1483830--6/25/2010--Niska_Gas_Storage_Partners

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Risks Inherent in Our Business We may not have sufficient cash following the establishment of cash reserves and payment of fees and expenses to enable us to make cash distributions to holders of our common units at the minimum quarterly distribution rate under our cash distribution policy. The amount of cash we have available for distribution to holders of our units depends primarily on our cash flow and not solely on profitability, which may prevent us from making cash distributions during periods when we record net earnings. Our level of exposure to the market value of natural gas storage services could adversely affect our revenues and cash available to make distributions. We face significant competition that may cause us to lose market share, negatively affecting our business. If third-party pipelines interconnected to our facilities become unavailable or more costly to transport natural gas, our business could be adversely affected. Our operations are subject to operational hazards and unforeseen interruptions, which could have a material adverse effect on our business. We are not fully insured against all risks incident to our business, and if an accident or event occurs that is not fully insured it could adversely affect our business. We are exposed to the credit risk of our customers, and any material nonpayment or nonperformance by our key customers could adversely affect our financial results and cash available for distribution. Our debt levels may limit our flexibility in obtaining additional financing and in pursuing other business opportunities. Restrictions in the agreements governing our indebtedness could limit our ability to make distributions to our members. We will be required to make capital expenditures to increase our asset base. If we are unable to obtain needed capital or financing on satisfactory terms, our ability to pay cash distributions may be diminished or our financial leverage could increase. Unstable market and economic conditions may materially and adversely impact our business. If we do not successfully complete expansion projects or make and integrate acquisitions that are accretive, our future growth may be limited. Exposure to currency exchange rate fluctuations will result in fluctuations in our cash flows and operating results. Our operations are subject to environmental and worker safety laws and regulations that may expose us to significant costs and liabilities. A change in the jurisdictional characterization of our assets by regulatory agencies or a change in policy by those agencies may result in increased regulation of our assets, which may cause our revenues to decline and operating expenses to increase. We hold title to our storage reservoirs under various types of leases and easements, and our rights thereunder generally continue only for so long as we pay rent or, in some cases, minimum royalties. Our financial results are seasonal and generally lower in the second and third quarters of the calendar year, which may require us to borrow money in order to make distributions to our members during these quarters. Our risk management policies cannot eliminate all commodity price risk. In addition, any non-compliance with our risk management policies could result in significant financial losses. The adoption of certain derivatives legislation by Congress, and the imposition of certain new regulations, could have an adverse impact on our ability to hedge risks associated with our business. We may enter into commercial obligations that exceed the physical capabilities of our facilities. Our operations could be affected by terrorist activities and catastrophic events that could result from terrorism. We depend on a limited number of customers for a significant portion of our revenues. The loss of any of these customers could result in a decline in our revenues and cash available to make distributions. Risks Related to Our Structure Holdco currently controls our manager, which has sole responsibility for conducting our business and managing our operations. Our manager has delegated this responsibility to our board, all of the members of which are appointed by our manager. Our manager and its affiliates, including Holdco, have conflicts of interest with us and limited fiduciary duties, and they may favor their own interests to the detriment of our common unitholders. Affiliates of our manager, including Holdco and the Carlyle/Riverstone Funds and their portfolio company subsidiaries, are not limited in their ability to compete with us and are not obligated to offer us the opportunity to pursue additional assets or businesses. Holders of our common units have limited voting rights and are not entitled to elect our manager or our directors. We are a "controlled company" within the meaning of NYSE rules and, as a result, qualify for, and rely on, exemptions from some of the NYSE listing requirements with respect to independent directors. Our Operating Agreement limits our manager's and directors' fiduciary duties to holders of our common units and restricts the remedies available to holders of our common units for actions taken by our manager or board that might otherwise constitute breaches of fiduciary duty. Even if unitholders are dissatisfied, they cannot initially remove our