Oil and Wind Energy: North Dakota Update Dr. Cole Gustafson Feb. 9, 2011

North Dakota Production July 2010 – 321,042 BOPD July 2010 – 320,371 MCF/D 5,051 Producing Wells Courtesy: Neset Consulting

Williston Basin Deposition - ND Courtesy: Neset Consulting

Relative Thickness Courtesy: Neset Consulting

ND Bakken and Three Forks Courtesy: Neset Consulting

Mud Motors Drillpipe Non-magnetic Drill Collar Bent Sub Mud Motor Rotating Sub Courtesy: Neset Consulting

Road Repair Paving $1,000,000 / mile Graveling $3600 /mile Rebuild Gravel Road $300,000/mile Courtesy: Neset Consulting

Farm Windmill--Aermotor

262 ft 242 ft Overall Diameter Incl. Hub: 252 ft

Wind Generation in North Dakota Operational: –Turbines770 –Rated Capacity1223 Mw Under Construction: –Rated Capacity76 Mw Planned: –Rated Capacity6684 Mw

Name Locati on Power Capacity (MW) Units Turbine Mfr. DeveloperOwnerPower Purchaser Year Online Cedar Hills Wind Facility GE Energy MDU Utilities 2010 Ashtabula II GE Energy NextEra Energy Resources Minnkota Power Cooperative 2009 Luverne GE Energy NextEra Energy Resoureces Otter Tail Power Co Prairie Winds Minot Wind GE Energy Basin Electric Prairie Winds ND 1 Basin Electric2009 Prairie Winds ND I GE Energy Basin Electric 2009 Rugby Suzlon Iberdrola Renewables Missouri River Energy Services 2009 Wilton Wind Energy Center II GE Energy NextEra Energy Resources Basin Electric2009 Ashtabula II GE Energy NextEra Energy 2009 Ashtabula - NextEra GE Energy NextEra Energy Resources 2008 Ashtabula - Otter Tail 4832 GE Energy NextEra Energy Resources Otter Tail Power Co. 2008

Power Generation Capacity in North Dakota MegawattsPercent Wind Hydro-Electric Coal-Fired Total

Some “Back-of-the-Envelope” Numbers… Rough Cost at 39% Capacity Factor: ¢/kWh Capital Cost ($2.2Million/MW, 6%, 23 yrs): 5.2 ¢/kWh Land Lease: 0.1 ¢/kWh O&M / Insurance: 0.9 ¢/kWh Property Taxes: 0.2 ¢/kWh Total Estimated Cost: 6.4 ¢/kWh Less Offsets… –P–P–P–Production Tax Credit or 30% Treasury Grant –A–A–A–Accelerated Depreciation –R–R–R–Renewable Energy Credit Sales Net Cost After Tax -- Less than 4¢/kWh

Local Economic Impacts - Langdon mw towers $500 million investment, $1 million lease payments, $456,000 local tax payments $500 million investment, $1 million lease payments, $456,000 local tax payments Met tower (2004), FPL (2006) Met tower (2004), FPL (2006)

Wind - Local Government Issues Large Wind – Infrastructure, labor, housing community services Small Wind – Zoning, siting, setback, inspections, complaints, decommissioning Taxation/investment Purchasing – How much? Generation – Where? Size? Own/Contr.?

Common Landowners Questions on Wind Lease Contracts Basics of Farm/Residential Small Wind Turbines Wind Energy Development: Key Financial Considerations Managing Your Expectations - Sizing a Small Wind Turbine To Your Land Understanding Wind Energy Leases Public Involvement and Land Issues Relating to Wind Projects

Questions?

Investment & Risk Comparison Transmission Risk 2-3 years wind studies Engineering $$$ Permitting Risk Operating Risk Market Risk Tax Risk ¼ to ½ acre of land per turbine Project Developer Landowner Cost: $3-5 Million/turbine Revenue: $4-$6000/turbine/yr

Wind will displace the system’s highest cost fuel Fuel Cost of Electricity… Gas is a likely partner for wind energy

Power Curve: Generation vs Wind Speed MPH Cutout Reaches Rated Capacity at MPH MPH Cut-in MPH MPH