Robert Cupina, Principal Deputy Director Office of Energy Projects Federal Energy Regulatory Commission Hot Button Issues and Priorities SGA Fall Leadership Conference October 16, 2007

October 16, 2007 Federal Energy Regulatory Commission 1 EPAct 2005 and LNG  Section 311 (Revised NGA § 3, new § 3A)  FERC: Exclusive Authority  Codifies Hackberry Policy  Mandatory Pre-filing  State and Local Considerations  Section 313 (Revised NGA §§ 15, 19)  FERC acts as lead agency; sets schedule  FERC maintains consolidated record  Judicial streamlining

October 16, 2007 Federal Energy Regulatory Commission 2 What Has FERC Done With EPAct Gas Mandates?  Order No. 665 (Pre-filing)  NOPR: August 26, 2005  Final Rule: October 7, 2005  Order No. 687 (Coordination/Consolidation)  NOPR: May 18, 2006  Final Rule: October 19, 2006 Order No. 687 Order No. 665

October 16, 2007 Federal Energy Regulatory Commission 3 Pre-Filing Process  Pre-filing process must begin at least six months prior to filing an application.  Pre-filing procedures are designed to encourage cooperation with state and local authorities.

October 16, 2007 Federal Energy Regulatory Commission 4 During Pre-filing  Staff issues scoping notice. Sponsor attends and participates in scoping meetings.  Sponsor files monthly reports on project activities. Staff facilitates identification of issues and reviews draft resource reports.  Staff conducts site visits and agency meetings. Sponsor attends. Staff begins preparing environmental document.

October 16, 2007 Federal Energy Regulatory Commission 5 Gas Project Scheduling/Coordination EPAct Mandate  Section Process Coordination  Revised Sections 15 and 19 of NGA FERC acts as lead agency; sets schedule FERC maintains consolidated record Streamlines judicial review  Order No. 687 issued by FERC on October 19, 2006  Final rule sets schedule/consolidation procedures When filed, applicant must ID all needed Federal authorizations 90 days after notice date, FERC issues notice of schedule or EA 90 days after EA or EIS is the deadline for other agencies 30 days after deadline expiration, each agency must file a copy of decision and an index of the record for inclusion in the FERC record.

October 16, 2007 Federal Energy Regulatory Commission 6 FERC and Transmission EPAct Mandate  Section Transmission Infrastructure Investment  New Section 219 of the FPA  FERC directed to develop incentive-based rate treatments for transmission  Order No. 679 issued by FERC on July 20, 2006  Provides for an expedited, case-by-case analysis of incentives needed to support new investment in transmission.

October 16, 2007 Federal Energy Regulatory Commission 7 FERC and Transmission EPAct Mandate  Section Siting of Interstate Electric Transmission Facilities  New Section 216 of the FPA  FERC given authority to site interstate transmission after attempting to site at state level Must be in corridors designated by DOE Must render decision within 12 months of filing date  DOE delegated lead agency authority to FERC  MOU signed with DOE and seven other federal agencies to coordinate processing.  Order No. 689 issued by FERC on November 16, 2006  Final rule provides direction for filing an application Pre-filing process Application process

October 16, 2007 Federal Energy Regulatory Commission 8 All Sources of Supply Needed to Meet Demand Source: EIA, EEA, FERC NET PIPELINE IMPORTS 85%71% 12% 5% LNG IMPORTS 17% 3% ALASKAN GAS 7% LOWER 48 PRODUCTION Billion Cubic Feet per day

October 16, 2007 Federal Energy Regulatory Commission 9 Top LNG Importers for 2006 Source: BP Website – Trade Movements 2006 Billion Cubic Feet per day

October 16, 2007 Federal Energy Regulatory Commission 10 Operating Regasification Capacity Will Increase by 10X U.S. Regasification Capacity Atlantic Basin Liquefaction Capacity Includes Regas Facilities Under Construction Source: FERC, CERA Bcf/Day

October 16, 2007 Federal Energy Regulatory Commission 11 Top LNG Importers Source: CERA

