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U.S. Natural Gas Demand in Increasing

Why Now?. U.S. Natural Gas Demand in Increasing North American Gas Supplies are Dwindling and Becoming More Expensive Options Have Problems Coal and Nuclear LNG Imports Domestic Gas in Alaska Must Get to the U.S. Market. Alaska Has the Gas!. North Slope. Anchorage. WCSB. Valdez.

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U.S. Natural Gas Demand in Increasing

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  1. Why Now? • U.S. Natural Gas Demand in Increasing • North American Gas Supplies are Dwindling and Becoming More Expensive • Options Have Problems • Coal and Nuclear • LNG Imports • Domestic Gas in Alaska Must Get to the U.S. Market

  2. Alaska Has the Gas! North Slope Anchorage WCSB Valdez AECO Hub Empress Huntingdon Monchy Emerson Kingsgate 35 TCF – Proven Reserves 200+ TCF – Undiscovered Technically Recoverable Resource 1000s TCF – Resources Chicago Hub Dawn Hub Boston New York Midcontinent Hub Waha Hub Henry Hub

  3. North Slope Anchorage WCSB Valdez AECO Hub Empress Huntingdon Monchy Emerson Kingsgate Chicago Hub Dawn Hub Boston New York Midcontinent Hub Waha Hub Henry Hub

  4. 8 BCF Cycled Every Day • Current Producing Area • Prudhoe Bay • Kuparuk River • Alpine North Slope Anchorage WCSB Valdez AECO Hub Empress Huntingdon Monchy Emerson Kingsgate Chicago Hub Dawn Hub Boston New York Midcontinent Hub Waha Hub Henry Hub

  5. ANWR North Slope Anchorage WCSB Valdez AECO Hub Empress Huntingdon Monchy Emerson Kingsgate Chicago Hub Dawn Hub Boston New York Midcontinent Hub Waha Hub Henry Hub

  6. NPR-A North Slope Anchorage WCSB Valdez AECO Hub Empress Huntingdon Monchy Emerson Kingsgate Chicago Hub Dawn Hub Boston New York Midcontinent Hub Waha Hub Henry Hub

  7. 3 1 2 1 3 2 Pipeline Options North Slope $? Anchorage WCSB Valdez AECO Hub Empress Huntingdon Monchy Emerson Kingsgate PIPELINE OPTIONS LEGEND Chicago Hub Dawn Hub Boston TransAlaska (LNG) New York Midcontinent Hub Alaskan Hwy Route Waha Hub Henry Hub W. Canada to Chicago

  8. Alaska Gasline, Now!

  9. History • Efforts in the 70’s and 80’s fizzled due to natural gas price collapses • Renewed efforts began in 2001 with negotiations between the State and project proponents over state fiscal terms

  10. History...cont. 2003-2004: Federal Actions • Alaska Gas Pipeline Enabling legislation • Federal Loan Guarantees • Accelerated Depreciation • Federal Coordinator Position • Study of Federal Sponsorship • FERC Open Season Rules • Presumption of “Rolled-in” rates

  11. History...cont. • 2006 - Negotiations resulted in a proposed fiscal contract with Producers (BP, CP, XOM) • Fiscal certainty for 35 – 45 years • Gas production taxes • Oil production taxes • Income, Property, and other taxes • State Royalty rights • Judicial system replaced by arbitration • Commitment to pursue project with “diligence”

  12. History...cont. • 2006 - Proposed fiscal contract rejected by State Legislature and Voters • Sarah Palin elected Governor on promise to provide a competitive and transparent process for the Alaska Gasline Project

  13. The Challenge • Producers (BP, CP, Exxon) would only consider a pipeline they controlled, and would only discuss proposed fiscal contract and 35 years of “complete” fiscal certainty • 3rd Party Pipelines reluctant to make investment to reach open season due to risk of Producer refusal to participate

  14. AGIA Alaska Gasline Inducement Act • Competitive Process For State Inducements to Build Pipeline – AGIA License • $500M in State matching grant to Licensee • “Exclusive” relationship with State • Requires • Timelines • Open Season within 3 years • Low Tariff • “Open access” pipeline • Expansion Terms • Rolled in Tariffs • Upstream Inducements tied to Gas Committed at initial open season • Royalty Valuation, Royalty-In-Kind switching • Tax Rate Stability for first 10 Years of Gas Flow

  15. AGIA License - Timeline • July 2, 2007: Request for Applications (RFA) • October 1, 2007: Proposal Due • October – December: Public Comments • January 2008: Administration selects licensee • March 2008: Legislature approves selection • Summer 2008: Field season

  16. Keys to Success • We must have a successful Open Season to get transportation commitments • Producers • Explorers • Demand “Pull” • Utilities need to have the regulatoryflexibility to consider long-term supply contracts • Individually • Jointly

  17. Summary • Alaska Gasline Project can address North American gas supply challenges • 100s of TCF to get to Market • The project is advancing, but may need help • The State of Alaska is aggressively taking action to move the project forward • Stay tuned…

  18. www.gov.state.ak.us/agia

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