Pacific Northern Gas Announces a Second Special Dividend of $3 Per Share and a 5 Percent Increase in First Quarter Earnings From

Pacific Northern Gas Ltd. (TSX:PNG)(TSX:PNG.PR.A) announced today that the Board
of Directors has declared a second special dividend of $3.00 per common share in
addition to a regular quarterly dividend of $0.30 per share. The regular
quarterly dividend is unchanged from the first quarter of 2011. The total
dividend of $3.30 per share is payable June 21, 2011 to shareholders of record
at the close of business on June 6, 2011.


The special dividend of $3.00 per share represents approximately $11 million of
the net remaining proceeds from the initial payment of $30 million received on
March 2, 2011 upon the closing of the sale of PNG's 50 percent stake in Pacific
Trail Pipelines Limited Partnership ("PTP"). The Company had previously paid out
a special dividend of $3 per share to shareholders on March 24, 2011.


Pacific Northern Gas Ltd. also announced today that net income for the three
months ended March 31, 2011 was $26.8 million, compared with net income of $5.5
million for the corresponding period in 2010. After providing for preferred
share dividends, the earnings per common share in the three months ended March
31, 2011 were $7.32 compared with earnings per common share of $1.51 for the
same period in 2010. The increase was mainly due to the gain on sale of the
Company's interest in PTP. Net income from discontinued operations was $20.8
million in the first quarter of 2011, composed of the net after tax gain of
$21.5 million recognized on the sale of the KSL project and $0.7 million of the
Company's share of KSL project development expenses incurred prior to its sale,
compared to a net loss of $0.2 million in the first quarter of 2010.


First Quarter 2011 Results

Net income from continuing operations for the three months ending March 31, 2011
was $6.0 million compared to $5.7 million for the comparable period in 2010. The
increase in earnings from continuing operations is mainly due to small
industrial customers sales volumes being higher than anticipated in the first
quarter of 2011, incremental rate base in 2011 and the inclusion of McNair
operations in the first quarter of 2011. The allowed weighted average return on
equity is 10.09 percent for 2011, the same as in 2010.


Residential deliveries were approximately 18 percent higher in the three months
ended March 31, 2011 and total commercial deliveries were 20 percent higher,
relative to deliveries over the same period in 2010. Management believes that
weather was the key reason for higher deliveries as it was approximately 18
percent colder for the three month period ended March 31, 2011 compared to the
same period in 2010. The weather was also 9 percent colder than normal for the
three month period ended March 31, 2011, with "normal" based on the average of
actual temperatures in the Company's service areas for the preceding 10 years. 


On a combined basis, deliveries to large and small industrial customers were
lower by approximately 8 percent for the three month period ended March 31, 2011
compared to the same period in 2010. The decrease is mainly due to the January
2010 closure of the West Fraser Kitimat liner board mill as small industrial
customer deliveries were higher primarily in the Western system where
significant gas demand for coal drying at Ridley Island Terminals reflected the
impact of colder weather and higher than normal coal shipments. 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.


Revenue from Gas Transmission and Distribution

Revenues in the three months ended March 31, 2011 were $37.0 million compared
with $40.2 million in the same period in 2010. The $3.2 million decrease
reflected a reduction of $4.6 million from the sale of gas surplus to customer
requirements ("off system gas sales"), lower commodity costs in 2011 compared to
2010, and a partial offset from higher sales volumes due to colder weather. Any
profit or loss realized on off system gas sales is deferred for future recovery
from, or refund to, the Company's sales customers. The decrease in off system
gas sales in the first quarter of 2011 reflects the impact of higher deliveries
to on system customers due to colder temperatures. Natural gas commodity prices,
which are passed through to the Company's sales customers without mark-up, can
be volatile, creating significant variability in the Company's reported revenues
and cost of gas. 


Operating margin in the three months ended March 31, 2011 increased slightly to
$18.0 million, as compared with $17.9 million in the same period in 2010. The
increase of $0.1 million was mainly due to higher than anticipated deliveries to
small industrial customers and higher than anticipated net customer additions in
2011, partially offset by lower than anticipated deliveries to large commercial
customers.


Revenue from Renewable Energy

For the three months ended March 31, 2011, the McNair hydro-electric facility
generated revenues of $0.44 million. Operating costs for this period amounted to
$0.15 million. The Company recorded net after-tax earnings of approximately
$0.04 million from renewable energy operations. There are no first quarter 2010
comparative results since the McNair Creek facility was not acquired until April
19, 2010. 