October 16, 2007 Federal Energy Regulatory Commission 12 Storage Capacity in Major LNG Importing Countries: Atlantic Basin Source: Data from IGU 23 rd World Gas Conference-WGC 2006 Working Gas Capacity (Tcf) United States3.56 Italy0.61 France0.41 United Kingdom0.11 Spain0.07 Belgium0.02 Mexico0.00

October 16, 2007 Federal Energy Regulatory Commission 13 All Storage Projects (Capacity in Bcf) On The Horizon Certificated Since 1/1/05 Currently Pending Pre-Filing

October 16, 2007 Federal Energy Regulatory Commission 14 August FERC Report on Alaska  The State of Alaska has enacted and begun to implement its Alaska Gasline Inducement Act (AGIA);  The U.S. Court of Appeals, DC Circuit upheld the Commission’s open season regulations;  The Federal Coordinator has been active in discussions with project stakeholders;  The U.S. Department of Labor has issued a grant to the state for pipeline worker training;  FERC Commissioners and Staff continue to prepare for the filing of any applications for an Alaskan gas pipeline; and  FERC Staff has toured potential routes of the pipeline.

October 16, 2007 Federal Energy Regulatory Commission 15 Recent, Current and Future Events  Alaska Gasline Inducement Act-AGIA(5/07)  Open, Competitive Process for Projects  Financial Incentives to Pipeline and Producers  Five delivery points and construction-hiring offices in Alaska  Application Review Criteria  Seven specific criteria related to timeliness, cost overruns, expansions, rates/tariff, amount of state money, feasibility, sponsor’s ability  Request for Applications-RFA Process (7/07)  Deadline November 30, 2007

October 16, 2007 Federal Energy Regulatory Commission 16 Next AGIA Steps  Applications Filed (11/07)  Applications determined complete  Public notice of applications 60 days  Alaska commissioners’ recommendation to legislature for 60-day review  License issued (4/08)

October 16, 2007 Federal Energy Regulatory Commission 17 Next FERC Steps for AGIA Project  Begin Pre-Filing and FERC Certificate Application Development  Parallel Activities of Staff and Sponsor  Complete Capacity Open Season

October 16, 2007 Federal Energy Regulatory Commission 18 Natural Gas Reserves in the U.S. Source: Based on data from EIA Annual Energy Outlook Offshore Gulf of Mexico, TX & LA TX & LA Rockies Other U.S. Reserves Source: Based on data from EIA US Crude Oil, Natural Gas, Natural Gas Liquids Reserves 2005

October 16, 2007 Federal Energy Regulatory Commission 19 Major Pipeline Projects Certificated (MMcf/d) January 2007 to October Bcf/D Total 2,366 Miles 12.6 BCF/D Total 903 Miles Gulf South (1,700, 560) Gulfstream (345, 155) Natural (200) Sonora (1,000) KM (360) Southeast Supply (1,140) Elba Express (1,175) Point Comfort (1,000) North Baja ( 2,700) Gulf LNG (1,500) Phase IV (Maritimes) (418) Northern Lights (Northern Natural) (374) Transco (165) Rockies Express West (1,800) Questar Overthrust (750) TransColorado (250) Questar (175) Trunkline(510) CenterPoint(280) WIC (556) TETCO (150) Kinder Morgan (3,395) Algonquin (800)

October 16, 2007 Federal Energy Regulatory Commission 20 Broadwater Pipeline (Broadwater) (1,000) Bradwood Landing (NorthernStar) (1,300) Phoenix Lateral (Transwestern) (500) GII Project (Guardian Pipeline) (537) Quoddy Bay (2,000) Downeast (500) Mid-Atlantic Express (1,500) High Plains Expansion (CIG) (899) Port Dolphin (1,200) Rockies Express REX East (Rockies Express Pipeline) (1,800) Medicine Bow Expansion (WIC) (330) Gulf Crossing Pipeline (Boardwalk) (1,732) Cedar Bayou (Texas Eastern) (360) Fayetteville/Greenville (Texas Gas) (1,609) Pacific Connector (Williams Pacific) (1,000) 08/09 Expansion (Iroquois) (200) Mid-Continent Express (1,500) Major Pipeline Projects Pending (MMcf/d) October BCF/D Total 2,798 Miles

