Governance

Set out below is a selection of the highlights of the Trust's corporate governance practices.

A corporation, Paramount Energy Operating Corp. ("PEOC") acts as trustee of Paramount Operating Trust (POT) and has been assigned the significant responsibilities of the Trustee of Paramount Energy Trust (PET) by Computershare Trust Company of Canada. PEOC is not an external management company rather it is wholly-owned by PET and, in its capacity as Trustee, it retains employees to administer, manage and operate the oil and gas business of POT as well as conducting the management, administrative and governance functions of PET.

The Board of Directors of PEOC is composed of a majority of external non-management Directors who are elected annually by the Unitholders.

The Board of Directors of PEOC currently has an Audit Committee, a Compensation Committee, a Corporate Governance Committee, a Reserves Committee and an Environmental, Health and Safety Committee.

The Audit Committee requires them to adhere to certain standards.  The Audit Committee's purpose is to provide assistance to the Board of Directors in fulfilling its legal, regulatory and fiduciary obligations with respect to: financial accounting, internal control processes, continuous public disclosure, the independent audit function, non-audit services provide by Independent Auditors and such other related matters as may be delegated by the Board of Directors.  It is required to report to the board of directors of PEOC on a regular basis. The Audit Committee currently consists of Donald J. Nelson, John W. Peltier and Randall E. Johnson, each of whom is an outside director.

The Compensation Committee shall be comprised of three members. This Committee ensures that compensation policies are fair, equitable and competitive with the rest of the industry and that the incentive mechanism of remuneration is well aligned with the interests of Unitholders. It reviews existing management resources to ensure that they are adequate and that an efficient succession planning process is in place. The Compensation Committee is responsible for reviewing salaries, employee benefits and incentive compensation for the employees of the PEOC including the President and Vice-Presidents and making recommendations to the board of directors in respect of all compensation issues. Once in each fiscal year, the Committee will review with the President the performance, development and succession of management of the Corporation. The Compensation Committee currently consists of Randall E. Johnson, Howard R. Ward and Karen A. Genoway.

The Corporate Governance Committee is mandated to be responsible for the governance of the Board including the responsibility to review the mandate of the Board's committees, recommending changes to the size of the Board and its committees and generally implementing good corporate governance practices. It oversees the effectiveness of management and management's interaction with and responsiveness to the Board and reviews succession planning and recommends approval of the full Board. This Committee also conducts an annual survey to ensure that Directors' compensation is consistent with industry standards. The Corporate Governance Committee currently consists of Karen A. Genoway, Randall E. Johnson and Howard R. Ward, each of whom is an outside director.

The Reserves Committee will be comprised of three or more independent directors as determined from time to time by resolution of the Board of Directors. This committee's prime responsibility is to provide assistance with the selection and remuneration of the Reserves Evaluator, the establishment of processes and procedures, compliance and disclosure of regulatory requirements of reserves information and the review of the annual and periodic independent engineering reports.  Generally, the committee will meet at least two times annually: once prior to the selection of the Reserves Evaluator and once prior to public release of the annual reserve estimates. The Reserves Committee currently consists of Donald J. Nelson, Jack W. Peltier and Karen A. Genoway

The Environmental, Health and Safety Committee's overall purpose is to ensure that the environmental, health and safety policies and procedures meet all obligations to achieve regulatory compliance and meet acceptable industry standards. This includes the review and approval of internal environment and safety policies, emergency response plans, review of environment, health and safety risks and ensures proper management of those risks. The Environmental, Health and Safety Committee currently consists of Donald J. Nelson, John W. Peltier, Susan L. Riddell Rose and Howard R. Ward.