1. Regulation and Investment in the U.S. Robert J. Cupina, Deputy Director Office of Energy Projects Federal Energy Regulatory Commission GIE Annual Conference Bratislava, Slovakia September 28, 2006

2. FERC Office of Energy Projects 2 Basis of U.S. Regulation: Natural Gas Act NATURAL GAS ACT Section 3 Import/Export Section 7(c) Interstate Pipelines Storage LNG Terminals

3. FERC Office of Energy Projects 3 Source: Based on Platts PowerMap Pipeline Regulation Construction and Operation Tariffs Rates Rate Schedules Terms and Conditions of Service

4. FERC Office of Energy Projects 4 Construction and Operation Tariffs Rates Rate Schedules Terms and Conditions of Service Storage Regulation Source: Based on Platts PowerMap.

5. FERC Office of Energy Projects 5 LNG Regulation Construction and Operation Ongoing Safety No Tariff Any Business Model Acceptable LAKE CHARLES ENERGY BRIDGE (Coast Guard Jurisdiction) ELBA ISLAND COVE POINT EVERETT

6. FERC Office of Energy Projects 6 Evaluation of Pipeline Proposals Certificate Policy Statement –Existing Shippers Do Not Subsidize New Facilities –Develop Record on Impacts (positive and negative) and Allow Commission to Make Decision Environmental/Engineering Review

7. FERC Office of Energy Projects 7 Evaluation of Storage Proposals Storage Policy for Market-based Rates –Relevant product market for market power analysis includes many substitutes, or –MBRs allowed even if lack of market power has not been demonstrated in situations to encourage infrastructure Environmental/Engineering Review

8. FERC Office of Energy Projects 8 Evaluation of LNG Terminals Environmental/Engineering Review Safety Review No Tariff –Hackberry Decision (December 2002) no need for tariffs or third party access. Treats re-gas as production.

9. FERC Office of Energy Projects 9 A Open Access At Delivery of Liquid to Terminal LNG Suppliers LNG Buyers A B B Open Access At Delivery of Vapor into Interstate Pipeline System Liquid to Vapor Flow 9 Hackberry Decision

10. FERC Office of Energy Projects 10 Major Pipeline Projects Certificated (MMcf/d) January 2005 to September 2006 12.6 BCF/D Total 903 Miles ANR (168) 1 5 Petal (600) Cheniere Corpus Christi (2,600) Transcontinental (105) CenterPoint(113) CIG (105) Vista Del Sol (1,100) Golden Pass (2,500) El Paso (502) Mill River (800) San Patricio (1,000) 2 4 3 1. TransColorado (300) 2. Rendezvous (300) 3. WIC (350) 4. Entrega (EnCana) (1,500) 5. Questar (102) 6. Northwest (450) 7. Questar Overthrust (550) Northern Border (Chicago III) (130) Dominion South (200) Columbia (172) Triple-T Extension (Tennessee) (200) Jewell Ridge Pipeline (East Tennessee) (235) Midwestern (120) 26.88 BCF/D Total 1,511 Miles Transcontinental (100) McMoRan (1,500) NE ConneXion (Tennessee) (136) Dominion (700) Cypress Pipeline (Southern Natural) (500) Florida Gas (160) Cameron (1,500) Cheniere Creole Trail (3,300) Port Arthur (3,000) Cove Point Pipeline (800) Logan Lateral (Texas Eastern) (900) 6 Essex-Middlesex (Tennessee) (82) 7

11. FERC Office of Energy Projects 11 Compass Pass (1,000) Algonquin (800) Point Comfort (1,000) Seafarer Pipeline (El Paso) (800) Millennium (525) Empire Connector (Empire Pipeline) (250) 2007 Expansion (Vector Pipeline) (245) Gulf LNG Pipeline (1,500) Broadwater Pipeline (Broadwater) (1,000) North Baja Expansion (North Baja Pipeline) (2,700) Major Pipeline Projects Pending (MMcf/d) September 2006 18.72 BCF/D Total 1,976 Miles Algonquin (325) Carthage to Perryville (CenterPoint) (1,237) Market Access (Iroquois) (100) TIME II (Texas Eastern) (150) Big Sandy Pipeline (Equitrans) (130) Maritimes Phase IV (Maritimes) (418) Rockies Express REX West (Rockies Express Pipeline) (1,800) Blanco to Meeker (TransColorado) (250) Northern Lights (Northern Natural) (374) Bradwood Landing (NorthernStar) (1,300) Potomac Expansion (Transcontinental) (167) Wamsutter Expansion (Questar Overthrust) (750) Phase III Project (Gulfstream) (200) East TX Mississippi Expansion (Gulf South) (1,700)

