Mayor’s Energy Task Force August 18, 2010

Agenda New Legislation New Entrants Gas Storage E & P Activities

New Legislation HB 369 - Creates Alaska Gas Development Corporation In-state Pipeline plan to Legislature July 1, 2011 due date Address needs of Railbelt consumers (residential and commercial) HB 280 Cook Inlet Incentives Gas Storage $1.50 / M Credit 10 year rent holiday, LIFO treatment Investment Incentives 40% production tax credit on qualified capital 25% Income tax credit on qualified expenditures HB 309 Jack-up Rig - 100%, 90%, and 80% credit (up to $25MM) on 1st three wells drilled from jack-up Several Key issues on Gas storage proposals 1) Development timing 2) Amount of storage needed 3) Third party access 4) Regulatory framework DNR engaged stakeholders - Storage Developers - Cook Inlet producers, Armstrong - Utilities, Contract negotiation mediation - RCA, public and private discussions - Interruptibles, LNG plant, Agrium CINGS is the largest proposal being currently in the planning stage - Developed by ANR / TransCanada - Enstar is anchor customer, CEA and ML&P? - Little in the public record at this point - Initial capacity of more than 10 BCF, expandable - Tariffs estimated at about $3.00 / MCF Nikolai Creek developer is Aurora - Project proposed early last year - Commercial storage - Open season in 2009 - Not big enough for Enstar - Well located for CEA - Timing dependent on outcome of CINGS discussions Ivan River is a 2 BCF capacity proposed private storage project for CVX - Potential ability to store some gas this summer - Withdrawals possible in winter 2011 - 2012

New Entrants to Alaska Apache - $34 B company, start-up 1954 S-48, Canada, Egypt, North Sea, Australia Buccaneer Alaska Linc Energy

Alaskan Clear & Equitable Share (ACES) In 2007 the Alaskan Government introduced the ACES program to incent new entrants to explore within Alaska. This program takes the form of a rebate of between 45 - 65% of direct exploration costs and up to 55% on development costs. This is a significant incentive and substantially reduces the commercial discovery threshold. On 19 April 2010 the Alaskan Legislature approved a significant amendment to Alaska’s AC ES program. The Governor signed this legislation into law on May 10, 2010. Most significantly, the statutory amendments enacted with this legislation will establish a tax credit of up to US $25 million for new wells drilled into the pre-Tertiary strata of the Cook Inlet with a jack-up drilling rig. The new incentive provides for the following: • If Buccaneer drills the first well in the Cook Inlet using a jack-up rig, it will be eligible to claim up to US $25 million of all drilling costs (including rig mobilization costs). If it drills the second well, the claim will be US $22.5 million. if its drills the third well, it is entitled to claim US $20 million. A company is eligible for only one of these incentives and is required to repay one-half (50%) the incentive equally over 10 years, but only if hydrocarbons are successfully produced. On any subsequent well Buccaneer will still be eligible for the standard AC ES incentive of 45 – 65% of drilling and development costs. The above incentives apply irrespective of the success of any well or development program.

Gas Storage Proposals CINGS, 11 BCF initial capacity Nicolai Creek, 1 BCF Several Key issues on Gas storage proposals 1) Development timing 2) Amount of storage needed 3) Third party access 4) Regulatory framework DNR engaged stakeholders - Storage Developers - Cook Inlet producers, Armstrong - Utilities, Contract negotiation mediation - RCA, public and private discussions - Interruptibles, LNG plant, Agrium CINGS is the largest proposal being currently in the planning stage - Developed by ANR / TransCanada - Enstar is anchor customer, CEA and ML&P? - Little in the public record at this point - Initial capacity of more than 10 BCF, expandable - Tariffs estimated at about $3.00 / MCF Nikolai Creek developer is Aurora - Project proposed early last year - Commercial storage - Open season in 2009 - Not big enough for Enstar - Well located for CEA - Timing dependent on outcome of CINGS discussions Ivan River is a 2 BCF capacity proposed private storage project for CVX - Potential ability to store some gas this summer - Withdrawals possible in winter 2011 - 2012

CINGS SEMCO (Enstar parent) – formerly TransCanada Initial Capacity 11 BCF expandable, $180 MM Applications in to RCA, AOGCC, DNR Initial deliveries during Winter 2012 / 2013 Customers, capacity, withdrawal, injection CEA, 2.4 B, 35 MM/D, 27 MM/D Enstar, 5B, 91 MM/D, 113 MM/D ML&P, 0.6B, 10 MM/D, 10 MM/D Several Key issues on Gas storage proposals 1) Development timing 2) Amount of storage needed 3) Third party access 4) Regulatory framework DNR engaged stakeholders - Storage Developers - Cook Inlet producers, Armstrong - Utilities, Contract negotiation mediation - RCA, public and private discussions - Interruptibles, LNG plant, Agrium CINGS is the largest proposal being currently in the planning stage - Developed by ANR / TransCanada - Enstar is anchor customer, CEA and ML&P? - Little in the public record at this point - Initial capacity of more than 10 BCF, expandable - Tariffs estimated at about $3.00 / MCF Nikolai Creek developer is Aurora - Project proposed early last year - Commercial storage - Open season in 2009 - Not big enough for Enstar - Well located for CEA - Timing dependent on outcome of CINGS discussions Ivan River is a 2 BCF capacity proposed private storage project for CVX - Potential ability to store some gas this summer - Withdrawals possible in winter 2011 - 2012

Nicolai Creek Aurora Gas is developer Initial Capacity 0.7 BCF Applications in to AOGCC, DNR Initial deliveries during Winter 2011 / 2012? Likely customer is a Utility Several Key issues on Gas storage proposals 1) Development timing 2) Amount of storage needed 3) Third party access 4) Regulatory framework DNR engaged stakeholders - Storage Developers - Cook Inlet producers, Armstrong - Utilities, Contract negotiation mediation - RCA, public and private discussions - Interruptibles, LNG plant, Agrium CINGS is the largest proposal being currently in the planning stage - Developed by ANR / TransCanada - Enstar is anchor customer, CEA and ML&P? - Little in the public record at this point - Initial capacity of more than 10 BCF, expandable - Tariffs estimated at about $3.00 / MCF Nikolai Creek developer is Aurora - Project proposed early last year - Commercial storage - Open season in 2009 - Not big enough for Enstar - Well located for CEA - Timing dependent on outcome of CINGS discussions Ivan River is a 2 BCF capacity proposed private storage project for CVX - Potential ability to store some gas this summer - Withdrawals possible in winter 2011 - 2012