Delivering energy poses environmental challenges that need to be managed responsibly. We strive to minimize our company's environmental footprint with proactive programs for climate change, air emissions management, spill prevention and pipeline integrity.

Greenhouse Gases

Climate change continues to be an issue of significant public concern and business risk. Enbridge shares this concern and believes that industry, working with government and other stakeholders, should take voluntary action to identify innovative and cost-effective actions.

We have taken slightly different tactics in addressing greenhouse gas (GHG)emissions in Canada and the United States, depending on the legislative and regulatory environments in which we operate.

In Canada,we have instituted measures to track GHG emissions as a founding member of the Voluntary Challenge and Registry (VCR). Our climate change plan, submitted annually to VCR Inc., outlines a comprehensive approach to minimizing GHG emissions from our Canadian operations through internal efficiencies, demand-side management, offsets and investments in alternative and renewable energy.

Based on our latest VCR results,reported for the year 2002, our total direct and indirect GHG emissions from our Canadian operations were 1.2 million tonnes of CO2 equivalent. This was 11% below 1990 levels, even though we delivered 29% more throughput on our energy transportation and distribution systems.

Striving for further improvements, we have set a corporate target to reduce direct GHG emissions from our Canadian operations by 15% below 1990 levels by 2005. This target exceeds the Canadian commitment to the Kyoto Protocol. Based on projections, we are on track to achieve our target.

In the United States, we have invested significantly in energy efficiency measures and emission controls, and continue to evaluate our approach to emission tracking against internal policies and government requirements.

Our U.S. Natural Gas Business has joined the Environmental Protection Agency's Natural Gas STAR Program. This voluntary program encourages oil and gas companies to identify and adopt cost-effective technologies and practices to reduce emissions of methane, a GHG. In 2003, as a first step, the company began to develop an inventory of methane emissions from its gas gathering and processing activities. Based on this study, we will evaluate opportunities to lower emissions and add value to the company through reduced loss of product.

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GHG performance by Canadian operations

Enbridge fully supports the aim of reducing GHG emissions. Since 1994, Enbridge has actively participated in Canada's Voluntary Challenge and Registry (VCR), a national initiative to reduce GHG emissions. To meet our climate change responsibilities under the program, we have developed a comprehensive action plan to reduce GHG emissions from our Canadian operations, which includes:

1. fugitive emission management In our Gas Distribution System, the use of polyethylene to replace older cast iron pipe is a major factor in reducing fugitive methane emissions. Since the start of this program, 872 kilometres (542 miles)of polyethylene pipe have replaced cast iron mains in Ontario. In 2002, this reduced fugitive methane emissions by 4.6 million cubic metres (163 million cubic feet), or 66,000 tonnes of CO2 equivalent.
2. internal efficiencies System expansions in our Liquids Pipelines System, including the use of larger diameter pipe and energy efficiency equipment, saved an estimated 1,070 gigawatt-hours of electricity in 2002, reducing the equivalent of 664,000 tonnes of CO2.
3. demand-side management Gas Distribution provides demand-side management programs that encourage and enable customers to use natural gas more efficiently. From 1995 to 2002, the programs resulted in total "avoided " emissions of 1.7 million tonnes of CO2.
4. renewable and alternative energy Enbridge, with Suncor Energy, operates the SunBridge Wind Power Project at Gull Lake, Saskatchewan. In 2003, the 11- megawatt project completed its second full year of operation. By displacing fossil fuel generating sources of electricity, the project results in avoided annual emissions of more than 30,000 tonnes of CO2 each year.
5. offsets Enbridge supports and monitors the development of new technologies and practices that offer the potential to lower or offset emissions. In partnership with oil and gas companies, Enbridge is investigating a proposal to build a pipeline to carry CO2 emissions from oil sands development in Fort McMurray, Alberta, to oil fields west of Edmonton.The benefits would include enhancing oil recovery and sequestering a portion of CO2.

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Air emissions and Enbridge

The major air emissions released by Enbridge facilities include carbon dioxide, methane, nitrogen oxides and volatile organic compounds. Other contaminants released but in much smaller quantities are sulphur dioxide and particulate matter.