12. FERC Office of Energy Projects 12 Sonora Pipeline (1,000) Brookhaven Lateral (Iroquois) (80) Phoenix Lateral (Transwestern) (500) Southern Expansion (Questar Pipeline) (170) Louisiana Pipeline (Kinder Morgan) (3,395) 11.71 BCF/D Total 2,386 Miles Major Pipeline Projects Pre-Filing (MMcf/d) September 2006 GII Project (Guardian Pipeline) (537) Kanda & Mainline (WIC) (225) Continental Connector (El Paso) (1,000) Pacific Connector (Williams Pacific) (1,000) Southeast Supply Header (CenterPoint) (1,000) Rockies Express REX East (Rockies Express Pipeline) (1,800) Phase IV Project (Gulfstream) (155) Southeast Expansion (Gulf South) (700) Sentinel Expansion (Transcontinental) (151)

13. FERC Office of Energy Projects 13 Northwinds Pipeline (NFG) (500) Dracut Interconnect (Tennessee) (250) Coronado (500) Painter Lateral (Overthrust) (200) EnCana Extension (Entrega) (1,000) Questar Expansion (160) Uinta Basin (WIC) (300) Greasewood Lateral (Northwest) (200) Panhandle Eastern (750) KM Illinois Pipeline (Kinder Morgan) (360) Kinder Morgan (170) Natural (232) Henry Hub Expansion (Natural) (200) North Texas Expansion (Trunkline) (510) Carthage Pipeline(KM Interstate)(700) A/G Line Expansion (Natural)(139) Mid-Continent Express (Kinder Morgan) (1,500) Mid-Continent Crossing (CenterPoint) (1,750) Transcontinental (Mobile Bay) (700) Boardwalk PL (1,000) Shenzi Lateral (Enbridge) (100) Alaska (4,000) Major Pipeline Projects On The Horizon (MMcf/d) August 2006 15.22 BCF/D Total 6,976 Miles

14. FERC Office of Energy Projects 14 Pipeline Infrastructure Least speculative gas infrastructure project –If approved, usually gets built –Cost-based rates required as an option, but usually rates are negotiated Contracts or binding precedent agreements with shippers usually required by sponsor, not the Commission, prior to filing application. Since 2000, the Commission has approved 57.1 Bcf per day of capacity; over 9,000 miles of pipeline; and 2.2 million horsepower of compression –Estimated cost of $16.9 billion.

15. FERC Office of Energy Projects 15 Pipeline Infrastructure Approvals 2000-2006 Short, high capacity pipelines to deliver regasified LNG to grid Typical long-line and replacement pipeline projects

16. FERC Office of Energy Projects 16 Pipeline Infrastructure Future Additions The INGAA Foundation estimates that between 2006 and 2020, $50.9 billion will need to be invested in 26,000 miles of pipelines and 5.2 milllion HP in the U.S. and Canada –Replacement of facilities: $16.4 billion 9,300 miles, 1.2 million HP –New facilities (16,900 miles): $34.5 billion 16,900 miles, 4.0 million HP –Alaska and MacKenzie Delta –Other facilities

17. FERC Office of Energy Projects 17 Storage Projects (Capacity in Bcf) Falcon MoBay (50.0) County Line (6.0) EnCana (8.0) Bluewater (29.2) Columbia (12.4) Natural (10.0) Dominion (9.4) Texas Gas (8.2) Freebird (6.1) CenterPoint (15.0) Starks (19.2) Falcon Hill-Lake (10.4) Liberty (17.6) Petal (5.0) SemGas (5.5) Certificated Since 1/1/05 On The Horizon Currently Pending Falcon Worsham-Steed (12.0) Unocal Windy Hill (6.0) Columbia (16.4) Natural (10.0) Bobcat (12.0) Texas Gas (6.8) Dominion (18.0) Caledonia (11.7) Caledonia (1.7) Arizona Natural Gas (3.5)

18. FERC Office of Energy Projects 18 Storage Infrastructure Additions More speculative gas infrastructure project than pipelines –Not all gas users need storage service New storage pricing policy to promote storage development Since 2000, the Commission has approved 275 Bcf of storage capacity and daily deliverability from storage of 14.6 Bcf.

19. FERC Office of Energy Projects 19 Storage Infrastructure Future Additions The INGAA Foundation estimates that between 2006 and 2020, $5.5 billion will need to be invested in underground storage. The NPC estimates that between 2005 and 2025, 492 Bcf of storage capacity needs to be added in the U.S. at an estimated cost of about $4.5 billion.

