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Peter A. Dea CEO & President, Western Gas Resources, Inc. Denver World Oil Form November 11, 2005

Energy Efficiency Programs in Metro Denver & Western Gas Resources Plus a Natural Gas Primer. Peter A. Dea CEO & President, Western Gas Resources, Inc. Denver World Oil Form November 11, 2005. No Excess Capacity. New Reality. 1 st Wakeup Call. Warm Weather (false sense of security).

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Peter A. Dea CEO & President, Western Gas Resources, Inc. Denver World Oil Form November 11, 2005

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  1. Energy Efficiency Programs in Metro Denver & Western Gas Resources Plus a Natural Gas Primer Peter A. Dea CEO & President, Western Gas Resources, Inc. Denver World Oil Form November 11, 2005

  2. No Excess Capacity New Reality 1st Wakeup Call Warm Weather (false sense of security) NYMEX from 1993 to Present 12.00 12.00 ERA of Excess Capacity 10.00 10.00 8.00 8.00 $ per MMBtu 6.00 6.00 Ave. $2.18 4.00 4.00 2.00 2.00 0.00 2.00 Oct-05 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-05 Jan-93 Jan-94 Jan-95 Jan-04 Year

  3. Natural Gas Productive Capacity “Surplus” to “Just in Time” 55 Productive Capacity 50 Bcf Per Day End of Excess Capacity & Onset of Higher Prices Gas Production 45 Productive Capacity Gas Production Spare Capacity 1995 1996 1997 1998 1999 2000 2001 2002 Year Source: NPC

  4. High Productive Capacity Utilization & High Prices Go Together Lower 48 States Effective Capacity Utilization and Gas Price (1987-2001) Productive Capacity Exceeded 90% for Natural Gas in 2000, sending process skyward $9.00 $8.00 $7.00 $6.00 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 Capacity utilization Exceeding 90% results in exponential price pressure in most commodities Wellhead Gas Price 70 75 80 85 90 95 100 Effective Capacity Utilization (Percent) *Lower 48, constant 2001 dollars per Mcf Source: EIA

  5. Tight Natural Gas Supply/Demand=Strong PricesGas Rig Count vs. U.S. Natural Gas Production Despite 63% increase in Gas Rig Count… U.S. production declined 2%* since January ‘03 Baker Hughes U.S. Gas Rig Count U.S. Gas Production *Based on Trailing 3 month average Source: Baker Hughes, EIA/DOE (2004 and 2005 production volumes are EIA estimates)

  6. U.S. Demand Imports Undiscovered Unconventional Fields Undiscovered Conventional Fields Existing Fields Existing Wells Future U.S. Gas Supply Half of 2012 Domestic Gas Supply Required to Meet Demand is Currently Undiscovered… 30 …and production per new well is decreasing annually. 25 20 15 Trillion Cubic Feet 10 5 0 2000 2005 2010 2015 2020 2025 LNG Will Add to Imports *Source: National Petroleum Council, 2004

  7. 2004 450 rigs 17 MMcfd/rig 900 rigs 4 MMcfd/rig Production Added per Day per Gas Rig, 2000-2004 • The U.S. Shows a solid trend of drilling lower productivity wells both as more wells are drilled each year and in each subsequent year. 25 450 rigs 22 MMcfd/rig Annual As gas rig count doubles from 450 to 900, production added per rig plummets by 325% 2000 20 15 Production added per day per rig (MMcfe/d/rig) 10 5 0 0 50 300 350 400 450 500 550 600 650 700 850 900 950 100 150 200 250 750 800 1000 2000 2004 Domestic Natural Gas Rig Count Source: Bank of America, 2004.

  8. U.S. Gas Resource: Why the Rockies? Estimated Proven and Potential Gas Reserves in the U.S. (1,135 Tcf) Rockies represent the single largest untapped onshore natural gas basin in the U.S. Rockies 41% Mid-Continent 36% Gulf Coast 23% Source: National Petroleum Council

  9. 1972 1999 U.S. Gas Supply: Why the Rockies? U.S. Daily Gas Production 1972 – 1999 Rockies is Only Onshore Region in U.S. Showing Growth 40 -24% 30 -24% 20 Bcfd -36% -36% 518% 518% 10 -21% 700% 0 Gulf Coast Mid-Continent Rockies Pacific N. Central Source: 2000 Potential Gas Committee Report

  10. Rockies Production Growth vs. Mature BasinsU.S. Lower 48 Rockies: #1 Producing Area in 2008 Gulf Coast Rockies Southwest Midcontinent Northeast As a percent of U.S. total, Rockies Gas Production has increased from12% in 1990 to 23% in 2003 Source: Energy Information Administration “Annual Energy Outlook” January 2005

  11. Forecast Demand under Energy Information Administration Base Case Reduced Gas Demand by Renewables and Efficiency (1&2) Revised Demand if Efficiency and Renewable Assumptions are Met Year . Natural Gas Demand Reduced by Efficiency, Conservation and Renewables Natural gas demand could be reduced by 19% by 2020 by efficiencies and renewables (1&2) 35 30 25 20 15 10 5 0 Annual Gas Demand (Tcf) Source: Data from EIA, (1) Western Resource Advocates and (2) Union of Concerned Scientists

  12. Drilling Requirements Despite Gains in Efficiency & Renewables Efficiency and renewables could reduce annual number of new gas wells by 22% by 2020 But… Still need to drill 27,300 new wells in 2020! – a 13% increase since 2002. However, production per rig is declining each year… 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Number of wells drilled under business as usual case Annual # New Gas Wells 27,300 wells In 2020 Number of wells to be drilled under efficiency case Number of wells to be drilled under efficiency plus renewable case 380,000 new wells required through 2020 Source: WGR Calculations

