DOC ID © Chevron 2005 Senate Resources Committee Cook Inlet Gas Discussion June 5, 2009 John P. Zager General Manager, Alaska

© 2007 Chevron Corporation Cook Inlet Gas Production Need more production and deliverability to meet peak needs No quick fix to increase annual production Peak deliverability can potentially be increased more quickly through new storage Cook Inlet is not attracting sufficient capital - Need to make the Inlet more attractive to gas explorers and producers The basics are here: —There are resources —There are open markets —Basic infrastructure is in place Risk – Reward appears to be out of balance: —geological risk —high cost —market risk —regulatory risk The State cannot control —Geology —High cost environment —Attractiveness of outside investments

© 2007 Chevron Corporation Cook Inlet Gas Production Actions to encourage more production and deliverability Promote (allow) a competitive gas price Accept that gas prices must be sufficient to attract capital A competitive price has worked with the Union Oil / Enstar contract Promote storage in all forms Make tax credits available for storage investments Treat storage costs like transportation and make deductible for royalty purposes Lower costs where possible Streamlined permitting Expanded annual access period for West side drilling in State Refuge Remove Barriers Access to public lands should be encouraged Current RCA process is a disincentive —RCA needs to simplify and limit process —Avoid abuse of process – limit intervention to parties with direct standing RCA should prioritize security of supply over price Year round industrial market is important 1) Summer market, 2) Winter backstopping, 3) Encourages investment Promote conservation, especially during peak times