1. The Future of LNG and the Permit Process Dan Kirschner, Executive Director, Northwest Gas Association National Waterways Conference September 8, 2006

2. 5335 SW Meadows Rd., #220 Lake Oswego, OR 97035 (503) 624-2160 www.nwga.org NWGA Members: Avista Corporation Cascade Natural Gas Co. Intermountain Gas Co. NW Natural Puget Sound Energy Duke Energy Gas Transmission Terasen Gas TransCanadas GTN System Williams NW Pipeline

3. 3 Source: EIA Annual Energy Review 2005

4. 4 Source: EIA 2006 Annual Energy Outlook

5. 5 Gas Consumption (Tcf) Source: EIA 2006 Annual Energy Outlook

6. 6 Growth in Gas Demand by Region Annual % Source: EIA 2006 Annual Energy Outlook

7. 7 An Interconnected Market

8. 8 Source: EIA Gas Prices

9. 9 The Price of Oil Has an Impact… Source: EIA

10. 10 Price Drivers: Production Source: Baker Hughes, 09/01/2006

11. 11 Production per Rig Source: EIA, Baker Hughes Rotary Rig Counts

12. 12 Gas Production by Region Source: Lippman Consulting via AGA

13. Productive Capacity Source: Energy and Environmental Analysis, Inc. Bubble Tight Market

15. 15 Putting It All Together: Growing Demand + Slowing Supply = LNG?

16. 16 Why LNG? Large reserves with little or no local market. Pipelines to markets impractical (Source: BP Statistical Review of World Energy, 2005) CountryProved Reserves (Tcf) Russia1,694 Qatar910 U.A.E.214 Nigeria176 Algeria160 Venezuela149 Indonesia90 Australia87 Norway84 Malaysia87 Egypt66 Libya53 Oman35 Trinidad/ Tobago19

17. 17 LNG enables long distance shipping Liquefying natural gas: Super-chilling it to -260°F Reduces volume of gas 620 times LNG weighs less than one-half that of water

18. 18 It Must Make Economic Sense Total = $2.00 - $3.70/MMBtu (Source: Center for Energy Economics)

19. 19 Pacific Basin Sources of LNG Peru LNG Bolivia LNG Sunrise Browse Basin Scarborough Australia NWS 5 Kenai Sakhalin Gorgon Darwin LNG Australia NWS 1-4 Iran Bintulu Arun Brunei Tangguh Oman Abu Dhabi Qatar Donggi Bontang Investment in new LNG liquefaction capacity is growing Existing/Under Construction Proposed Yemen

21. 21 PortWestward LNG Skipanon LNG Jordan Cove LNG „Northern Star LNG …Tansy Point †Kitimat LNG ‡WestPac Terminal Challenges include: Local acceptance Regulatory/Permitting Commercial considerations: economics/financing takeaway infrastructure worldwide competition supplier commitment Northwest LNG Proposals

22. A Bit About Process… FERC is lead agency; consults w/state agencies USCG serves as subject matter expert for maritime safety and security for EIS USCG validates Waterways Suitability Analysis (WSA) Provide USCG and Maritime Stakeholder input USCG issues Letter of Recommendation (LOR)

23. 23 Waterways Suitability Analysis Risk-based analysis: Identify risks that arise from introduction of LNG operations into port What can go wrong? What is the likelihood? How severe are consequences? The goals: Understand individual risks in terms of: probabilities, threats, vulnerabilities, consequences Use info to develop effective risk management strategies

24. 24 WSA Includes: Transportation through the vessels arrival in US waters to LNG facility Navigation and environmental safety issues Safety and security issues that might affect entire port; detailed review of specific points of concern

25. Questions?