2016 Northwest Gas Market Outlook Northwest Gas Association Dan Kirschner, Executive Director

NWGA Members: 1914 Willamette Falls Dr., #255 West Linn, OR 97068 (503) 344-6637 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. FortisBC Energy Intermountain Gas Co. NW Natural Puget Sound Energy Spectra Energy Transmission TransCanada GTN System Williams NW Pipeline

…but everything is different What is “The Outlook”? A unique look at natural gas in our region. Not much has changed… Abundant supply Low Prices Modest demand growth Sufficient Capacity …but everything is different Sustained low commodity prices Slowing global economy Uncertain policy environment

Total Available Resource

Sources of NW Gas Supply

Northwest Supply Prospects Source: EIA 2015 AEO, 2016 Canada’s Energy Future

Supply Conclusions: Abundant resource; shale gas transformative Production continues to exceed expectations Adjacent/connected to two production areas Variables: Low oil prices Environmental concerns/impact Legislation/regulation New/improved production techniques

Natural Gas Price Source: EIA Annual Wellhead Price adjusted to $2015 using BLS CPI

Projected Natural Gas Spot Price Source: EIA 2008/2015 AEO NW Power Council 7th Power Plan Fuel Price Forecast

Projected Fuel Price Differentials Source: EIA 2015 AEO

Prices Conclusions: Projections reflect continued production growth Gas retains advantage in context of low oil prices Forecasts have softened since advent of shale Variables: Economic growth Pace of adoption gen, ind’l and trans adoption Infrastructure constraints New or improved production technologies Regulatory/statutory impacts Exports

Recent Gas Demand

Changing Load Composition

2016 Outlook Forecast (0.8% CAGR)

Peak Day Forecast Comparison

Demand Conclusions: Modest organic growth Variables: Magnitude and application of gas for generation Potential large loads (industrial, exports) Use as a transportation fuel Adequacy of infrastructure Policy/regulatory initiatives

Demand Scenarios Explore impact of plausible potential loads not included in Outlook data set: Coal retirement 120 MDth/day in three tranches (800 MW) Heat rate = 7000Btu/kilowatt-hour 75% utilization rate General Industrial 435 MDth/day in three tranches Large Load Industrial (e.g. export, methanol) 1,000 MDth/day in four tranches

Combined Scenarios

Regional Facilities/Capacities Pipelines Spectra BCP Williams NWP TCPL - GTN Other TCPL FortisBC SCP K-M Ruby Underground Storage Jackson Prairie Mist LNG Storage Nampa Newport Plymouth Portland Tilbury Mt. Hayes Station 2 2060 Starr Road 165 Kingsgate 2796 Stanfield 693 Kemmerer 655 154 1196 520 120 60 305 158 495 AECO Sumas 1306 Malin Palouse 165 Gorge 551 110 2080 1500

Regional Storage Capacities

Regional Peak Supply/Demand

I-5 Peak Supply/Demand

Accelerated S/D Balance

Capacity Projects Pipelines Southern Crossing Expansion Palomar Sunstone Blue Bridge (N-MAX) Ruby Pacific Connector Pacific Trail Oregon LNG Washington Expansion LNG Terminals Kitimat LNG Bradwood Landing Jordan Cove LNG Storage Facilities Mist Jackson Prairie Kitimat LNG Bradwood Landing LNG Oregon LNG Jordan Cove LNG

Capacity Conclusions: Existing system sufficient for current demand Recent cold weather reached upstream limits Additional capacity likely needed to serve design day Higher than expected gen/ind’l demand accelerates need Type/timing/location of expansions will depend on new load profiles Prospective large loads will require new capacity Will provide for more consistent flows year around Variables: Timing/location/nature of required for generation loads Whether prospective large loads materialize Timeliness of project permitting/construction

Questions ? Northwest Gas Association (503) 344-6637 www.nwga.org dkirschner@nwga.org