News Releases - 2007

• Funds from operations* increased $6.1 million or 9.9% to $67.6 million compared to the same quarter last year
• Payout ratios before sustaining capital* for the three and nine month periods ended September 30, 2007 were 63.1% and 76.2%, respectively
• Cash distributions to unitholders totalled $42.7 million, or $0.21 per unit during the quarter
• Oil sands transportation and conventional crude oil pipeline systems transported a quarterly record 795,300 barrels per day (b/d)
• Corridor pipeline expansion project remains on schedule and on budget, with approximately 240 kilometres, or 52%, of total line pipe installed 
• Successfully closed a $2.2 billion syndicated credit facility to finance the development and expansion of the Corridor pipeline system
• Subsequent to the quarter end, Shell Canada Energy’s Orion oil sands project began transporting volumes on the Cold Lake pipeline system
  
  * Please refer to the "Non-GAPP Financial Measures" section of the MD&A.

On June 22, 2007, the Federal Government’s Tax Fairness Plan (part of Bill C-52) became law.  As a result, publicly-traded flow-through entities such as income funds, royalty trusts and limited partnerships will be subject to taxation commencing January 1, 2011.  In recent months there has been considerable debate within the investment community and the media regarding the sustainability of current cash distributions paid by such entities once they become taxable.

Inter Pipeline believes it is well positioned to maintain its current level of cash distributions to unitholders, despite becoming taxable in 2011.  The Partnership’s positive outlook is supported by attractive fundamentals within each of its four business units, continuing strong financial performance, and a large inventory of capital investment opportunities to expand and enhance its energy infrastructure assets.

“Upon completion of the $1.8 billion capacity expansion project currently underway on the Corridor pipeline system in 2010, we expect to see a material increase in the cash flow available for distribution to our unitholders,” commented David Fesyk, President and Chief Executive Officer.  “The timing of incremental cash flow is well-matched to the period when Inter Pipeline will be transitioning into a taxable entity.  To my knowledge, very few flow-through entities in Canada have positioned themselves as well as Inter Pipeline to mitigate the impact that future taxation could have on the sustainability of cash distributions.”

During the third quarter of 2007, Inter Pipeline generated record funds from operations of $67.6 million, representing an increase of $6.1 million over the third quarter in 2006.  For the nine month period ended September 30, 2007, funds from operations increased to $167.4 million, or $9.2 million higher than results for the comparable period in 2006.  Inter Pipeline’s strong financial performance during the quarter was primarily the result of favourable product pricing on propane plus sales within the NGL extraction business unit.  In addition, Inter Pipeline’s quarterly results incorporate, for the first time, a full quarter of funds from operations on the Corridor pipeline system.  Inter Pipeline’s acquisition of the Corridor system from an affiliate of Kinder Morgan Inc. closed on June 15, 2007.

In the third quarter, Inter Pipeline’s NGL extraction, conventional oil pipeline, oil sands transportation and bulk liquid storage businesses contributed $38.4 million, $20.7 million, $18.2 million and $11.5 million, respectively to funds from operations.  Corporate charges totalled $21.2 million.

Throughput volumes on the Cold Lake pipeline system reached a new quarterly record of 356,200 b/d during the third quarter.  This represents an increase of approximately 20,700 b/d, or 6.2%, over volumes delivered during the same period in 2006.  Volumes now exceed the minimum aggregate throughput commitment of shippers on the Cold Lake system.  Inter Pipeline is allowed to collect additional revenue on shipments above a minimum “take-or-pay” threshold of 355,000 b/d.

Subsequent to quarter end, Inter Pipeline began transporting volumes from Shell Canada Energy’s Orion oil sands project on the Cold Lake pipeline system. Cash flow from the Orion project is supported by a 10-year ship-or-pay contract which includes provisions for the flow through of all material operating costs.
 
During the third quarter, transportation volumes on the Corridor oil sands pipeline averaged 242,300 b/d.  Revenue from the Corridor system is underpinned by a 25-year ship-or-pay contract which includes the recovery of all operating costs, depreciation, taxes and interest as well as a structured return on the equity component of Corridor’s rate base.

Corridor Expansion Project

Inter Pipeline continues to make strong progress on the $1.8 billion capacity expansion project currently underway on the Corridor pipeline system.  The project remains on schedule and on budget.

Following a very successful summer construction season, 240 kilometres of 42-inch diameter line pipe have been installed.  This represents approximately 52% of the total length of expansion pipeline that will be installed.  As at September 30, 2007, Inter Pipeline has incurred approximately $479 million in capital costs related to the Corridor expansion, representing over 26% of the estimated project costs.  Pump station and additional line pipe construction will continue over the next two years, with an expected in-service date in 2010.  A substantial portion of remaining line pipe and facility construction costs has been committed under fixed price contracts. 

The Corridor expansion project has been designed to accommodate additional bitumen blend volumes from the Athabasca Oil Sands Project near Fort McMurray, Alberta.  Bitumen blend capacity on the Corridor system will increase from 300,000 b/d to 465,000 b/d upon completion of the current expansion project.  The Athabasca Oil Sands Project is jointly owned by Shell Canada Energy, Chevron Canada Resources and Marathon Oil Company.