20. 46 30 CONSTRUCTED A. Everett, MA : 1.035 Bcfd (SUEZ/Tractebel - DOMAC) B. Cove Point, MD : 1.0 Bcfd (Dominion - Cove Point LNG) C. Elba Island, GA : 1.2 Bcfd (El Paso - Southern LNG) D. Lake Charles, LA : 2.1 Bcfd (Southern Union - Trunkline LNG) E. Gulf of Mexico: 0.5 Bcfd (Gulf Gateway Energy Bridge - Excelerate Energy) APPROVED BY FERC 1. Hackberry, LA : 1.5 Bcfd (Cameron LNG - Sempra Energy) 2. Bahamas : 0.84 Bcfd (AES Ocean Express)* 3. Bahamas : 0.83 Bcfd (Calypso Tractebel)* 4. Freeport, TX : 1.5 Bcfd (Cheniere/Freeport LNG Dev.) 5. Sabine, LA : 2.6 Bcfd (Sabine Pass Cheniere LNG) 6. Corpus Christi, TX: 2.6 Bcfd (Cheniere LNG) 7. Corpus Christi, TX : 1.1 Bcfd (Vista Del Sol - ExxonMobil) 8. Fall River, MA : 0.8 Bcfd (Weaver's Cove Energy/Hess LNG) 9. Sabine, TX : 2.0 Bcfd (Golden Pass - ExxonMobil) 10. Corpus Christi, TX: 1.0 Bcfd (Ingleside Energy - Occidental Energy Ventures) 11. Logan Township, NJ : 1.2 Bcfd (Crown Landing LNG - BP) 12. Port Arthur, TX: 3.0 Bcfd (Sempra) 13. Cove Point, MD : 0.8 Bcfd (Dominion) 14. Cameron, LA: 3.3 Bcfd (Creole Trail LNG - Cheniere LNG) 15. Sabine, LA: 1.4 Bcfd (Sabine Pass Cheniere LNG - Expansion) 16. Freeport, TX: 2.5 Bcfd (Cheniere/Freeport LNG Dev. - Expansion) APPROVED BY MARAD/COAST GUARD 17. Port Pelican: 1.6 Bcfd (Chevron Texaco) 18. Louisiana Offshore : 1.0 Bcfd (Gulf Landing - Shell) CANADIAN APPROVED TERMINALS 19. St. John, NB : 1.0 Bcfd (Canaport - Irving Oil) 20. Point Tupper, NS 1.0 Bcf/d (Bear Head LNG - Anadarko) 21. Kitimat, BC: 0.61 Bcfd (Galveston LNG) MEXICAN APPROVED TERMINALS 22. Altamira, Tamulipas : 0.7 Bcfd (Shell/Total/Mitsui) 23. Baja California, MX : 1.0 Bcfd (Energy Costa Azul - Sempra) 24. Baja California - Offshore : 1.4 Bcfd (Chevron Texaco) PROPOSED TO FERC 25. Long Beach, CA : 0.7 Bcfd, (Mitsubishi/ConocoPhillips - Sound Energy Solutions) 26. Bahamas : 1.0 Bcfd, (Seafarer - El Paso/FPL ) 27. LI Sound, NY: 1.0 Bcfd (Broadwater Energy - TransCanada/Shell) 28. Pascagoula, MS: 1.5 Bcfd (Gulf LNG Energy LLC) 29. Bradwood, OR: 1.0 Bcfd (Northern Star LNG - Northern Star Natural Gas LLC) 30. Pascagoula, MS: 1.3 Bcfd (Casotte Landing - ChevronTexaco) 31. Port Lavaca, TX: 1.0 Bcfd (Calhoun LNG - Gulf Coast LNG Partners) 32. Hackberry, LA : 1.15 Bcfd (Cameron LNG - Sempra Energy - Expansion) 33. Pleasant Point, ME : 2.0 Bcfd (Quoddy Bay, LLC) 34. Robbinston, ME: 0.5 Bcfd (Downeast LNG - Kestrel Energy) 35. Elba Island, GA: 0.9 Bcfd (El Paso - Southern LNG) 36. Baltimore, MD: 1.5 Bcfd (AES Sparrows Point – AES Corp.) 37. Coos Bay, OR: 1.0 Bcfd (Jordan Cove Energy Project) PROPOSED TO MARAD/COAST GUARD 38. Offshore California : 1.5 Bcfd (Cabrillo Port - BHP Billiton) 39. Offshore California : 0.5 Bcfd, (Clearwater Port LLC - NorthernStar NG LLC) 40. Offshore Louisiana : 1.0 Bcfd (Main Pass McMoRan Exp.) 41. Gulf of Mexico: 1.5 Bcfd (Beacon Port Clean Energy Terminal - ConocoPhillips) 42. Offshore Boston: 0.4 Bcfd (Neptune LNG - SUEZ LNG) 43. Offshore Boston: 0.8 Bcfd (Northeast Gateway - Excelerate Energy) 44. Gulf of Mexico: 1.4 Bcfd ( Bienville Offshore Energy Terminal - TORP) 45. Offshore Florida: ? Bcfd (SUEZ Calypso - SUEZ LNG) 46. Offshore California: 1.2 Bcfd (OceanWay - Woodside Natural Gas) Existing and Proposed North American LNG Terminals As of September 22, 2006 FERC Office of Energy Projects A 2 3 26 38 25 40 39 18 US Jurisdiction FERC MARAD/USCG * US pipeline approved; LNG terminal pending in Bahamas ** Construction suspended 28 8 27 11 C, 35 41 17 7 5 15 42 29 E 19 22 20 23 24 43 10 31 9 12 14 33 34 1,32 44 36 B, 13 37 45 21 4,16 6 D