Our key sources include:

1. carbon dioxide (CO2)indirect emissions from energy consumption in liquids and natural gas pipeline systems;
2. methane (CH4) fugitive emissions from natural gas pipelines and facilities;
3. nitrogen oxides (NOx) fuel use in vehicle fleets and combustion sources such as flares, engine compressors, heaters and boilers; and
4. volatile organic compounds (VOCs) fugitive emissions from vehicle use, liquids storage tanks and gas dehydration facilities.

Carbon dioxide and methane are greenhouse gases linked to climate change. Nitrogen oxides combine with sulphur dioxide emissions to form acid precipitation that can damage plants, structural materials and aquatic ecosystems. Together with volatile organic compounds, nitrogen oxides also contribute to ground-level ozone and smog.

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Contributing to climate change policy

In Canada, interest in climate change increased significantly in 2003 with the federal government's ratification of the Kyoto Protocol at the end of 2002. The Protocol commits the country to reducing GHG emissions to 6% below 1990 levels over the period 2008 to 2012.

With the Protocol's ratification, all Canadians and Canadian industry increasingly face a carbon-constrained future.

During 2003, we continued to position Enbridge for this future by managing our GHG emissions and by contributing constructively to policy development that affects our industry.

Through the Canadian Gas Association, we participated in discussions with the federal government to better understand the exposure of the natural gas business and the impact of proposed targeted measures under Canada's climate change plan. We were also involved in similar discussions through the Canadian Energy Pipeline Association for our liquids pipelines business.

In 2003, the government agreed to remove fugitive methane emissions from the list of covered GHG emissions for large industrial emitters. Although we will continue to reduce fugitive emissions through our cast iron replacement program in Ontario, this decision will help to lessen our financial exposure to meet compliance under Canada's proposed climate change plan.

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Natural gas vehicles fit climate change agenda

Increasing the use of natural gas vehicles (NGVs) has the potential to help Canada environmentally while benefiting our company's natural gas delivery business.

Statistics from Natural Resources Canada show that NGVs produce 22% less CO2 than gasoline-powered vehicles and lower emissions of other air pollutants such as SO2 and NOx. Natural gas also offers a higher octane rating than gasoline or propane, translating into greater performance and higher fuel efficiencies in a factory-built vehicle.

In 2003,Gas Distribution participated in a lobbying effort led by the Canadian Natural Gas Vehicle Alliance to encourage the federal government to consider incentives to increase demand for lower-emitting vehicles such as NGVs.

The effort was successful in persuading the government to recognize NGVs as a transportation solution to GHG emissions. In August, as part of Canada's national climate change plan to reduce emissions, the government pledged nearly CDN$10 million to reduce the cost of NGVs in urban fleets, such as taxis and delivery trucks. Starting in 2004, the funds will be used to provide cash incentives to fleets that use NGVs, including factory-built NGVs and those converted from conventional vehicles.

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Renewable and alternative energy

Society may eventually be able to move away from its reliance on fossil fuels and make greater user of other energy supplies. Creating this future,however, will take time and require further investments in emerging energy technologies.

At Enbridge, we believe it is important to do our part to contribute to this future by fostering the development of renewable and alternative energy sources. Our strategy is to invest in energy technologies that complement our core operations, provide environmental benefits and open the door to long- term business opportunities.

In early 2004, we joined with Suncor Energy and EHN Wind Power Canada in announcing plans for a CDN$48 million wind power project near Magrath in southern Alberta. When fully commissioned in late 2004, the 20-turbine, 30-megawatt facility will generate enough energy to meet the equivalent demands of about 13,000 homes. We will use our share of the output to power pump stations along our Liquids Pipelines System.

We also operate the SunBridge Wind Power Project at Gull Lake, Saskatchewan, in partnership with Suncor. In 2003, the 11 MW plant exceeded its predicted wind power output.

Together, Enbridge's two wind power projects are expected to provide nearly 15% of Canada's installed wind electricity capacity and offset about 115,000 tonnes of CO2 emissions each year.

Besides wind power, we are focusing on opportunities to invest in emerging alternative energy technologies that use natural gas. One of the most important is the fuel cell, which promises high performance, near-zero emissions and increased energy efficiencies.

In 2003, Enbridge signed an agreement with U.S.-based FuelCell Energy, to be the distributor of FuelCell Energy's direct FuelCell ®products in Canada. We are exploring several project opportunities for this technology with institutional and commercial customers. Through our agreement, we will also support continued development of solid oxide fuel cell technology, which has longer-term potential.

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