Securities Law & Instruments


Mutual Reliance Review System for ExemptiveRelief Applications -- distribution of securities by an issuerto its security holders pursuant to a dividend reinvestmentplan -- exemption required because distributions to be paidto unitholders are royalty income -- not a dividend, interest,capital gains or earnings or surplus under Part 1 of 45-502-- aggregate number of securities to be issued greater than2% of outstanding in that year exceeding number available underthe exemption in Part 3 -- 45-502.

Applicable Ontario Statutory Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.,ss. 74(1).

Ontario Rules

Rule 45-502 -- Dividend or Interest Reinvestmentand Stock Dividend Plans.

















1. WHEREAS the local securities regulatoryauthority or regulator (the "Decision Maker") ineach of Alberta, British Columbia, Saskatchewan, Manitoba,Ontario, Quebec, New Brunswick, Prince Edward Island, Newfoundlandand Labrador, Nova Scotia, the Yukon Territory, the NunavutTerritory and the Northwest Territories (the "Jurisdictions")has received an application from Paramount Energy Trust (the"Applicant") for a decision under the securitieslegislation of the Jurisdictions (the "Legislation")that the requirement contained in the Legislation to be registeredto trade in a security and to file and obtain a receipt fora preliminary prospectus and a final prospectus (the "Registrationand Prospectus Requirements") shall not apply to thedistribution of trust units of the Applicant pursuant to adistribution reinvestment and optional trust unit purchaseplan;

2. AND WHEREAS any terms and conditions usedherein that are defined in National Instrument 14-101 shall,unless otherwise defined herein, have the meanings as providedin that National Instrument;

3. AND WHEREAS under the Mutual Reliance ReviewSystem for Exemptive Relief Applications (the "MRRS"),the Alberta Securities Commission is the principal regulatorfor this application;

4. AND WHEREAS the Applicant has representedto the Decision Makers that:

4.1 the Applicant is an unincorporated trustestablished on June 28, 2002 under the laws of the Provinceof Alberta pursuant to a trust indenture, as amended (the"PET Trust Indenture"). The Applicant has beena reporting issuer, or the equivalent thereof, in each provinceand territory in Canada since February 3, 2003. The Applicantis not in default of any requirements of the Legislation.Computershare Trust Company of Canada is the trustee ofthe Applicant;

4.2 the Applicant finances the operationsof Paramount Operating Trust ("POT"), an unincorporatedtrust established on June 28, 2002 under the laws of theProvince of Alberta pursuant to a trust indenture, as amended.POT is an operating oil and gas entity and the Applicantis the sole beneficiary of POT;

4.3 Paramount Energy Operating Corp. (the"Administrator"), a wholly-owned subsidiary ofthe Applicant incorporated on June 28, 2002 under the BusinessCorporation Act (Alberta), provides certain operational,executive and financial services and governance functionsto the Applicant and is the trustee of POT;

4.4 under the PET Trust Indenture, the Applicantis authorized to issue an unlimited number of transferableredeemable trust units (the "Units") and an unlimitednumber of special voting units, of which, as at May 8, 2003,there were 39,638,376 Units issued and outstanding. Eachholder of Units (a "Unitholder") is entitled toan equal undivided share of any distributions from the Applicantand upon cessation or winding-up of the Applicant, an equalundivided share of any amounts distributed. Each Unit entitlesa Unitholder to one vote at meetings of Unitholders. Ifand when special voting units are issued, they will entitlethe trustee thereof to such number of votes at meetingsof Unitholders as may be prescribed by the board of directorsof the Administrator. The Units are listed and posted fortrading on the Toronto Stock Exchange (the "TSX");

4.5 the Applicant has established a DividendReinvestment and Optional Trust Unit Purchase Plan (the"DRIP") to enable Unitholders, at their discretion,to automatically reinvest the distributable income of theApplicant paid on their Units (the "Distributable Income")into additional Units ("DRIP Units") as an alternativeto receiving cash distributions, and as well, at their discretion,to purchase additional DRIP Units by making optional cashpayments ("OCP's");

4.6 distributions due to participants enrolledin the DRIP ("DRIP Participants") will be paidto Computershare Trust Company of Canada in its capacityas agent under the DRIP (the "DRIP Agent") andwill be applied to the purchase of DRIP Units. DRIP Participantswho elect to purchase additional DRIP Units through OCP'swill pay such amounts to the DRIP Agent who will purchaseadditional DRIP Units;

4.7 no commissions, service charges or brokeragefees will be payable by DRIP Participants in connectionwith the DRIP;