Inter Pipeline’s NGL extraction business continued to generate strong results during the third quarter due to strong NGL product prices and favourable natural gas volumes. Combined, Inter Pipeline’s three NGL extraction facilities processed 4.1 billion cubic feet per day of natural gas, producing an average of 138,900 b/d of NGL, comprised of 83,600 b/d of ethane and 55,300 b/d of propane plus.  Strong NGL production volumes were achieved despite a routine maintenance shut down in September at the Cochrane extraction plant, Inter Pipeline’s largest NGL production facility. 

Propane plus sales at the Cochrane extraction facility are exposed to frac spread, or the difference between the weighted average price of propane-plus products and AECO natural gas.  During the quarter, Inter Pipeline’s realized frac spread averaged $0.676 US/US gallon, compared to $0.598 US/US gallon in the same quarter last year.  Energy commodity markets during the quarter were characterized by rising crude oil prices and weak natural gas prices.  This environment is highly favourable for the extraction of NGL products from natural gas.

Throughput volumes on Inter Pipeline’s conventional oil pipeline systems averaged 196,800 b/d during the third quarter, compared to 213,800 b/d during the same period in 2006.  The reduction in year-over-year throughput is primarily the result of lower southbound shipments on the Bow River pipeline from Hardisty, Alberta. 

During the third quarter, demand for Bow River crude oil was reduced due to refinery turnaround activity in the Billings, Montana market.  In addition, Inter Pipeline has implemented new oil blending practises on the Bow River system which result in the transportation of heavier, more viscous oil blends from Hardisty.  Consequently, the capacity available for southbound oil shipments has been reduced.  Inter Pipeline has concurrently implemented a toll increase on southbound volumes to generate incremental revenue to materially offset the impact of lower shipping capacity.

The average revenue per barrel realized on Inter Pipeline’s conventional oil pipelines during the third quarter of 2007 was $1.67 compared to $1.54 for the same quarter in 2006.

During the third quarter, Inter Pipeline’s European bulk liquid storage business contributed $11.5 million to funds from operations, representing a 12.7% increase over the same period in 2006.  Tank utilization rates averaged 95.8%, compared to 94.5% in 2006 reflecting continued high demand for petroleum and petrochemical storage facilities in western Europe.

In response to growing demand for biofuel storage and handling facilities, Inter Pipeline intends to construct an additional 318,000 barrels of tankage at its deep water storage terminal at Immingham on the eastern coast of the United Kingdom.  Inter Pipeline’s capital investment is estimated to be $26 million.  The new storage facilities are expected to be operational in 2009.

In August, Inter Pipeline (Corridor) Inc. closed a new $2.2 billion credit facility with a syndicate of 15 major lending institutions in Canada and abroad.  This facility ensures access to funding for the development and expansion of the Corridor pipeline system.

Inter Pipeline has an investment grade, long term corporate credit rating of BBB from both Standard & Poor’s and DBRS.  Inter Pipeline (Corridor) Inc.’s senior unsecured debentures are rated A (low), A3 and BBB+ by DBRS, Moody's and Standard & Poor’s, respectively.

As at September 30, 2007, Inter Pipeline’s outstanding debt balance was $1,891 million, resulting in a total debt to total capitalization ratio of 68.0%.  Adjusting for the impact of $888 million of Corridor non-recourse debt, Inter Pipeline’s debt to capitalization ratio was 53.0%.

New Alberta Royalty Regime

On Thursday, October 25, 2007, the Alberta Government announced a new royalty framework for conventional crude oil, oil sands and natural gas production within the Province of Alberta effective January 1, 2009.  At this time, Inter Pipeline does not expect any material impact to its overall business as a result of the new royalty regime.

Inter Pipeline will hold a conference call and webcast today at 2:30 p.m. (Mountain Time) / 4:30 p.m. (Eastern Time) to discuss third quarter 2007 financial and operating results. 

To participate in the conference call, please dial 866-542-4236 or 416-641-6125. A recording of the call will be available for replay until November 15, 2007, by dialling 800-408-3053 or 416-695-5800. The pass code for the replay is 3240141.

A webcast of the conference call can be accessed on Inter Pipeline’s website at www.interpipelinefund.com under Investor Relations / Webcasts.  A rebroadcast of the conference call will be available on the website for approximately 90 days.

Eligible Investors

Disclaimer

Certain information contained herein may constitute forward-looking statements that involve risks and uncertainties. Readers are cautioned not to place undue reliance on forward-looking statements. Such information, although considered reasonable by the General Partner of Inter Pipeline at the time of preparation, may later prove to be incorrect and actual results may differ materially from those anticipated in the statements made. For this purpose, any statements that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements often contain terms such as "may", "will", "should", "anticipate", "expects" and similar expressions. Such risks and uncertainties include, but are not limited to, risks associated with operations, such as loss of markets, regulatory matters, environmental risks, industry competition and the ability to access sufficient capital from internal and external sources. You can find a discussion of those risks and uncertainties in Inter Pipeline’s securities filings at www.sedar.com. Except to the extent required by applicable securities laws and regulations, Inter Pipeline assumes no obligation to update or revise forward-looking statements made herein or otherwise, whether as a result of new information, future events, or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary note.

All dollar values are expressed in Canadian dollars unless otherwise noted.