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To buy 50% interest in the Pacific Trail Pipelines LP, the developer of the proposed 463-kilometer, KSL gas pipeline from Summit Lake, B.C. to Kitimat, B.C.

Pacific Northern Gas Ltd. (TSX: PNG) has agreed to sell its 50% interest in the Pacific Trail Pipelines Limited Partnership (PTP) for $50 million. The transaction has two parts, with the first payment consisting of $30 million that PNG will receive on closing and a second payment of $20 million which PNG will receive when the purchasers decide to proceed with construction of the Kitimat liquefied natural gas (LNG) facility.

The purchasers are PNG's Calgary-based partners in the KSL Pipeline, Apache Canada Ltd. and EOG Resources Canada Inc. As a result of the transaction Apache Canada's ownership of the pipeline will increase from 25.5% to 51% and EOG Canada's ownership will increase from 24.5% to 49%.

PTP is the developer of the proposed 463 kilometer, KSL natural gas pipeline from Summit Lake, B.C. to Kitimat, B.C. The KSL Pipeline would serve the planned Kitimat LNG facility owned by Apache Canada and EOG Canada.

"We believe that the transaction delivers full and fair value for our stake in PTP and provides significant benefits for all PNG stakeholders," said Roy Dyce, president and chief executive officer of PNG. "We did not initiate the transaction, but negotiating with our partners was the right thing to do. We recognized the value to be obtained from closely coordinating the development and financing of both the KSL Pipeline and Kitimat LNG export facility. Now there is an increased likelihood that these projects will move forward."

Mr. Dyce further noted that, "The long term transportation service agreements negotiated with Apache Canada and EOG Canada will significantly increase capacity utilization on PNG's existing pipeline system."

The transaction is scheduled to close by the end of February 2011.