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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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Presentation Transcript
slide2

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
slide3

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

slide4

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

slide5

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

slide6

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

slide7

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

slide8

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

slide10

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
slide11

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
slide12

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”
slide13

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
slide14

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
slide15

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
slide16

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
slide17

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
slide18

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…