Production from the McNair facility is seasonal. During the first three months
of 2011, the McNair Creek facility experienced average hydrologic conditions. As
a result, electricity generation from the McNair Creek facility for the three
months ended March 31, 2011 was consistent with the long-term average that was
estimated using standard industry procedures. 


Sale of the Company's Interest in PTP KSL Project

PTP is developing the KSL Project, a proposed 463 kilometre natural gas pipeline
from Summit Lake, B.C. to Kitimat, B.C. The KSL Project would serve the planned
Kitimat LNG facility being developed by Apache Canada Ltd. ("Apache Canada"),
EOG Resources Canada Inc. ("EOG Canada") and EnCana Corporation ("EnCana"). On
February 4, 2011, the Company entered into an agreement to sell its 50 percent
interest in PTP and the underlying KSL Project to Apache Canada and EOG Canada,
the Company's partners in the project, for payments of up to $50 million. The
transaction has two cash components, the first being a payment of $30 million
that the Company received on March 2, 2011, and the second being a payment of
$20 million to be paid contingent on the purchasers making a decision to proceed
with construction of the Kitimat LNG facility. 


In connection with the sale of its interest in PTP, the Company agreed on the
terms for 20-year transportation service agreements with each of Apache Canada
and EOG Canada that will significantly increase the utilization of the Company's
current pipeline if LNG Partners does not claim this capacity first. If the LNG
Partners project does not proceed and the Kitimat LNG facility does proceed,
combined Apache Canada and EOG Canada would use up to 50 MMcf per day of the
Company's existing pipeline capacity to supplement KSL Project pipeline
throughput. Initial deliveries would be 30 MMcf per day starting with LNG
production and an additional 20 MMcf per day would occur if liquefaction
capacity is later increased. Service under the agreements would commence with
commercialization of the Kitimat LNG facility which is expected to occur in
2015. The transportation service agreements are subject to approval by the B.C
Utilities Commission (the "Commission").


Further, the Company negotiated with Apache Canada and EOG Canada an operating
and maintenance agreement under which the Company would operate the KSL Project
pipeline. This agreement will have an initial term of seven years with renewal
provisions and will be subject to approval by the Commission.


Upon receipt of the first cash payment of $30 million in March 2011, the Company
recorded a net gain of $24.2 million after transaction related costs ($21.5
million after taxes). This reflected accounting for the $8.3 million of KSL
Project expenditures by the Company from its inception to March 2, 2011, of
which $7.3 million was expensed and $1.0 million was capitalized. On March 3,
2011, the Company's Board of Directors declared a special dividend of $3.00 per
common share, which represented approximately $11 million of the proceeds from
the sale of PTP, and as noted, today the Board declared a second special
dividend of $3.00 per common share. 


Should the second contingent payment of $20 million be made, the total $50
million sale proceeds would have an approximate value to shareholders of $9 to
$10 per share after taxes and related expenses, including payments under the KSL
Project management incentive plan. The disposition of PTP has resulted in its
presentation as discontinued operations in the Company's financial statements in
both 2011 and 2010.


The Company can give no assurances that construction of the Kitimat LNG facility
will be completed or that the second $20 million contingent payment will be
made.


New Investment in Renewable Energy Business 

The Company continues to advance its renewable energy strategy with an
investment in the 45 MW Narrows Inlet run-of-river renewable energy project (NI
Project), also referred to as the Stl'ixwim Renewable Energy Initiative or the
Stl'ixwim Project. The Company has formed Narrows Inlet Limited Partnership
("NILP") with Skookum Power Corp. to undertake an investment of up to $2.5
million to advance the NI Project to the start of construction. To March 31,
2011, the Company has invested $0.3 million. Prior to the commencement of
construction, the Company will make its final investment decision, and through
NILP, will have an exclusive option to provide construction equity as well as an
option to ensure NILP owns a 50 percent interest in the NI Project.


Partnering with Skookum Power Corp., as it did on the McNair Creek facility,
allows the Company to gain access to hydro development and construction
expertise. Both parties will be working closely with the team of existing NI
Project developers, Renewable Power Corp. and Altaqua Renewable Power Corp., to
advance the project through the B.C. Environmental Assessment process. Renewable
Power Corp. has extensive experience in hydro project development, construction
and operations and was the founding partner of the McNair Creek facility.


