transportation segment includes the Company’s core liquids pipeline operations, other liquids pipelines in Canada and the United States, investments in natural gas transmission pipelines, and midstream natural gas activities. 

The mainline pipeline consists of the wholly-owned Enbridge System in Canada and the Lakehead System in the United States, in which the Company has a 15.3% interest. The mainline pipeline is the world’s longest crude oil pipeline system and is the primary transporter of crude oil from Western Canada to the United States. It is the only pipeline that transports crude oil from Western Canada to Eastern Canada, serving all of the major refining centres in the province of Ontario as well as the Great Lakes region of the United States. 

The Company also owns the Enbridge Athabasca System, which transports synthetic and heavy oils from northern Alberta to the pipeline hub at Hardisty, Alberta; the Norman Wells System (Enbridge NW System) which transports crude oil from Norman Wells, Northwest Territories to Zama, Alberta; a number of feeder pipelines which deliver crude oil to the Enbridge System; and investments in a number of strategic crude oil pipelines in the United States. 

Natural gas transmission pipeline activities include the investments in the Alliance and Vector Pipelines. The Company owns a 21.4% interest in the Alliance Pipeline, a 3,000-kilometre (1,800-mile) pipeline which commenced operations in 

December 2000 and transports liquids-rich natural gas from Fort St. John, British Columbia, to Chicago, Illinois. The Company operates and holds a 45% investment in the Vector Pipeline, which transports natural gas from Chicago to Dawn, Ontario and commenced operations in December 2000. Alliance and Vector currently have the capacity to deliver 1.3 billion cubic feet per day (bcfd) and 0.7 bcfd of natural gas, respectively. 

Energy Transportation earnings have decreased $13.9 million from 1999, before the effect of tax rate reductions. The core liquid operations posted solid operating results and construction on Vector and Alliance generated a higher allowance for equity funds during construction (AEDC). This business was affected by a one-time charge of $8.7 million (after tax) for the Company’s merchant capacity commitment on Alliance and Vector for the years 2000 through 2003. In 1999, an $11.5 million after-tax gain related to a reduction in the Company’s ownership interest in the Lakehead System was recorded. 

The 1999 earnings were $58.3 million higher than 1998 stemming from system expansions and increased earnings from Alliance and Vector because AEDC on rate base increased as construction progressed. The 1999 results also included a gain on the reduction in the Lakehead System ownership interest. 

## Enbridge System 

Earnings from the Enbridge System increased slightly compared with 1999, primarily due to system expansions. Earnings also reflect sustained achievements under incentive tolling arrangements. Although throughput was lower in 2000, Enbridge System earnings are protected from changes in volumes through the provisions of the Incentive Tolling Settlement (ITS). The second phase of the System Expansion Program (SEP II) was completed in early 1999, while major portions of Terrace Phase I were put into service during 1999. 

In April 2000, Enbridge and the Canadian Association of Petroleum Producers (CAPP) announced the details of a renewed incentive arrangement, which governs tolls on the Enbridge System. The ITS, which was approved by the National Energy Board (NEB) in June, expires on December 31, 2004 and extends the 1995 Incentive Tolling Agreement which expired at the end of 1999. The fundamentals of the extended agreement are consistent with the original agreement, allowing the Enbridge System and its customers to continue to share in cost savings. 