manager without Holdco's consent. Our manager, or its interest in us, may be transferred to a third party without unitholder consent. Increases in interest rates could adversely impact our unit price and our ability to issue additional equity to make acquisitions or for other purposes. It is our policy to distribute a significant portion of our available cash to our members, which could limit our ability to grow and make acquisitions. We may issue additional membership interests without unitholder approval, which would dilute a unitholder's existing ownership interests. Our manager has a call right that may require unitholders to sell their common units at an undesirable time or price. Our Operating Agreement restricts the voting rights of unitholders owning 20% or more of our common units. Unitholders may have liability to repay distributions that were wrongfully distributed to them. Historically, there was no market for our common units, and a trading market that will provide unitholders with adequate liquidity may not develop. The price of our common units may fluctuate significantly, and unitholders could lose all or part of their investment. The market price of our common units could be adversely affected by sales of substantial amounts of our common units in the public or private markets, including sales by Holdco or other large holders. We incur increased costs as a result of being a publicly-traded company. We will be exposed to risks relating to evaluations of controls required by Section 404 of the Sarbanes-Oxley Act. Tax Risks to Common Unitholders Our tax treatment depends on our being treated as a partnership for U.S. federal income tax purposes and having no liability for U.S. federal income tax. If the U.S. Internal Revenue Service, or the IRS, were to treat us as a corporation for U.S. federal income tax purposes, then our cash available for distribution to unitholders would be substantially reduced. Notwithstanding our treatment for U.S. federal income tax purposes, we are subject to certain non-U.S. taxes. If a taxing authority were to successfully assert that we have more tax liability than we anticipate or legislation were enacted that increased the taxes to which we are subject, the cash available for distribution to unitholders could be further reduced. If we were subjected to a material amount of additional entity-level taxation by individual states and localities, it would reduce our cash available for distribution to unitholders. We may become a resident of Canada and have to pay tax in Canada on our worldwide income, which could reduce our earnings, and unitholders could then become taxable in Canada in respect of their ownership of our units. Moreover, as a non-resident of Canada we may have to pay tax in Canada on our Canadian source income, which could reduce our earnings. Our tax treatment as a publicly-traded partnership, as a company with multinational operations as well as the tax treatment of an investment in our common units could be subject to potential legislative, judicial or administrative changes and differing interpretations, possibly on a retroactive basis. If a tax authority contests the positions we take, the market for our common units may be adversely impacted and the cost of any such contest will reduce our cash available for distribution to unitholders. Unitholders are required to pay taxes on their share of our income even if they do not receive any cash distributions from us. Tax gain or loss on the disposition of our common units could be more or less than expected. Tax-exempt entities and non-U.S. persons face unique tax issues from owning our common units that may result in adverse tax consequences to them. We treat each unitholder as having the same tax benefits without regard to the actual common units held. The IRS may challenge this treatment, which could adversely affect the value of the common units. We prorate our items of income, gain, loss and deduction between transferors and transferees of our units each month based upon the ownership of our units on the first day of each month, instead of the date a particular unit is transferred. The IRS may challenge this treatment, which could change the allocation of items of income, gain, loss and deduction among our unitholders. The amount of taxable income or loss allocable to each unitholder depends, in part, upon values that we periodically determine for our outstanding equity interests and our assets in order to comply with federal income tax law. The IRS may challenge our determinations of these values, which could adversely affect the value of our units. A unitholder whose units are loaned to a "short seller" to cover a short sale of units may be considered as having disposed of those units. If so, such unitholder would no longer be treated as the owner of those units for tax purposes during the period of the loan and may recognize gain or loss from the disposition. The sale or exchange of 50% or more of our capital and profits interests during any twelve-month period will result in the termination of our tax partnership for U.S. federal income tax purposes. Unitholders are likely subject to state and local taxes and return filing requirements in jurisdictions where we operate or own or acquire property.

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1483830--6/25/2010--Niska_Gas_Storage_Partners_LLC