October 16, 2007 Federal Energy Regulatory Commission BCF/D Total 604 Miles Major Pipeline Projects Pre-Filing (MMcf/d) October 2007 Sentinel Expansion (Transcontinental) (151) East End Expansion (Ozark) (1,000) Brookhaven Lateral (Iroquois) (80) 2009 Expansion (Eastern Shore) (60) Yuma Lateral (North Baja) (81) Palomar Project (Palomar Gas) (700) Tontitown Project (CenterPoint) (90) HubLine Expansion (Algonquin) (1,145)

October 16, 2007 Federal Energy Regulatory Commission 22 Source: Platts PowerMap Interstate natural gas pipelines in proximity to the Barnett and Fayetteville Shale

October 16, 2007 Federal Energy Regulatory Commission 23 Barnett Shale Fort Worth Basin Fayetteville Shale Arkoma Basin Ozark Gas Transmission East End Expansion 1,000 MMcf/d CenterPoint Energy Carthage to Perryville 1,237 MMcf/d* Gulf South Pipeline East Texas to Mississippi 1,700 MMcf/d & 560 MMcf/d** Natural Gas Pipeline Louisiana Line 200 MMcf/d** Boardwalk Gulf Crossing 1,732 MMcf/d Midcontinent 1,500 MMcf/d Texas Gas Transmission Fayetteville/Greenville 1,609 MMcf/d Ozark Gas Transmission 70 MMcf/d CenterPoint Energy Carthage to Perryville (Phase III) 280 MMcf/d** Approved & Proposed Pipelines to Move Barnett and Fayetteville Shale * In-Service ** Approved Source: Platts PowerMap

October 16, 2007 Federal Energy Regulatory Commission 24 Southern LNG Elba Island, GA. Elba Express Pipeline With the approval of Elba Express Pipeline and the commencement of service (Phase I) of the Cypress pipeline in May 2007, LNG volumes from Elba Island will be available to Florida and the Northeast. Source: Platts PowerMap

October 16, 2007 Federal Energy Regulatory Commission 25 Capacity Release RM & RM  Petitions filed in 2006 asking that FERC:  Remove the maximum rate cap on capacity releases  Clarification of capacity release rules vis- à-vis portfolio management services  FERC issued a request on January 3, 2007 for comments asking:  Should the maximum rate cap be lifted?  Should the Commission’s shipper-must- have-title requirement be modified?  Comments were due by April 11, 2007.

October 16, 2007 Federal Energy Regulatory Commission 26  RM07-10 Market Transparency, April 19, 2007  Intrastate pipeline daily posting of capacity at major receipt/delivery points  Buyers and sellers report annual numbers and volumes of relevant transactions  RM07-1 Standards of Conduct, January 18, 2007  Comply with National Fuel decision  Asset managers = marketing affiliates Competitive Markets and Market Manipulation

October 16, 2007 Federal Energy Regulatory Commission 27 Comprehensive Energy Oversight Program  RM07-9 FERC Form 2, February 15, 2007  Gas, Oil, Electric forms included  Sufficient information to determine company’s rates, excess fuel retention?  Monitor Markets Daily  Review and Analyze Data  Provide Feedback to the Commission  Disseminate Information  Audits

October 16, 2007 Federal Energy Regulatory Commission 28 Composition of Proxy Groups for Determining Return on Equity  PL07-2, July 19, 2007  Fewer and fewer diversified natural gas companies  Inclusion of MLPs  Consumer safeguards  Distributions vs. depreciation

October 16, 2007 Federal Energy Regulatory Commission 29 Conclusions  Commission implementing EPAct mandates  U.S. needs gas from diverse sources  High level of gas-related activity at FERC  State of the Natural Gas Industry Conference November 6 (AD07-15) 