corporate governance

Policies and Management Systems

Continuous improvement of our management systems

Our business units apply management systems specifically adapted to their activities and business needs. These systems are designed to focus our company’s EH&S objectives, improve worker safety, reduce adverse impacts on health and the environment, and measure our progress. A goal of these systems is to increase the consistency of our EH&S activities and to ensure our activities are closely tied to our business and CSR objectives. In 2005, we continued to strengthen these systems:

• DuPont Safety Resources completed a comprehensive review of Liquids Pipelines’ Health and Safety Management Systems to determine what we are doing well and where we need to make improvements. DuPont’s four key recommendations focused on “felt” leadership, employee involvement, enhancement of policies and procedures, and management of contractors. We are now working on improving our health and safety programs in line with the recommendations. A similar review of Liquids Pipelines’ Environmental Management Systems has been commissioned for 2006.
• In 2005, Enbridge Gas Distribution continued to integrate its EH&S programs and policies into the company’s Distribution Management System (DMS). The DMS is a customized management system based on the framework adopted by the corporation to comply with the Sarbanes-Oxley Act and the ISO framework. We process-mapped the majority of the company’s EH&S programs, identified process stakeholders, and identified process gaps and scheduled them for closure. For example, the company’s EHS Training Management process, Contractor Safety Management process, and Chemical Management process each underwent a thorough review by all stakeholders involved, followed by a concerted effort at implementing identified opportunities for improvement in these processes. Overall, the introduction of the DMS to Enbridge Gas Distribution ensures that employees know and understand the systems and controls that are in place for employee safety and environmental protection, and improves the ease and opportunity of conducting checks and audits on the system’s effectiveness and efficiency going forward.
• We continued to strengthen EH&S compliance in our United States Natural Gas Business through the use of our Ops Environmental compliance database system, an online set of EH&S tracking and notification tools that help staff in monitoring compliance with federal, state and internal requirements. We have successfully put this system into effect in all areas of the United States Natural Gas Business, including the Gulf of Mexico offshore assets we acquired at the beginning of 2005.

Top of pageReviews and Audits

We use reviews and audits to assess each business segment’s compliance with government regulations and our internal policies and management systems, and to provide guidance for making improvements.

Internal EH&S reviews

We conduct internal EH&S reviews at all facilities we operate. To carry out a review, a team of EH&S professionals inspects the site, conducts interviews, and checks documentation. After the review is completed, the team provides local management with a formal written review report summarizing the findings. Management then develops an action plan to correct deficiencies. The review team follows up on documented issues to ensure they are fully addressed.

• Environmental reviews were conducted on the Enbridge Pipelines (NW) Inc. system, Enbridge Energy Partners L.P/ Cushing Region and the Hardisty Caverns Limited Partnership facility. These reviews are an integral component of the Enbridge Environmental Management System and consist of a formalized program of inspections and reviews to monitor compliance with regulatory requirements, Enbridge policies and procedures, and industry best practices.
• In mid-2005, our United States Natural Gas Business implemented a new corporate EH&S audit program designed to ensure compliance and consistency across our various assets. We completed 11 audits in the second half of the year. Our field EH&S personnel also performed 81 additional internal audits.
• Enbridge Gas Distribution reviewed one-third (13) of the company’s gate stations in 2005 for compliance with environment and health and safety regulations. The company also completed an EH&S compliance review at its meter shop facility, and is on track for reviewing three of its operations stations in 2006. The compliance review process is proving valuable in identifying issues, tracking closure of issues, communicating expectations to relevant internal groups, and maintaining strong EH&S compliance across company facilities.

External audits and inspections

Local and federal regulatory agencies carry out environmental and safety audits and inspections of our operations. Here are some examples:

• The Oklahoma Department of Environmental Quality completed a comprehensive hazardous waste inspection at Liquids Pipelines’ Cushing tank farm. No deficiencies were identified. In addition, our Vector Pipeline compressor stations in Indiana and Michigan received air compliance inspections by the respective state environmental agencies, also with no notable deficiencies.
• Regulatory agencies conducted 96 external audits at our United States Natural Gas Business facilities in 2005. These audits resulted in two violation notifications. Both of these violations were the result of exceeding emission limits at two separate gas plants. One violation was minor and did not result in a fine, and the other was more significant and is described in more detail in the section below.
• The United States Natural Gas Business also received three additional violation notifications in 2005 for reporting, record keeping and operating variances that were discovered by agencies conducting files reviews.

Top of pageRegulatory compliance

We manage compliance with laws and regulations through system controls and regular reviews and inspections. We consider any regulatory notification or penalty to be important and continue to work toward our goal of continuous compliance. In the event that our performance falls short of this goal, we carry out rigorous reviews and institute corrective processes.

In 2005, we received 10 regulatory notifications from government agencies for environmental or safety issues:

• Our United States Natural Gas Business received five notices of violation/enforcement for air permit and non-compliance issues. The most significant was a US$22,500 fine issued to our Plum Creek, Texas, natural gas treating plant. A Notice of Enforcement (NOE) was issued for failure to meet sulphur dioxide emission limits of 42.01 pounds/hour. This NOE is in reference to what Enbridge described as “dramatic variations in the inlet gas’s composition”, which resulted in the plant experiencing SO₂ emissions greater than the permitted limits. We have since changed operating parameters at the plant to prevent a reoccurrence in the future.
• Liquids Pipelines received four notices – three from the United States Department of Transportation’s Pipeline and Hazardous Materials Safety Administration and one from the Illinois Environmental Protection Agency. None were significant violations or bore any monetary fines, and all four were addressed and resolved.
• Enbridge Gas Distribution received one minor administrative order from the Ontario Ministry of Labour, related to construction work at our main Toronto office. The order cited that the company was to post temporary emergency evacuation procedures consistent with the construction flow and work being accomplished during renovation and that the notice of project identify Enbridge Gas Distribution as the primary constructor. We complied immediately with the order, and we reviewed the issues to prevent future recurrences.

Regulatory notifications and fines

* Regulatory notifications are formal written notices by regulators that Enbridge may not be adhering to the law, regulation or permit requirements. Examples include formal warnings, enforcement actions, summons and charges, notices of violation and stop and control orders.

** In 2005, Gas Pipelines received a fine of US$69,300 for exceeding operating permit levels for carbon monoxide at the Highland, Michigan compressor station on the Vector pipeline during 2004. We took corrective action, modifying equipment and operating practices, in consultation with the United States Environmental Protection Agency and state regulators.

Top of pageSettlement agreement reached in Garland late payment penalty proceedings

Enbridge Gas Distribution has entered into a settlement agreement in a proposed class proceeding related to late payment penalties charged in the past by Enbridge Gas Distribution. Under the proposed settlement, Enbridge Gas Distribution will make payments of $21.2 million, including a one-time payment of $9 million prior to the end of January 2007 to the Winter Warmth Fund which we have been supporting since 2004; $10.2 million to class counsel on account of the plaintiff’s legal fees and expenses; and approximately $2 million to the Class Proceedings Fund operated by the Law Foundation of Ontario. This settlement does not constitute any admission of liability on the part of Enbridge Gas Distribution. The settlement agreement is subject to the approval of the Ontario Superior Court of Justice.

Late payment penalty revenues are included in Enbridge Gas Distribution’s estimate of revenues for the year and therefore accrue to the benefit of all customers, reducing the cost of providing distribution services. The Ontario Energy Board (OEB) approves these estimates and resulting rates each year. Enbridge Gas Distribution intends to apply to the OEB for recovery of the proposed payments resulting from the settlement of this action.