Overview & Status for: International Association of Energy Economists Alaska Chapter October 25, 2001 Anchorage, Alaska

September Team Objectives Assess the economic viability of a pipeline project Focus on route evaluation – Cost and environmental considerations Prepare sufficient information to support potential permit applications Safe and Environmentally Responsible

September Miles TAPS Northstar Endicott Prudhoe Bay Kuparuk Milne Point NPRA ANWR Coastal Plain (1002 Area) Colville River LJL (April, 1997) Pt. Thomson Developments Major Discoveries Alpine Liberty Badami Location Map Alaska Gas Resources & Major Producers North Slope discovered resource = 35 Tcf Prudhoe Bay – 8 Bcf/d of production, currently reinjected into reservoir Ultimate ANS resource estimates ~100 Tcf Alaska Gas Owners ExxonMobil Phillips State Others BP

September Preliminary Comparison of Two Pipeline Routes Southern Route 2,139miles Northern Route 1,803miles Pipeline Design Basis Diameter 52” High pressure 2,500 psi Buried line Throughput 4-6 bcf/d Note: Mackenzie Valley Pipeline 1,140miles

September Route Attribute Elements 1.Economics 2.Revenues 3.Gas Access 4.Jobs 5.Environment 6.Safety 7.Timing

September Total Project Cost ($bn) (4.0bcf/d from Alaska, 0.8bcf/d from MD) South North Gas Treatment Plant Alaska to Alberta Alberta to Market NGL Extraction Facilities Alaska Project Total Mackenzie Delta Line Pt.Thomson Development Notional Toll ($/mcf) (Alaska North Slope to US L-48 Market) South North Gas Treatment Plant Alaska to Alberta Alberta to Market Total All number in US dollars Price Assumptions Based after EIA, ~$3.00/mmbtu, escalating with inflation. View 2000 price spike as an anomaly. Total Governments * Owners Project Discounted Cumulative Cash Flows ($bn) (at 15% discount rate) EIA Price Scenario North South North South Owner’s investment not repaid. Additional risk from price and cost uncertainty. Team is still working to improve economics by lowering costs. * Includes Mackenzie Delta Benefits Element 1: Economics Neither Route Is Economic

September Element 1: Economics Gas Price History and Forecast Demand growth encouraging Highly volatile commodity Intense market competition Successful project must have competitive cost of supply Henry Hub Gas Price ($/mmbtu) Average ‘90-‘95 $1.80/mmbtu Average ‘96-‘99 $2.27/mmbtu Average ‘00-‘01 $4.09/mmbtu Based after EIA, 2001

September Total Undiscounted Revenue South $66.2bn, MoD $22.7bn $1.7bn $23.7bn State of Alaska US L-48 States US Federal $6.9bn Canadian Provinces $11.2bn Canada Federal Total Undiscounted Revenue North $68.0bn, MoD $24.1bn $1.7bn $24.2 $6.7bn $11.3bn State of Alaska US L-48 States US Federal Canadian Provinces Canada Federal Element 2: Revenues Substantial Government Revenues Regardless of Route Assumptions: Both routes include MD upstream and midstream revenues.

September Total State of Alaska RevenuesDifference in Alaska State Revenues North vs. South ANS Developed Reserves (Tcf) Delta Cum. Revenues ($bn, MoD) Current Project Element 2: Revenues State of Alaska Revenues SouthNorth Total Revenues ($bn, MoD) Royalty Severance Tax Ad Valorem Tax Income Tax 4.0

September U.S. Regulatory Enabling Legislation Creates market-driven, expedited regulatory process for any viable project(s) –Subject to FERC regulation; fair and reasonable terms and conditions; open access –Subject to all environmental laws and regulations; 18 month EIS completion Producer participation in Senate Energy Committee testimony on October 2 Senate Energy Bill now going straight to floor –Language developed by producers in current mark up Creates best possible structure for successful Alaska Pipeline Project

September Way Forward Feasibility study underway – expect engineering to be completed by year-end. Update of project economics / route attribution comparison to follow Then open season decision to be made: –Project economic? –Enabling legislation been enacted? –State fiscal certainty progressed? –Route selected?