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Hot Button Issues and Priorities SGA Fall Leadership Conference

Hot Button Issues and Priorities SGA Fall Leadership Conference. October 16, 2007. Section 311 (Revised NGA § 3, new § 3A) FERC: Exclusive Authority Codifies Hackberry Policy Mandatory Pre-filing State and Local Considerations. Section 313 (Revised NGA §§ 15, 19)

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Hot Button Issues and Priorities SGA Fall Leadership Conference

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  1. Hot Button Issues and PrioritiesSGA Fall Leadership Conference October 16, 2007

  2. Section 311 (Revised NGA § 3, new § 3A) FERC: Exclusive Authority Codifies Hackberry Policy Mandatory Pre-filing State and Local Considerations Section 313 (Revised NGA §§ 15, 19) FERC acts as lead agency; sets schedule FERC maintains consolidated record Judicial streamlining Schedule EPAct 2005 and LNG October 16, 2007 Federal Energy Regulatory Commission

  3. Order No. 665 Order No. 687 What Has FERC Done WithEPAct Gas Mandates? • Order No. 665 (Pre-filing) • NOPR: August 26, 2005 • Final Rule: October 7, 2005 • Order No. 687 (Coordination/Consolidation) • NOPR: May 18, 2006 • Final Rule: October 19, 2006 October 16, 2007 Federal Energy Regulatory Commission

  4. Pre-Filing Process • Pre-filing process must begin at least six months prior to filing an application. • Pre-filing procedures are designed to encourage cooperation with state and local authorities. October 16, 2007 Federal Energy Regulatory Commission

  5. During Pre-filing • Staff issues scoping notice. Sponsor attends and participates in scoping meetings. • Sponsor files monthly reports on project activities. Staff facilitates identification of issues and reviews draft resource reports. • Staff conducts site visits and agency meetings. Sponsor attends. Staff begins preparing environmental document. October 16, 2007 Federal Energy Regulatory Commission

  6. Gas Project Scheduling/CoordinationEPAct Mandate • Section 313 - Process Coordination • Revised Sections 15 and 19 of NGA • FERC acts as lead agency; sets schedule • FERC maintains consolidated record • Streamlines judicial review • Order No. 687 issued by FERC on October 19, 2006 • Final rule sets schedule/consolidation procedures • When filed, applicant must ID all needed Federal authorizations • 90 days after notice date, FERC issues notice of schedule or EA • 90 days after EA or EIS is the deadline for other agencies • 30 days after deadline expiration, each agency must file a copy of decision and an index of the record for inclusion in the FERC record. October 16, 2007 Federal Energy Regulatory Commission

  7. FERC and TransmissionEPAct Mandate • Section 1241 - Transmission Infrastructure Investment • New Section 219 of the FPA • FERC directed to develop incentive-based rate treatments for transmission • Order No. 679 issued by FERC on July 20, 2006 • Provides for an expedited, case-by-case analysis of incentives needed to support new investment in transmission. October 16, 2007 Federal Energy Regulatory Commission

  8. FERC and TransmissionEPAct Mandate • Section 1221 - Siting of Interstate Electric Transmission Facilities • New Section 216 of the FPA • FERC given authority to site interstate transmission after attempting to site at state level • Must be in corridors designated by DOE • Must render decision within 12 months of filing date • DOE delegated lead agency authority to FERC • MOU signed with DOE and seven other federal agencies to coordinate processing. • Order No. 689 issued by FERC on November 16, 2006 • Final rule provides direction for filing an application • Pre-filing process • Application process October 16, 2007 Federal Energy Regulatory Commission

  9. All Sources of Supply Needed to Meet Demand ALASKAN GAS 7% 3% LNG IMPORTS 17% NET PIPELINE IMPORTS 12% 5% Billion Cubic Feet per day 85% 71% LOWER 48 PRODUCTION Source: EIA, EEA, FERC October 16, 2007 Federal Energy Regulatory Commission

  10. Top LNG Importers for 2006 Billion Cubic Feet per day Source: BP Website – Trade Movements 2006 October 16, 2007 Federal Energy Regulatory Commission

  11. U.S. Regasification Capacity Atlantic Basin Liquefaction Capacity Operating Regasification CapacityWill Increase by 10X 20 Includes Regas Facilities Under Construction 15 Bcf/Day 10 5 0 2000 2002 2004 2006 2008 2010 Source: FERC, CERA October 16, 2007 Federal Energy Regulatory Commission

  12. Top LNG Importers 2007-2015 Source: CERA October 16, 2007 Federal Energy Regulatory Commission

  13. Storage Capacity in Major LNG Importing Countries: Atlantic Basin Source: Data from IGU 23rd World Gas Conference-WGC 2006 October 16, 2007 Federal Energy Regulatory Commission

