On September 17, 2008, together with its Fort Hills partners Petro-Canada and Teck, UTS announced that the preliminary results from the Front End Engineering and Design (FEED) process indicated significant capital cost inflation for a fully integrated Project. The Fort Hills partners continue to review the preliminary cost estimates and assess options for development of the Project, including the phasing of various aspects of the Project. The selected development option will be reflected in the final FEED report at which time Fort Hills will develop a definitive cost estimate, which will be the basis for the final investment decision by the Fort Hills Partnership. This decision is expected in the fourth quarter of 2008.

While no final decision has been taken by the Fort Hills Partnership, the partners contemplate making the initial investment decision with respect to only the mining and extraction portion of the Project. Due to several factors including costs, current commodity, equity and credit market conditions, the partners are considering deferral of any decision to construct the upgrader. This would substantially reduce Project costs prior to first bitumen production. The Fort Hills Partnership does not yet have a definitive cost estimate for a stand-alone mine, extraction plant and infrastructure. However, it is UTS' view that the costs associated with the mining and extraction project would be in the range of $13 - $15 billion (including pre-FEED, FEED costs of $1.5 billion, contingency and escalation). UTS' corresponding funding requirements, after the current earn-in and cash on hand have been spent, based on this preliminary estimate would be between $1.1 and $1.5 billion (excluding fees and capitalized interest).

"This is a significant step forward in today's business environment. We anticipate making the final investment decision on a mining and extraction project before year end. We believe that proceeding prudently with a bitumen project would decrease our overall funding requirements, and thereby extend the duration of UTS' current funding into the first quarter of 2010," said William Roach, President & Chief Executive Officer. "Moreover, this will allow more time for the equity and debt markets to recover, at a time when we are placing the additional funding required for the Project."

Proceeding with the Project is subject to certain regulatory approvals being received. Fort Hills is working with the regulators and various stakeholders to obtain the necessary approvals, which are expected in the fourth quarter of 2008.

The Fort Hills Project, located 90 kilometers north of Fort McMurray, is held by UTS with a 20% working interest, Teck with a 20% working interest and Petro-Canada with a 60% working interest and operatorship.