Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) announced today that net
income for the three months ended March 31, 2010 was $5.5 million, compared with
net income of $5.2 million for the corresponding period in 2009. After providing
for preferred share dividends, the earnings per common share in the three months
ended March 31, 2010 were $1.51 compared with earnings per common share of $1.39
for the same period in 2009.


First Quarter 2010 Results

Net income for the quarter was higher in 2010 compared to 2009 by approximately
$0.3 million. This was mainly due to the higher weighted average return on
equity ("ROE") earned in the first quarter of 2010 of 10.09 percent compared to
9.07 percent in the first quarter of 2009, accounting for $0.6 million. This
increase has been partially offset by higher administrative expenditures
incurred by the Company for its new strategic initiatives and expenditures for
the project to loop the Company's mainline transmission system from Kitimat to
Summit Lake (the "KSL Project").


Included in net income for the three months ended March 31, 2010 are after-tax
charges of $0.2 million or $0.06 per share compared to $0.04 million or $0.01
per share for the corresponding period in 2009 relating to the Company's share
of development expenditures by Pacific Trail Pipelines Limited Partnership
("PTP") on the KSL Project.


The Company's share of planned capital expenditures for the KSL Project in 2010
is expected to be approximately $5.5 million, of which approximately 90 percent
would be capitalized, subject to completing commercial arrangements for the KSL
Project transportation capacity by the second quarter of 2010.


Residential deliveries were approximately 18 percent lower in the three months
ended March 31, 2010 and total commercial deliveries were 22 percent lower,
relative to deliveries over the same period in 2009. Management believes that
weather was a key factor in the decrease in both the residential and the
commercial deliveries, as it was approximately 13 percent warmer for the three
month period ended March 31, 2010 compared to the same period in 2009. The
weather was also 5 percent warmer than normal for the three month period ended
March 31, 2010, with "normal" based on the average of actual temperatures in the
Company's service areas for the preceding 10 years.


Industrial deliveries were lower by approximately 33 percent for the three month
period ended March 31, 2010 compared to the same period in 2009. The decrease in
industrial deliveries is comprised of a 48 percent decrease in large industrial
customer deliveries, mainly due to the closure of the West Fraser Mills Ltd.
Kitimat liner board mill, combined with a 20 percent decrease in small
industrial deliveries. The decrease in small industrial customer deliveries
relate primarily to the Northeast system. Deferral accounts are in place that
recover or refund margin differences resulting from deliveries to large
industrial customers and to some small industrial customers varying from the
forecast approved for rate making purposes.


Operating revenues in the three months ended March 31, 2010 decreased to $40.2
million compared with $48.3 million in the corresponding period in 2009. The
decrease was primarily due to the lower commodity cost of gas embedded in rates
as a result of declining gas market prices.


Operating margin in the three months ended March 31, 2010 increased to $17.9
million, as compared with $17.0 million in the same period in 2009, mainly due
to the higher ROE in the first quarter of 2010 compared to the first quarter of
2009.


Interim Negotiated Settlements of the 2010 Revenue Requirements Applications

A negotiated settlement process ("NSP") was conducted over the February 8 to 10,
2010 period in respect of the 2010 revenue requirements applications for all of
the Company's operating divisions. On March 4, 2010 the B.C. Utilities
Commission ("Commission") approved the interim negotiated settlement agreements
reached by the parties in February. The agreements are interim pending review of
the Company's CAP/ROE Application which is described in more detail below.


Capital Structure and Equity Risk Premium Application (the "CAP/ROE Application")

For many years the Company has maintained higher actual common equity than the
Commission has allowed for rate making purposes in order to preserve a
reasonable level of financial integrity. As a result, the Company's actual ROE
has been less than the ROE approved by the Commission. To address the foregoing
and allow the Company the opportunity to earn a fair and reasonable return on
its utility investments and achieve improved financial health, on July 16, 2009
the Company and its wholly owned subsidiary Pacific Northern Gas (N.E.) Ltd.
("PNG(N.E.)") jointly filed the CAP/ROE Application with the Commission
primarily to increase the deemed common equity from 40 to 47.5 percent in the
Western system and from 36 to 42.5 percent in PNG(N.E.). The Company also
requested Commission approval to increase its risk premium relative to the
benchmark utility ROE from 65 to 75 basis points for the Western system and from
40 to 75 basis points for PNG(N.E.)'s Fort St. John/Dawson Creek division and
from 65 to 75 basis points for the Tumbler Ridge division of PNG(N.E.).