  14. All Storage Projects(Capacity in Bcf) ANR Pipeline (17.0) ANR Pipeline (14.7) SemGas (5.5) Central NY (13.0) Bluewater (29.2) Northern Natural (2.1) Dominion (4.4) Dominion (18.0) Dominion (9.4) Northern Natural (8.5) Steckman Ridge (12.0) Columbia (5.7) Dominion (11.0) Natural (10.2) Unocal Windy Hill (6.0) Chestnut Ridge (25.0) CIG (7.0) ANR Pipeline (70.0) Texas Eastern (3.0) Columbia (15.0) Texas Gas (8.2) Tenasda (17.5) Northern Natural (6.0) Texas Gas (11.3) Columbia (12.4) Texas Gas (8.25) Arizona Natural Gas (3.5) Gulf South (1.2) Monroe Gas (12.0) Natural (10.0) Four Mile Creek (8.0) Mississippi Hub (12.0) County Line (6.0) Freebird (6.1) CenterPoint (3.0) Bobcat (12.0,1.5) Caledonia (11.7) Caledonia (1.7) Bobcat (2.1, 9.4) Natural (10.0) AGL (12.0) Enstor-Waha Storage (7.2) Enstor (30.0) Leaf River Energy (24.0) Falcon Worsham-Steed (8.0) Falcon MoBay (50.0) Falcon Hill-Lake (3.0) SG Resources (12.0) Tres Palacios (36.0) Copiah (12.2) Enterprise (10.0) Starks (19.2) Floridian Natural (8.0) Certificated Since 1/1/05 Liberty (5.0) Southeast Storage (14.0) Petal (9.0) Liberty (17.6) Currently Pending Pine Prairie (16.0) Petal (2.8) Egan Hub (8.0) Black Bayou (15.0) Pre-Filing PetroLogistics (6.0) On The Horizon October 16, 2007 Federal Energy Regulatory Commission

  15. August FERC Report on Alaska • The State of Alaska has enacted and begun to implement its Alaska Gasline Inducement Act (AGIA); • The U.S. Court of Appeals, DC Circuit upheld the Commission’s open season regulations; • The Federal Coordinator has been active in discussions with project stakeholders; • The U.S. Department of Labor has issued a grant to the state for pipeline worker training; • FERC Commissioners and Staff continue to prepare for the filing of any applications for an Alaskan gas pipeline; and • FERC Staff has toured potential routes of the pipeline. October 16, 2007 Federal Energy Regulatory Commission

  16. Recent, Current andFuture Events • Alaska Gasline Inducement Act-AGIA(5/07) • Open, Competitive Process for Projects • Financial Incentives to Pipeline and Producers • Five delivery points and construction-hiring offices in Alaska • Application Review Criteria • Seven specific criteria related to timeliness, cost overruns, expansions, rates/tariff, amount of state money, feasibility, sponsor’s ability • Request for Applications-RFA Process (7/07) • Deadline November 30, 2007 October 16, 2007 Federal Energy Regulatory Commission

  17. Next AGIA Steps • Applications Filed (11/07) • Applications determined complete • Public notice of applications 60 days • Alaska commissioners’ recommendation to legislature for 60-day review • License issued (4/08) October 16, 2007 Federal Energy Regulatory Commission

  18. Next FERC Steps for AGIA Project • Begin Pre-Filing and FERC Certificate Application Development • Parallel Activities of Staff and Sponsor • Complete Capacity Open Season October 16, 2007 Federal Energy Regulatory Commission

  19. Other U.S. Reserves TX & LA Offshore Gulf of Mexico, TX & LA Rockies Natural Gas Reserves in the U.S. Source: Based on data from EIA Annual Energy Outlook Source: Based on data from EIA US Crude Oil, Natural Gas, Natural Gas Liquids Reserves 2005 October 16, 2007 Federal Energy Regulatory Commission

  20. Phase IV (Maritimes) (418) Northern Lights (Northern Natural) (374) Algonquin (800) Questar (175) Rockies Express West (1,800) TETCO (150) KM (360) Questar Overthrust (750) WIC (556) Transco (165) TransColorado (250) North Baja ( 2,700) Trunkline(510) Elba Express (1,175) Southeast Supply (1,140) Gulf South (1,700, 560) CenterPoint(280) Natural (200) Gulf LNG (1,500) Point Comfort (1,000) Kinder Morgan (3,395) Gulfstream (345, 155) 12.6 BCF/D Total 903 Miles Sonora (1,000) Major Pipeline Projects Certificated (MMcf/d)January 2007 to October 2007 21.5 Bcf/D Total 2,366 Miles October 16, 2007 Federal Energy Regulatory Commission

