To our unitholders and shareholders

Looking Ahead

What's ahead? Our multi-year, multi-billion-dollar expansion program is largely complete. However, we believe solid, long-term fundamentals in both crude oil and natural gas will result in more infrastructure needs; we are well positioned to pursue growth opportunities in both lines of business. We do not expect that major expansions to our Lakehead System will be required over the next few years. We do, however, see significant growth potential in our North Dakota System, where the Bakken Shale is located. Production in the Bakken, one of the most promising production areas, is expected to quickly ramp-up over the next few years to about 350,000 Bpd. As the full potential of the play is developed, volumes could well exceed that number. The Partnership is well positioned to capitalize on that growth by providing additional capacity on our North Dakota System, which supplies the Lakehead System and the North Dakota refining market.

Our Cushing crude oil storage facilities are attracting significant interest from third parties looking for contract storage capacity. Currently, we have close to 16 million barrels of storage capacity with additional expansions possible.

With respect to natural gas, we continue to see significant growth potential in areas such as the Haynesville Shale and the Anadarko Granite Wash as well as areas where we don't currently operate such as the Marcellus Shale located in the eastern United States. Early estimates have calculated that the Marcellus Shale contains between an estimated 1.9 - 500 trillion cubic feet (Tcf) of natural gas. Even if only 10 percent of that gas is recovered, it would be enough to supply the entire U.S. for about two years. As such, we are closely monitoring potential development opportunities in areas such as the Marcellus Shale, where we can replicate the success we have had with our gathering and processing businesses in Texas.

Though volumes decreased on our natural gas systems in 2009, we expect this trend to change in 2010 as rig counts stabilize and horizontal drilling technology enhances well productivity. We are working on several growth initiatives that would add capacity and volumes to our East Texas System in the South Haynesville area of Shelby County, Texas.