Under the interim 2010 revenue requirements applications settlement agreements
the parties agreed to attempt to negotiate an agreement on the following matters
in the context of the CAP/ROE Application:




1.  The deemed common equity components used for rate making purposes. 
2.  The risk premium relative to the benchmark utility ROE. 
3.  The disposition of the Merrill Lynch option fees which were recorded in
    a deferral account for future potential disposition as a credit to the
    Western system cost of service. 
4.  The level of deferred income taxes draw down in 2010. 
5.  The disposition of the 2009 ROE deferral accounts established under
    Commission Order No. G-172-09. 



The parties agreed that the permanent rates effective January 1, 2010 would be
finalized having regard to the terms of settlement reached in respect of the
above matters. The CAP/ROE Application negotiated settlement process commenced
on April 26, 2010. The Company expects the negotiated settlement process will be
completed in late May 2010 with the Commission approving permanent rates,
effective January 1, 2010 that reflect the terms of settlement reached in
respect of both the Company's 2010 revenue requirements applications and the
CAP/ROE Application.


Launch of Renewable Power Business

On April 7, 2010, the Company announced a partnership with Skookum Power
Holdings Corp. ("Skookum Power") to acquire the 9.8 megawatt McNair Creek "run
of river" hydro-electricity generation facility from Kiewit Hydropower Investors
Inc. and Renewable Power Corp. The McNair Creek facility is located on B.C.'s
Sunshine Coast and has been in operation for more than 5 years. The facility's
generation is committed for sale under a long-term contract to BC Hydro.


The Company entered into a joint development and operating agreement with
Skookum Power gaining access to extensive expertise in hydrology, engineering
and commercial development to support its new renewable power business platform.
The principals of Skookum Power are former power company executives with
collectively more than 50 years experience in the hydro-electricity and energy
sectors.


The investment in the McNair Creek facility represents the launch of the
Company's renewable power business as part of its business diversification
strategy. The key elements of this strategy are to diversify the Company's risk
profile, grow its asset base and enhance its cash flows.


The transaction was closed on April 19, 2010 with the Company acquiring a 97
percent interest in the McNair facility. The purchase price was approximately
$17 million and has been funded in part by the assumption of approximately $9
million in non-recourse debt and the remainder in cash payments. The Company's
cash purchase obligations were met through drawings on its existing financial
resources. The Company's debt to capitalization will now be approximately 51
percent. The transaction is expected to be cash flow positive and EPS accretive
in 2011.


KSL Project

The Company continues to pursue the KSL Project through its 50 percent ownership
of PTP. The KSL Project would provide gas transportation services for up to 1.0
billion cubic feet per day, primarily for Kitimat LNG Inc.'s proposed LNG export
terminal ("Terminal") to be located approximately 15 kilometers southwest of
Kitimat. The KSL Project entails the construction of approximately 470
kilometers of up to 36 inch diameter pipeline and associated compression
facilities, at a cost of $1.2 billion based on estimates made in 2006.


On January 13, 2010 Apache Corporation's subsidiary Apache Canada Ltd.
("Apache") acquired 51 percent of the Terminal. Apache also acquired a 25.5
percent interest in PTP from Galveston LNG Inc., the parent company of Kitimat
LNG Inc.


Subject to a number of conditions, construction of the KSL Project by PTP is
planned to commence in 2012 for completion in 2014 when the Terminal is planned
to begin operation. Conditions to construction include the securing of contracts
for use of PTP's transportation capacity, financing for construction of the KSL
Project, and additional regulatory approvals for the KSL Project such as a
Certificate of Public Convenience and Necessity ("CPCN") from the Commission and
other permits from the B.C. Oil and Gas Commission. The Company will be working
to finalize transportation reservation agreements for the KSL Project in the
second quarter of 2010 at which point it would file its CPCN application with
the Commission. The Company can give no assurances that such agreements will be
signed or other conditions will be satisfied or that construction of the KSL
Project by PTP will proceed.


