1. Bringing Natural Gas to North Dakota EDND Summer Conference Doug Lee – CEO – Progress Solutions June 22, 2016

2. Agenda Why natural gas? Municipal versus industrial-owned utility Volume of gas needed Cost to convert Delivered cost of natural gas Distribution system layout Funding sources What’s next?

3. Why Natural Gas? Cost comparison to propane or electricity Reliability Safety No propane tanks EPA emission reductions Impact on electric costs

4. ND Towns without Natural Gas Created by Montana-Dakota Utilities. Used with permission.

5. Municipal Versus Investor-Owned Utility Discussion with MDU Capital investment Conversion rate concerns Gas supply Other Municipal Systems Granville, North Dakota Portal, North Dakota Perham, Minnesota Battle Lake, Minnesota

6. Support for Municipal Systems The Minnesota Municipal Utilities Association (MMUA) indicated they would help North Dakota municipalities On the national level, the American Public Gas Association is available

7. Regulation North Dakota Public Service Commission Sets rates for IOU’s Met with PSC Personnel, June 6 th to discuss “Rate de-regulation” Provides safety regulation CFR 49, Part 192 addresses Pipeline Safety

8. How much gas is used? Rugby Peak day load 1200 dkt/day Annual load 110 dkt/home-year Community load – 110,000 dkt/year Source – Comparison load from Carrington, ND

9. Costs to Convert Heating/Water Heater Furnaces Normally can convert Older should be replaced for improved efficiency Electric heat – Difficult if there is no duct work Water heaters – Not normally convertible – Propane water heaters can be replaced for $500

10. Natural Gas Sources Pipelines Residential and commercial gas is available from dry gas sources such as WBI, Northern Border Xcel Energy, Viking, Great Plains Natural Gas Liquefied natural gas (LNG) Available near Tioga – 200 mile radius as a rule of thumb Back up from other sources Compressed natural gas (CNG) The virtual pipeline concept

11. Pipeline Facts Cost effective Reliable Capital requirements Immediate capacity Preferred long-term solution

12. LNG Lower capital requirements Higher delivered cost of gas Good interim solution Allows build-out/conversion time Reliable Requires trucking of LNG

13. LNG Regasification System

14. Virtual Pipeline - CNG More gas sources Large capital Easier to disseminate to small users Flexible Requires trucking

15. Virtual Pipeline Concept https://verdek.com/ pipeline.htm

16. Virtual Pipeline

17. Delivered Cost of Natural Gas LNG to town border - $6.21/MCF Cost of natural gas - $2.00/MCF Cost of distribution system including capital investment and operations - $2.82/MCF Total delivered cost - $11.03/ MCF X 110MCF/Customer - Year = $1,213/Year

18. Distribution System Layout Systems are laid out similar to other utilities Requires easements Load must justify extensions Must be built out over a period of time as customers sign up Commercial and industrial loads targeted first

19. Gas Distribution System Example illustrates 20,000 feet of pipeline Mains 2” $20-$25/ft Service lines ¾” $1,738 each Service lines up to 150 feet Rough cost $789,000

20. Gas Main Placement

21. Funding Sources for Distributions Systems Municipal bonds Bank of North Dakota low interest loans Private investors Northwest Gas, a distribution company in MN may have an interest Cooperatives Commercial/industrial partnerships

22. What are the next steps? Feasibility/business plan Talk with investors Determine direction the community wants to go Support Legislative changes to rate making process Call me, Doug Lee, at 1 701 955 4230

23. Questions? Thank you. Doug Lee, CEO Progress Solutions 1 701 955 4230