  13. Metro Denver Economic Development Corporation (EDC) Energy Efficiency Program Peter A. Dea, Chairman Energy Committee, MDEDC

  14. Metro Denver EDC – Energy Efficiency Program • As the “Balanced Energy Capital of the West”Metro Denver needs to have a stronger energy efficiency program • Goal is to develop an energy efficiency program for the Metro Denver region • Colorado Energy Science Center, Pat Keegan, Executive Director, retained by MDEDC to design program • Focus Areas: • Commercial • Industrial • Residential • Leverage off existing programs especially Xcel Demand Side Management

  15. Metro Denver EDC – Energy Efficiency Program • Task Areas: • Assess Economic Impact of Energy Efficiency & Conservation • Survey of Current Energy Efficiency Programs in Colorado • Best Practices in U.S. • A Menu of Recommendations • Website (eventually) • Provide a Centralized Resource for Stakeholders to Seek Out Energy Efficiency Practices for Their Respective Entities

  16. Metro Denver EDC – Energy Efficiency Program Most Important Energy Efficiency Measures • Residential buildings: • Insulation and Air Leakage Reduction • High efficiency furnaces and air conditioners • Efficient lighting and appliances • Commercial buildings • Lighting • Heating Ventilating, Air Conditioning (HVAC) • Office equipment • Industrial facilities • Motors • HVAC • Lighting

  17. Metro Denver EDC – Energy Efficiency Program Electricity Energy Efficiency Potential in Colorado % Savings Potential in Three Sectors 30% 20% 25% Source: Western Resource Advocates

  18. Metro Denver EDC – Energy Efficiency Program Economic Analysis Approach • Jobs and Income Growth • Profitability of Energy Savings • Investment Opportunities • Economic Impact and Economic Multipliers

  19. Metro Denver EDC – Energy Efficiency Program Transportation Not Primary Focus of EDC Program But Denver is a National Leader with FasTracks etc. Energy Use Per Passenger Per Kilometer Gas Fired Buses Mega- Joules per person Yes on FasTracks

  20. Metro Denver EDC – Energy Efficiency Program Keys to Success in Metro Denver • Near Term • Completion of Comprehensive Recommendations • Buy in from 9 – County Metro Mayors • Communication and Encouragement of Program from Metro leaders to Stakeholders • Early Wins to Show Energy Efficiency Value • Long Term • Website • Continued Encouragement by Leaders • Xcel’s Demand Side Management program expansion • Incentive Programs in each Metro Community

  21. Metro Denver EDC – Energy Efficiency Program Balanced Energy Capital of West Metro Denver Supply • Vast Natural Gas Reserves • Center for Natural Gas Upstream, Midstream & Service Companies • Significant Coal Reserves • Clean Coal Technology Companies Demand • Growing Renewable & Energy Efficiency Companies • Renewable Energy & Efficiency Programs • Xcel’s Wind Power & DSM Research • World Class Research Institutions for EfficiencyRenewables & Supply Technologies

  22. Western Gas Resources (WGR) • Western’s Energy & Emissions Savings Program (ESP) Promotes: • Energy Savings • Efficiency Increases • Emissions Reduction • Cost Reduction • ESP Formalized Company-wide in 2004

  23. WGR Energy & Emissions Savings Program • Goals • Sustaining non-renewable energy sources • Increasing efficiency of work processes • Reducing greenhouse gas emissions • Utilizing renewable energy sources • Reduce costs and increase profits

  24. WGR Energy & Emissions Savings Program • Results • Cost reduction in millions of $ • Reduction of pollutants & greenhouse gases • Productivity increases • Consumption of fuel reduced • Positive culture shift

  25. WGR Energy & Emissions Savings Program Methodology • Increase Employee Involvement and Participation • Raise awareness of opportunities for everyday energy savings • Recognize individual accomplishments • Monthly & Annual Presidents’ Awards • Share ideas for emulation or adaptation to new uses • Publicize departmental accomplishments • Have some fun

  26. WGR Energy & Emissions Savings Program Participation • Realization • Not a spectator sport • Individual contributions are important • Participation = Success • Spread the word and encourage others in industry • (Your Company Name Here) Energy Savings Program

  27. WGR Energy & Emissions Savings Program Emission & Cost Reductions • Reduced 1,500 tons of greenhouse gases last year and 7,500 tons in the last four years in a Texas facility • Converted pneumatic instrumentation from gas to air saving $500K/year, eliminating 1,600 tons of emissions at one site • Preserved 1.23 BCF in fuel savings at a value $7.54 million in 2004 on one project alone • Solar-powered pumps installed company-wide as chemical injection pumps saving $500K/year in energy costs • 28,000 hp of lean burn compressors installed in our Coal Seam Operations saves $1,000,000/year in fuel consumption • WGR will enjoy more than 1.5 BCF of fuel reduction in 2005 by using lean-burn compression. • Reduced gathering pressure at one Wyoming facility and increasing production by 10% with low pressure pigging.

  28. WGR Energy & Emissions Savings Program ESP Projects • The Company estimates approximately 25 to 50 ESP ideas and projects will be submitted and acted upon each year. Examples: • Convert to Lean-burn compressors • Install solar-powered pumps • Convert natural gas driven pneumatics to compressed air driven. • Drive cleaners (pigs) through low-pressure lines to operate more efficiently

  29. Summary • Natural Gas Supply – Demand will continue to be tight • Requires Balanced Solution • Increase Supply of Fossil, Renewables & Efficiency • Decrease Demand • Expanded Research on Supply & Demand Solutions • Metro and Company Efficiency Programs must become main stream across nation • American Consumer is ultimately the largest participant in Efficiency & Conservation Programs

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