Dividends

The Board of Directors declared a semi-annual dividend of 84.375 cents per share
on the Company's 6-3/4 percent cumulative, redeemable, preferred shares, payable
July 1, 2010 to the shareholders of record at the close of business on June 16,
2010.


The Board of Directors also declared a quarterly dividend of 28 cents per share
on the Company's common shares, payable June 22, 2010 to shareholders of record
at the close of business on June 8, 2010.


Pacific Northern Gas Ltd., for purposes of the Income Tax Act (Canada), and any
similar provincial or territorial legislation, designates all dividends paid by
Pacific Northern Gas Ltd. after December 31, 2005 to be "eligible dividends"
unless otherwise notified by the Company. An eligible dividend paid to a
Canadian resident is entitled to the enhanced dividend tax credit.


Forward-looking statements

This news release includes forward-looking statements. Forward-looking
statements relate to, among other things, anticipated financial performance,
business prospects, strategies, regulatory developments, new services, market
forces, commitments and technological developments. Many of these statements can
be identified by words such as "believe", "expects", "expected", "will",
"intends", "projects", "anticipates", "estimates", "continues" or similar words.
PNG believes the expectations reflected in such statements are reasonable but no
assurance is given that such expectations will be correct. All forward-looking
statements are based on management's beliefs and assumptions based on
information available at the time the assumption was made and on its experience
and perception of historical trends, current conditions and expected further
developments as well as other factors deemed appropriate in the circumstances.


By its nature, such forward-looking information is subject to various risks and
uncertainties that are known and unknown, including those material risks
discussed in PNG's 2009 Annual Information Form under "Risk Factors" which could
cause PNG's actual results and experience to differ materially from the
anticipated results or other expectations expressed. Such risks and
uncertainties include but are not limited to: general economic conditions and
markets; gas supply and availability; gas commodity price volatility;
competition; decisions by regulators; seasonal weather patterns; federal and
provincial climate change initiatives; financing of investments as well as the
value of such investments; the cost and availability of capital; the impact on
PNG's liquidity if it were to go offside of the covenants in its debt
facilities; successful execution of strategic initiatives; the ability of PNG to
attract and retain quality employees and the impact of accounting changes
including the transition to International Financial Reporting Standards. Readers
are cautioned not to place undue reliance on this forward-looking information,
which is given as of the date it is expressed in this news release or otherwise,
and PNG undertakes no obligation to update publicly or revise any
forward-looking information, whether as a result of new information, future
events or otherwise, except as required by applicable securities laws.


About Pacific Northern Gas

Headquartered in Vancouver, British Columbia, Pacific Northern Gas Ltd.
(TSX:PNG)(TSX:PNG.PR.A) owns and operates natural gas transmission and
distribution systems. The Company's western transmission line extends from the
Spectra Energy gas transmission system north of Prince George to tidewater at
Kitimat and Prince Rupert, and provides service to 12 communities and a number
of industrial facilities. In the northeast, Pacific Northern's subsidiary
Pacific Northern Gas (N.E.) Ltd. provides gas distribution service in the Dawson
Creek, Fort St. John and Tumbler Ridge areas. Further information is available
on the Company's website at: www.png.ca.




First Quarter Consolidated Results
Three Month Period Ended
March 31 ($ thousand, except for per share data)

                                                           2010        2009

Operating revenues                                      $40,235     $48,318 
Cost of sales                                            22,338      31,288 
                                                   ------------------------
Operating margin                                         17,897      17,030 
                                                                           
Net income applicable to common shares                   $5,404      $5,072 
Earnings per common share - basic                         $1.51       $1.39 
Earnings per common share - diluted                       $1.48       $1.38 
Dividends per share                                       $0.28       $0.23 
                                                                           
Net cash from operating activities before changes                          
 in operating assets and liabilities                     $8,530      $4,880
Changes in operating assets and liabilities              (7,418)      2,113
Additions to plant, property and equipment                 (915)     (1,248)
Repayment of bank indebtedness                             (118)     (2,998)
Issuance of long-term debt                                    -       3,000
Dividends paid                                           (1,005)       (842)
                                                                           
First Quarter Consolidated Results                        March    December 
As at                                                  31, 2010    31, 2009
($ in thousand, except for per share data)                                 
Cash and cash equivalents                                   902       1,511
Common shareholders' equity                              90,357      85,436
Book value per common share                              $25.18      $24.03

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