Reviews and Audits

We use reviews and audits to assess each business segment's compliance with government regulations and our internal policies and management systems.

Internal Environment, Health and Safety reviews

We conduct periodic EH&S reviews at all facilities we operate. We consider each internal review a key opportunity to verify compliance with company standards and regulatory requirements, and to continually improve our performance. To carry out the review, the review team visits the site, conducts interviews and examines documentation. After the review is done, the findings are presented to local management. Management then develops an action plan to correct deficiencies.

In 2003, teams of EH&S professionals conducted 114 internal reviews of pipeline operations, gate stations, compressor stations and gas processing plants. We continually look for opportunities to improve our review programs to enhance their effectiveness and value.

During the year, Liquids Pipelines, for example, conducted a multi- disciplinary review in Canada, which covered review protocol for EH&S, security and operations. The multi-disciplinary review was conducted for pumping stations and terminal facilities along a 475-kilometre (295-mile) section of pipeline in Alberta and Saskatchewan. As part of this process, we also conducted a health and safety management system review of our Canadian mainline system.

Gas Distribution introduced an enhanced review program, with expanded criteria and improved follow-up procedures. This program was used to review 20 unmanned gate stations in Ontario. Although no significant compliance issues were found, the review identified opportunities to improve labelling of chemical storage containers. A corrective action plan will be implemented in 2004 at all of the company's 42 gate stations.

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Process safety management

Process safety management (PSM) is a formal review process required by U.S. regulations for non-pipeline plant facilities to promote worker and public safety. In 2003, we carried out PSM reviews at 13 gas plants covered under the regulations in our U.S. Natural Gas Business. Our review focused on continued compliance in the area of process hazard analysis and on integrating new acquisitions into our natural gas systems.

We also applied similar review processes to other facilities not covered under the regulations, helping to promote a consistent approach to safety throughout our U.S. Natural Gas Business.

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Environmental and safety due diligence

We conduct environmental and safety due diligence on new business acquisitions to identify and account for potential environmental and public safety liabilities, and to identify opportunities for improvement.

In 2003, we carried out due diligence reviews before acquiring three major pipeline systems in the United States.

These included an assessment of risks on a 1,050-kilometre (650-mile) crude oil pipeline from Chicago to Cushing, Oklahoma, and the Mid-Continent System, which includes a 697-kilometre (433-mile) liquids pipeline in Oklahoma, Missouri and Illinois, and terminal facilities with 10 million barrels of storage capacity. Based on our reviews, we plan to upgrade spill containment facilities and install groundwater monitoring at appropriate locations in these systems, starting in 2004.

We also undertook an extensive due diligence review of the North Texas System, which consists of five gas processing plants and more than 3,200 kilometres (2,000 miles) of gas gathering pipe.

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External audits and inspections

Environmental and safety audits and inspections of our operations also are carried out by local and federal regulatory agencies.

The National Energy Board (NEB), for example, conducted an audit of the Canadian portion of our Liquids Pipelines System, focusing on environment, safety, operations and emergency response. Although finding no significant issues, the auditors identified the need for improvements to training, internal reviews and environmental monitoring. Action plans were carried out to correct these deficiencies.

In 2003, the Liquids Pipelines System's pipeline integrity program underwent major audits by the NEB, the Alberta Energy and Utilities Board and the U.S. Department of Transportation. The results of these audits and inspections supported the strength of our integrity program.

State and federal regulators also conducted 57 compliance audits of our U.S. Natural Gas Business systems. No significant issues were identified.

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