CHAPTER 7

Transportation Agreements (Pipelines)

In India Demand for transporting petroleum products over long distances is

expected to total 54.6 million tonnes in 2001-2002 and around 87.3 million
tonnes in 2006-07. Pipeline transportation is the most efficient way of moving
petroleum products across long distances. In India, barely 25 percent of long
distance movement of petroleum products is by pipelines. In contrast, in the
developed countries almost all such movement is through pipelines. Around Rs.
30,000 crore is expected to be invested over the next decade in setting up
pipeline networks.

Globally,Pipeline transactions face unique and complex challenges that bring to

bear an unusually broad array of legal specialties. In addition to the usual
commercial and contractual issues that arise in virtually any transaction, pipeline
deals often involve such distinct practice areas as the following:

1.Common carrier regulation in the countries

2.Economic regulation by state agencies in multiple states

3.Antitrust review by the government department

4.Pipeline safety regulation of the government

5.Right-of-way issues governed by state and International laws

6.Tax issues specifically applicable to the various kinds of pipeline entities

7.Negotiating transportation agreements for the transmission of crude oil, natural

gas, refined petroleum products, and various petrochemicals

8.Handling contractual arrangements by pipeline, marine vessels, or rail cars

9.Rate development and rate design issues

10.Fuel requirements

International pipeline transactions raise a host of additional issues, by allowing

unrestricted entry under a well-defined policy framework for the setting up and
operation of pipelines , Set up new pipelines for products under the common
carrier principle and place an even greater premium on experience and in-depth
knowledge.

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 FORM OF FIRM TRANSPORTATION AGREEMENT
TRANSPORTATION AGREEMENT
FOR FIRM TRANSPORTATION OF NATURAL GAS
ALLIANCE PIPELINE L.P.
Firm Transportation Agreement No. _______

This TRANSPORTATION AGREEMENT FOR FIRM TRANSPORTATION OF

NATURAL GAS ("Firm Transportation Agreement” or “Agreement") is
made and entered into this ___ day of ______________, 20___, between:

ALLIANCE PIPELINE L.P., ("Transporter"),

and
__________________________________________, ("Shipper").

Witnesseth: That in consideration of the mutual covenants contained herein

the parties agree as follows:

Section 1. Service to be Rendered

Transporter shall perform and Shipper shall receive Firm Transportation
Service in accordance with the provisions of Transporter's effective Rate
Schedule FT-1 and the applicable General Terms and Conditions (GTC) of
Transporter's FERC Gas Tariff on file with the Federal Energy Regulatory
Commission ("Commission") as the same may be amended or superseded in
accordance with the Rules and Regulations of the Commission.

Section 2. Term
This Agreement shall be effective as of the date first written above, for a term
of ______ years. Shipper may extend the term of this Agreement for a
minimum of _______________ upon ___________ prior written notice of the
extension. Pregranted abandonment of service shall apply upon termination
of this agreement.

Section 3. Rates
[Shipper shall pay the currently effective Rate Schedule FT-1 Recourse
Rates set forth at Sheet No. 10 of Transporter’s Tariff, as such
rates may be revised and superseded, subject to Commission
approval, from time to time, unless Shipper has executed a
Negotiated Rate Agreement in accordance with Section 39 of
the GTC.]
OR
[Negotiated Rate]
Section 4. Notices
Notices to Transporter under this Agreement shall be addressed to:
Alliance Pipeline L.P.
6385 Old Shady Oak Road
Eden Prairie, MN 55344
Attention: Manager, Tariff Administration
Fax: (612) 944-9166
Section 5. Superseded Agreements
This Firm Transportation Agreement supersedes and cancels as of the
effective date hereof the following agreements:

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__________, ___________.

IN WITNESS WHEREOF, the Parties have duly executed this Firm

Transportation Agreement in several counterparts by their duly authorized
officers with effect as of the day first above written.

ALLIANCE PIPELINE L.P. by its Managing General Partner, ALLIANCE

PIPELINE INC.
[Date of Execution] Per: _______________________
Per: _______________________
[SHIPPER]
[Date of Execution] Per: _______________________
Per: _______________________

APPENDIX A
TO TRANSPORTATION AGREEMENT NO. [TA Contract No]
BETWEEN

ALLIANCE PIPELINE L.P.

and
[COMPANY FULL NAME]

CONTRACTED CAPACITY AND PRIMARY DELIVERY POINTS

Contracted Capacity __________ MMcf/day

Primary Delivery Primary Delivery Point

Point(s) Capacity (MMcf/day)
Total Primary Delivery Point Capacity
(Not to exceed 150% of Contracted
capacity)

Agreement No. --------

APPENDIX B

RATE PRINCIPLES

1) Subject to the incentive provisions, the reservation rates will be

calculated on a per unit-of-capacity basis to provide for the recovery by
the Transporter of all of the fixed costs of providing service. In addition,
Shippers will pay a commodity or usage charge for volumes actually
shipped, plus fuel.