21. 55 POTENTIAL U.S. SITES IDENTIFIED BY PROJECT SPONSORS 47. Offshore California: 0.75 Bcfd, (Chevron Texaco) 48. St. Helens, OR: 0.7 Bcfd (Port Westward LNG LLC) 49. Philadelphia, PA: 0.6 Bcfd (Freedom Energy Center - PGW) 50. Astoria, OR: 1.0 Bcfd (Skipanon LNG - Calpine) 51. Boston, MA: 0.8 Bcfd (AES Battery Rock LLC - AES Corp.) 52. Calais, ME: ? Bcfd (BP Consulting LLC) 53. Offshore New York: 2.0 Bcfd (Safe Harbor Energy - ASIC, LLC) 54. Offshore California: 0.6 Bcfd (Pacific Gateway - Excelerate Energy) 55. Offshore California: ? Bcfd (Esperanza Energy - Tidelands) POTENTIAL CANADIAN SITES IDENTIFIED BY PROJECT SPONSORS 56. Quebec City, QC : 0.5 Bcfd (Project Rabaska - Enbridge/Gaz Met/Gaz de France) 57. Rivière-du- Loup, QC: 0.5 Bcfd (Cacouna Energy - TransCanada/PetroCanada) 58. Prince Rupert, BC: 0.30 Bcfd (WestPac Terminals) 59. Goldboro, NS 1.0 Bcfd (Keltic Petrochemicals) 60. Énergie Grande-Anse QC: 1.0 Bcfd POTENTIAL MEXICAN SITES IDENTIFIED BY PROJECT SPONSORS 61. Lázaro Cárdenas, MX : 0.5 Bcfd (Tractebel/Repsol) 62. Puerto Libertad, MX: 1.3 Bcfd (Sonora Pacific LNG) 63. Offshore Gulf, MX: 1.0 Bcfd (Dorado - Tidelands) 64. Manzanillo, MX: 0.5 Bcfd 65. Topolobampo, MX: 0.5 Bcfd 66. Baja California, MX : 1.5 Bcfd (Energy Costa Azul - Sempra - Expansion) Potential North American LNG Terminals As of September 22, 2006 FERC Office of Energy Projects 47 US Jurisdiction FERC MARAD/USCG 49 48 50 63 57 58 59 61 62 64 65 51 52 47 53 60 56 54 66

22. FERC Office of Energy Projects 22 LNG Infrastructure Additions Most speculative gas infrastructure project –Capacity usually reserved by marketers Hackberry Decision encourages new LNG facilities by removing some of the economic and regulatory barriers to investment.

23. FERC Office of Energy Projects 23 LNG Infrastructure Additions (Cont.) Existing Deliverability = 5.8 Bcf per day Since Hackberry Decision: –Approved by FERC = 25.3 Bcf per day –Pending before FERC = 13.6 Bcf per day Potential Deliverability = 48.9 Bcf per day

24. FERC Office of Energy Projects 24 LNG Infrastructure Future Additions The NPC projects up to 9 new terminals and 9 expansions in North America are necessary by 2025 to provide a total of 15 Bcf per day of LNG imports. The INGAA Foundation estimates that $9.4 billion in investment will be needed to develop LNG terminals in the U.S. and Canada between 2006 and 2020 to support LNG imports of about 19 Bcf per day.

25. FERC Office of Energy Projects 25 Conclusions Infrastructure construction necessitates firm contracts for capacity. The Commission is a responsible and responsive regulator - to both the public and the industry-the public interest. We approve the siting of infrastructure, but the market ultimately decides what is built. Contact robert.cupina@ferc.gov