The NI Project was awarded a 30 year energy purchase agreement with B.C. Hydro
in spring of 2010. Construction is expected to commence in mid/late 2012, with
an estimated capital cost of approximately $190 million of which approximately
$20 million would be equity provided by the Company if NILP elects to proceed
with funding construction. The NI Project consists of five developments on four
creeks that are located within a radius of 5 to 7 km of each other at the
northern end of Narrows Inlet which is located approximately 35 km north of the
town of Sechelt, British Columbia and lies within the Sechelt Nation's
traditional territory. The NI Project is expected to benefit from coastal
precipitation patterns, some storage capacity and close proximity to the largest
electricity load center in British Columbia.


Conditions to construction include the receipt of the necessary environmental
and construction permits required to commence construction, securing of
contractor agreements to construct the facility, and financing for construction
of the NI Project. The Company can give no assurances that these conditions will
be satisfied or that construction of the NI Project by NILP will proceed.


Negotiated Settlements of 2011 Revenue Requirements Applications

Negotiated settlements of the Company's 2011 revenue requirements applications
were reached on April 27, 2011 between the Company and customer representatives
in respect of all divisions. The Commission is currently reviewing the
settlements and the Company expects Commission approval by the end of May 2011. 


The Western system settlement results in the applied for $2.1 million revenue
deficiency for 2011 declining to approximately $0.5 million. Of this reduction,
$0.3 million reflects agreed to amendments to budgeted expenses, $0.2 million is
for an overall settlement allowance and $0.5 million pertains to the sale of
PTP. The majority of the balance of the reduction is due to increasing the
forecast of deliveries to residential and small commercial customers ($0.4
million) used for rate making purposes. 


Under the Western system settlement the gas delivery rate increase for
residential customers, effective January 1, 2011, compared to the corresponding
delivery rate as of October 1, 2010, is approximately $0.17 per GJ. This
represents an annual bill increase of $11 or 0.9 percent for the average
residential customer consuming 66.7 GJ/year. The gas supply commodity rate
decrease as of April 1, 2011 results in the annual gas bill for a typical
residential customer being 2.9 percent lower compared to the annual bill using
October 1, 2010 rates.


The Pacific Northern Gas (N.E.) Ltd. (PNG (N.E.)) Fort St. John/Dawson Creek
division's settlement results in the $2.6 million revenue deficiency decreasing
by $0.4 million to $2.2 million. The gas delivery rate increase for residential
customers, effective January 1, 2011, compared to the corresponding delivery
rate as of October 1, 2010, is $0.74 per GJ. This represents an annual bill
increase of $79 or 8 percent for the average residential customer consuming 108
GJ/year. The gas supply commodity rate decrease as of April 1, 2011 results in
the annual gas bill for a typical residential customer being virtually equal to
the annual bill using October 1, 2010 rates. The PNG (N.E.) Tumbler Ridge
division settlement results in the applied for $0.05 million revenue deficiency
decreasing by $0.08 million to result in a modest revenue sufficiency of $0.03
million.


Preferred Share Dividends

The Board of Directors also 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, 2011 to the shareholders of record at the close of business on
June 16, 2011.


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 2011 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)

                                                           2011        2010
Operating revenues                                    $  37,479    $ 40,235
Cost of gas                                              19,072      22,338
                                                      ---------------------
                                                         18,407      17,897
                                                                           
Net income applicable to common shares                $  26,707    $  5,404
Earnings per common share - basic                     $    7.32    $   1.51
Earnings per common share - diluted                   $    7.11    $   1.48
Dividends per share                                   $    3.30    $   0.28
                                                                           
Net income from continuing operations                 $   5,970    $  5,687
Earnings per common share from continuing operations                       
 - basic                                              $   1.61     $   1.57
 - diluted                                            $   1.57     $   1.53
                                                                           
                                                                           
Net cash from continuing operations operating                              
 activities before changes in operating assets
 and liabilities                                      $  7,050     $  8,838
Continuing operations changes in operating assets
 and liabilities                                          (603)      (7,529)
Additions to plant, property and equipment                (674)        (915)
Repayment of bank indebtedness                          (4,836)        (118)
Employee stock option exercise proceeds                  1,818          432
Dividends paid                                         (12,332)      (1,005)
                                                                           
                                                                           
First Quarter Consolidated Results                                         
As at                                                 March 31  December 31
($ in thousand, except for per share data)                2011         2010
                                                                           
Cash and cash equivalents                             $ 18,073     $  1,301
Common shareholders' equity                            105,374       89,043
Book value per common share                           $  28.20     $  24.63