National Waterways Conference September 8, 2006

1. The Future of LNG and the Permit ProcessDan Kirschner, Executive Director, Northwest Gas Association National Waterways Conference September 8, 2006

2. 5335 SW Meadows Rd., #220 Lake Oswego, OR 97035 (503) 624-2160 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. Intermountain Gas Co. NW Natural Puget Sound Energy Duke Energy Gas Transmission Terasen Gas TransCanada’s GTN System Williams NW Pipeline

3. Source: EIA Annual Energy Review 2005

4. Source: EIA 2006 Annual Energy Outlook

5. Gas Consumption (Tcf) Source: EIA 2006 Annual Energy Outlook

6. Growth in Gas Demand by Region Annual % Source: EIA 2006 Annual Energy Outlook

7. An Interconnected Market

8. Gas Prices Source: EIA

9. The Price of Oil Has an Impact… Source: EIA

10. Price Drivers: Production Source: Baker Hughes, 09/01/2006

11. Production per Rig - mcf/day 2500 2000 1500 mcf/day 1000 500 0 Jul-03 Jul-88 Jul-93 Jul-98 Apr-02 Oct-89 Apr-92 Oct-94 Apr-97 Oct-99 Jan-01 Jun-01 Jan-91 Jun-91 Jan-96 Jun-96 Feb-03 Mar-90 Feb-93 Mar-95 Feb-98 Mar-00 Aug-00 Sep-02 Dec-88 Aug-90 Sep-92 Dec-93 Aug-95 Sep-97 Dec-98 Nov-01 Nov-91 Nov-96 May-89 May-94 May-99 Production per Rig Source: EIA, Baker Hughes Rotary Rig Counts

12. Gas Production by Region Source: Lippman Consulting via AGA

13. Productive CapacitySource: Energy and Environmental Analysis, Inc. Bubble Tight Market

15. Putting It All Together:Growing Demand + Slowing Supply = LNG?

16. Why LNG? • Large reserves with little or no local market. • Pipelines to markets impractical (Source: BP Statistical Review of World Energy, 2005)

17. LNG enables long distance shipping • Liquefying natural gas: • Super-chilling it to -260°F • Reduces volume of gas 620 times • LNG weighs less than one-half that of water

18. It Must Make Economic Sense Total = $2.00 - $3.70/MMBtu (Source: Center for Energy Economics)

19. Existing/Under Construction Proposed Pacific Basin Sources of LNG Kenai Sakhalin Qatar Iran Abu Dhabi Oman Yemen Brunei Arun Donggi Bintulu Tangguh Bontang Darwin LNG Bolivia LNG Sunrise Scarborough Peru LNG Browse Basin Gorgon Australia NWS 5 Australia NWS 1-4 Investment in new LNG liquefaction capacity is growing

21. NorthwestLNG Proposals • PortWestward LNG •  Skipanon LNG •  Jordan Cove LNG • Northern Star LNG • Tansy Point • Kitimat LNG • WestPac Terminal • Challenges include: • Local acceptance • Regulatory/Permitting • Commercial considerations: • economics/financing • takeaway infrastructure • worldwide competition • supplier commitment

22. A Bit About Process… • FERC is lead agency; consults w/state agencies • USCG serves as subject matter expert for maritime safety and security for EIS • USCG validates Waterways Suitability Analysis (WSA) • Provide USCG and Maritime Stakeholder input • USCG issues Letter of Recommendation (LOR)

23. Waterways Suitability Analysis • Risk-based analysis: • Identify risks that arise from introduction of LNG operations into port • What can go wrong? • What is the likelihood? • How severe are consequences? • The goals: • Understand individual risks in terms of: • probabilities, threats, vulnerabilities, consequences • Use info to develop effective risk management strategies

24. WSA Includes: • Transportation through the vessel’s arrival in US waters to LNG facility • Navigation and environmental safety issues • Safety and security issues that might affect entire port; detailed review of specific points of concern

25. Questions?