4.8 the DRIP Agent will purchase DRIP Unitsdirectly from the Applicant. In the event that the Administratordetermines for whatever reason that DRIP Units will notbe available from the Applicant for a particular distributionperiod, or also in the event of the OCP's the maximum numberof Units have been issued for a particular period, thenDistributable Income (together with, if applicable, anyOCP's received) will be paid to DRIP Participants;

4.9 the acquisition price for DRIP Unitspurchased directly from the Applicant will be based on theweighted average price of the Units traded on the TSX onthe ten trading days prior to a distribution date as describedin the DRIP (the "Treasury Purchase Price"). Theacquisition price for distribution reinvestments shall be95% of the Treasury Purchase Price, and in the case of OCP'sshall be 100% of the Treasury Purchase Price;

4.10 DRIP Participants may terminate theirparticipation in the DRIP by providing written notice tothe DRIP Agent no less than 5 business days prior to theapplicable record date. Such notice, if actually receivedno later than 5 days prior to the applicable record date,will have effect for the distribution associated with thatrecord date, and if not so received will have effect forthe next following distribution;

4.11 Legislation in certain of the Jurisdictionsprovides exemptions from the Registration and ProspectusRequirements for distribution reinvestment plans. Such exemptionsare not available to the Applicant in certain of the Jurisdictionsbecause such exemptions are generally with respect to thedistribution of one or more of the following: (i) dividends;(ii) interest; (iii) capital gains; or (iv) earnings orsurplus. The distributions that are paid to the Unitholdersare royalty income in relation to the income that the Applicantreceives from POT on oil and gas properties;

4.12 Legislation in certain of the Jurisdictionsprovides for OCP's to be exempt from the Registration andProspectus Requirements, however that Legislation placesa restriction on such distributions to 2% of the issuedand outstanding securities fo the issuer as at the beginningof an issuer's financial year. The Applicant was formedin 2002 and established its financial year as the calendaryear in keeping with many of its industry peers. As at January1, 2003, which was prior to the completion of certain transactionswhich commenced the Applicant's operations, the Applicanthad only one Unit issued and outstanding;

4.13 Legislation in certain of the Jurisdictionsprovides exemptions from the Registration and ProspectusRequirements for reinvestment plans of a "mutual fund".The Applicant is not a "mutual fund" under theLegislation as the holders of Units are not entitled t receiveon demand an amount computed by reference to the value ofa proportionate interest in the whole or in a part of thenet assets of the Applicant, as contemplated by the definitionof "mutual fund" in the Legislation.

5. AND WHEREAS under the MRRS, this MRRS DecisionDocument evidences the decision of each Decision Maker (collectively,the "Decision");

6. AND WHEREAS each of the Decision Makersis satisfied that the test contained in the Legislation thatprovides the Decision Maker with the jurisdiction to makethe Decision has been met;

7. THE DECISION of the Decision Makers underthe Legislation is that:

7.1 the Registration and Prospectus Requirementscontained in the Legislation shall not apply to distributionsby the Applicant of DRIP Units under the DRIP, includingpursuant to OCP's, provided that:

7.1.1 no sales charge is payable by DRIPParticipants in respect of the distributions;

7.1.2 each DRIP Participant annually receivesa notice of his or her right, and instructions on howto exercise such right, to withdraw from the DRIP;

7.1.3 for the 2003 financial year of theApplicant ending December 31, 2003, the aggregate numberof DRIP Units issuable under OCP's of the DRIP does notexceed 792,768 Units, and, thereafter, the aggregate numberof DRIP Units issuable by the Applicant in any financialyear of the Applicant under OCP's of the DRIP does notexceed 2% of the issued and outstanding Units as at thecommencement of that financial year; and

7.1.4 at the time of the trade, the Applicantis a reporting issuer or the equivalent under the Legislationand is not in default of any requirements of the Legislation;and

7.2 the first trade in DRIP Units acquiredby DRIP Participants shall be a distribution or primarydistribution to the public unless:

7.2.1 at the time of the trade, the Applicantis a reporting issuer or the equivalent under the Legislationand is not in default of any requirements of the Legislation;

7.2.2 no unusual effort is made to preparethe market or to create a demand for the DRIP Units;

7.2.3 no extraordinary commission or considerationis paid to a person or company other than the vendor ofthe DRIP Units in respect of the trade;

7.2.4 the vendor of the DRIP Units, ifin a special relationship with the Applicant, has no reasonablegrounds to believe that the Applicant is in default ofany requirement of the Legislation; and

7.2.5 the trade of the DRIP Units is nota control distribution as defined in the Legislation.

June 9, 2003.

"Glenda A. Campbell"
"Stephen R. Murison"