  21. Quoddy Bay (2,000) Bradwood Landing (NorthernStar) (1,300) Downeast (500) GII Project (Guardian Pipeline) (537) Medicine Bow Expansion (WIC) (330) Pacific Connector (Williams Pacific) (1,000) 08/09 Expansion (Iroquois) (200) Broadwater Pipeline (Broadwater) (1,000) Mid-Atlantic Express (1,500) High Plains Expansion (CIG) (899) Rockies Express REX East (Rockies Express Pipeline) (1,800) Fayetteville/Greenville (Texas Gas) (1,609) Phoenix Lateral (Transwestern) (500) Mid-Continent Express (1,500) Gulf Crossing Pipeline (Boardwalk) (1,732) Cedar Bayou (Texas Eastern) (360) Port Dolphin (1,200) Major Pipeline ProjectsPending (MMcf/d)October 2007 17.97 BCF/D Total 2,798 Miles October 16, 2007 Federal Energy Regulatory Commission

  22. Palomar Project (Palomar Gas) (700) HubLine Expansion (Algonquin) (1,145) Sentinel Expansion (Transcontinental) (151) Brookhaven Lateral (Iroquois) (80) 2009 Expansion (Eastern Shore) (60) East End Expansion (Ozark) (1,000) Tontitown Project (CenterPoint) (90) Yuma Lateral (North Baja) (81) Major Pipeline ProjectsPre-Filing (MMcf/d)October 2007 3.31 BCF/D Total 604 Miles October 16, 2007 Federal Energy Regulatory Commission

  23. Interstate natural gas pipelines in proximity to the Barnett and Fayetteville Shale Source: Platts PowerMap October 16, 2007 Federal Energy Regulatory Commission

  24. Ozark Gas Transmission 70 MMcf/d Texas Gas Transmission Fayetteville/Greenville 1,609 MMcf/d Ozark Gas Transmission East End Expansion 1,000 MMcf/d Fayetteville Shale Arkoma Basin Boardwalk Gulf Crossing 1,732 MMcf/d Midcontinent 1,500 MMcf/d CenterPoint Energy Carthage to Perryville 1,237 MMcf/d* CenterPoint Energy Carthage to Perryville (Phase III) 280 MMcf/d** Barnett Shale Fort Worth Basin Gulf South Pipeline East Texas to Mississippi 1,700 MMcf/d & 560 MMcf/d** Natural Gas Pipeline Louisiana Line 200 MMcf/d** Approved & Proposed Pipelines to Move Barnett and Fayetteville Shale * In-Service ** Approved Source: Platts PowerMap October 16, 2007 Federal Energy Regulatory Commission

  25. With the approval of Elba Express Pipeline and the commencement of service (Phase I) of the Cypress pipeline in May 2007, LNG volumes from Elba Island will be available to Florida and the Northeast. Southern LNG Elba Island, GA. Elba Express Pipeline Source: Platts PowerMap October 16, 2007 Federal Energy Regulatory Commission

  26. Capacity ReleaseRM06-21-000 & RM07-4-000 • Petitions filed in 2006 asking that FERC: • Remove the maximum rate cap on capacity releases • Clarification of capacity release rules vis-à-vis portfolio management services • FERC issued a request on January 3, 2007 for comments asking: • Should the maximum rate cap be lifted? • Should the Commission’s shipper-must-have-title requirement be modified? • Comments were due by April 11, 2007. October 16, 2007 Federal Energy Regulatory Commission

  27. Competitive Markets and Market Manipulation • RM07-10 Market Transparency, April 19, 2007 • Intrastate pipeline daily posting of capacity at major receipt/delivery points • Buyers and sellers report annual numbers and volumes of relevant transactions • RM07-1 Standards of Conduct, January 18, 2007 • Comply with National Fuel decision • Asset managers = marketing affiliates October 16, 2007 Federal Energy Regulatory Commission

  28. Comprehensive Energy Oversight Program • RM07-9 FERC Form 2, February 15, 2007 • Gas, Oil, Electric forms included • Sufficient information to determine company’s rates, excess fuel retention? • Monitor Markets Daily • Review and Analyze Data • Provide Feedback to the Commission • Disseminate Information • Audits October 16, 2007 Federal Energy Regulatory Commission

  29. Composition of Proxy Groups for Determining Return on Equity • PL07-2, July 19, 2007 • Fewer and fewer diversified natural gas companies • Inclusion of MLPs • Consumer safeguards • Distributions vs. depreciation October 16, 2007 Federal Energy Regulatory Commission

  30. Conclusions • Commission implementing EPAct mandates • U.S. needs gas from diverse sources • High level of gas-related activity at FERC • State of the Natural Gas Industry Conference November 6 (AD07-15) • robert.cupina@ferc.gov October 16, 2007 Federal Energy Regulatory Commission

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