Natural Gas Infrastructure in the U.S. Big Potential, Big Uncertainty C. Gregory Harper President CenterPoint Energy Pipeline Group Energy Bar Association Mid-Year Meeting December 3, 2009

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CenterPoint Energy Pipelines Pipelines CEGT MRT SESH Miles of pipelines: 6,231 1,663 288.5 Storage Capacity (Bcf working gas): 40 31.6 0 Maximum Capacity (daily Bcf) 6.5 1.7 1.0 Total capital deployed (2005 – 3Q 2009): $1.7B* * Includes CNP’s 50% share of SESH equity investment Woodford Fayetteville Carthage to Perryville Southeast Supply Header CEGT MRT Haynesville

CenterPoint Energy Field Services Miles of gathering pipelines: 3,600 2009 average daily throughput (Bcf/day): 1.3 Well connects 2005 - 2009 (3Q): 1,958 CenterPoint Energy Field Services Other CenterPoint pipeline assets (incl SESH) Woodford Fayetteville Haynesville

Natural Gas Industry Always the Red-headed Stepchild The 1970s Price Controls – 1954 Supreme Court ruling regulating natural gas prices (Phillips) Created environment that lead to natural gas shortages during the mid-1970’s Natural Gas Policy Act of 1978 created new environment for natural gas regulation Contributed to lack of infrastructure investment The 1980s FERC restructuring Order 436 – 636 Take or pay LDCs were released from contractual terms Pipelines left carrying producer’s bag The 1990s Consolidations, investment activity – good times! Trading and marketing shops opened up Field services businesses carved out of pipelines and LDCs

Natural Gas Industry Always the Red-headed Stepchild (cont’d) The 2000s Merchant power generation – boom to bust Trading shops closed down and drained capital from investment in infrastructure LNG, Rockies and Canadian gas supply predicted to increase Alaska natural gas pipeline coming by 2010! 2009 LNG volumes haven’t materialized Rockies drilling declined along with conventional production areas Extensive shale development in spite of recession and low gas price environment Only significant event from Alaska in the decade – Sarah Palin!

CenterPoint Energy Pipeline Group Evolved Continuously to Meet a Changing Market Formation of separate gathering company (CEFS) (1995) To meet competition Increased contracting flexibility Acquisition of Illinois Gas Transmission Company (1998) New supply sources for existing markets around St. Louis Formed Service Star (2001) Industry leading remote monitoring and data acquisition as technology enabled better communications Line CP (in-service May 2007) Meet competition from “bullet” pipelines High operating pressure, low fuel, point A to point B pipelines Largely anchored by producers (XTO, BP, EOG, Samson, Penn-Virginia, Chesapeake, Petrohawk) SESH (in-service September 2008) Meeting Florida market’s demand for more reliable onshore supplies following hurricanes Katrina and Rita Perryville Hub® Services (March 2009) Gas market center with four times the volume of Henry Hub

Market Pull Shifts to Supply Push Major projects backed by producers Barnett Shale (2004) Producers acquiring capacity on Energy Transfer, Duke and Enbridge gathering and intrastate pipelines to evacuate production to Carthage Hub market Line CP moves producer gas beyond Carthage constraints Woodford Shale (2005-2006) Mark West (gathering and pipe) and Enogex intrastate transport to Bennington Kinder Morgan Mid-Continent Express, Boardwalk’s Gulf Crossing see producers paying to move beyond Bennington to Perryville Fayetteville Shale (2006 – 2007) Producers pay to gain access to Texas Gas, NGPL, ANR, Trunkline Rockies Express (2009) Built to take Rockies supply to Midwest and East Coast markets Ultimately need growth to support infrastructure investment Oversupply and overcapacity leads to flat basis Indecision on new investments delayed until bubbles burst Will still see intra-supply zone projects Especially in Fayetteville, Woodford and Haynesville shale areas

Major U.S. Shale Gas Basins Appalachian and Ouachita Thrust Trend Haynesville Shale Characteristics Avg Estimated Ultimate Recoveries of 6.5 Bcf per well over 30 years Low finding and development cost; Avg well cost (2009) of $7MM Indicative Initial Production of 10 MMcf/d Profitable (10% return on investment) at $4.28/Mcf Haynesville Shale presents concentrated opportunities with existing infrastructure within CEFS’ footprint

Location, Location, Location Haynesville Fayetteville Woodford Carthage to Perryville Southeast Supply Header (SESH) CenterPoint Energy Field Services CEGT MRT CNP Pipelines and Field Services have deployed over $1.4 billion of capital in shale areas since 2005

Just When our Star is Rising… More Uncertainty Natural gas fits in a “greener” energy environment Clean Abundant Domestic Sounds like the natural choice, but… Climate change legislation and EPA mandates abound House bill and EPA treat natural gas as a problem Uncertainty creates market volatility, and in capital intensive businesses…..indecision

Conclusion Natural gas is not just a bridge fuel but a solution The industry must be a better advocate of its successes and its potential to solve problems