2) A deemed capital structure of 70% debt and 30% equity for the primary
term and any extension of the primary term of the Firm Transportation
Agreement.

3) A cost of debt calculated using a rate of interest equal to the weighted

average of the interest rates borne by Transporter’s debt. Changes in

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Transporter’s actual weighted average cost of debt will be reflected in
Transporter’s negotiated rates from time to time.

4) Return on Equity

1. Base rate of return on equity of 12%.

2. Base rate of return on equity to be subject to an incentive

adjustment. The resulting return on equity will apply for the primary
term and any extension of the primary term of the Firm
Transportation Agreement.

3. The base rate of return on equity will be increased or decreased

inversely with increases or decreases in the actual capital cost
versus the estimated capital cost of the Alliance Pipeline L.P.
system. The adjustment formula will be linear so that any variations
between actual and estimated capital cost will be reflected in the
adjusted rate of return on equity. For example, a 10% increase in
the actual capital cost, versus the estimated capital cost, would
result in a decrease of 0.5% (50 basis points) in the base rate of
return on equity. Similarly, a 20% decrease in the actual capital
cost versus the estimated capital cost would result in an increase in
the base rate of return on equity of 1.0% (100 basis points). The
incentive rate of return increase or decrease will be limited to a
maximum of 2% (200 basis points).

4. If (i) Transporter's facilities are not completed, tested and

available to provide the service contemplated herein; or (ii)
Transporter has not been granted permission to commence service
by the Commission on or before November 1, 2001, then
Transporter's return on equity shall be reduced by one percent (100
basis points) for the primary term set forth in section 2 of this Firm
Transportation Agreement; provided, however, that Transporter's
return on equity shall not be reduced if the delay beyond November
1, 2001 is attributable to (i) a Force Majeure event as defined in
Transporter's FERC Gas Tariff; or (ii) a failure by Shipper to satisfy
its obligations under this Firm Transportation Agreement.

5) Income taxes will be calculated on a normalized basis, utilizing the

federal and state corporate tax rates on income derived from pipeline
operations for the primary term and any extension of the primary term of
the Firm Transportation Agreement.

6) The depreciation on transmission plant used for purposed of deriving

rates will be calculated annually in accordance with Table 1. If, at any
point, a Shipper elects not to exercise its rolling right to extend the primary
term of its Firm Transportation Agreement, then during the final five (5)
years of this Firm Transportation Agreement, that Shipper's rates will be
adjusted so that the average depreciation rate over the term of the Firm
Transportation Agreement is 4%.

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7) The rate base will include, among other things, actual capital costs.

8) The actual reservation rates will be calculated based upon the higher of
the sum of all of the Contracted Capacities or 1325 MMcfd, for the primary
term and any extension of the primary term of the Firm Transportation
Agreement.

9) There will be a commodity or usage charge which will recover all of

those costs that vary with volumes actually shipped, for the primary term
and any extension of the primary term of the Firm Transportation
Agreement.

10) Fuel will be recovered on an actual tracked basis.

11) The estimated capital cost of the Alliance Pipeline L.P. system,
excluding AFUDC and at a system design of 1325 MMcfd, is
U.S.$1,235,163,000 ($1235.2 million).

12) Changes in Transporter's operating costs will be reflected in its rates

from time to time, for the primary term and any extension of the primary
term of the Firm Transportation Agreement.

13) The rate for Authorized Overrun Service will be the negotiated
commodity charge, plus fuel, for the primary term and any extension of
the primary term of the Firm Transportation Agreement.

Table 1
Year Depreciation Rate
1 0.290%
2 0.751%
3 1.212%
4 1.673%
5 2.134%
6 2.595%
7 3.056%
8 3.517%
9 3.978%
10 4.439%
11 4.900%
12 5.361%
13 5.822%
14 6.283%
15 6.744%
16 4.725%
17 4.725%
18 4.725%
19 4.725%
20 4.725%
21 4.725%
22 4.725%
23 4.725%
24 4.725%
25 4.725%

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