1. North American Natural Gas Security: Gaining Public Support for Action Mike Cleland Canadian Gas Association March 21, 2005

2. 2 The challenge of ensuring public support  Natural gas industry has focused on upstream access and regulatory issues  We take as givens: Demand growth is a reality Need improved land access and regulatory efficiency to ensure supply  But are they givens?  Public support for policy actions needed to bring on supply should not be taken for granted

3. 3 What we know  Key attributes of the energy economy are widely understood by industry: Security and reliability of the energy system is critical to our society Steady decline in energy intensity is not enough to eliminate demand growth There is a long term trend toward greater supply diversity but carbon based fuels are with us for many decades to come Natural gas will be a large and essential part of the supply picture

4. 4 Growth of energy demand – Canadian perspective  Most outlooks envisage population and economic growth over the next two decades not significantly changed from last decade  Although the Canadian economy uses less energy today per dollar of GDP, economic growth has driven total energy use higher.

5. 5 Growing diversity of energy supply – Canadian perspective  Historical trend is toward supply diversity.  Next generation of fuels & technologies even more diverse  Natural Gas and technologies that use natural gas will be a key part of that future.

6. 6 What the public thinks – or what the politicians think they think  Polls may not reveal what the public will really do  But they do likely reveal what the public thinks  And they have growing influence on policy decisions  A lot of polling results reveal a public which does not share our perceptions of reality  For example, some extracts from a recent US/Canada comparison…….

7. 7 Most important energy priority  More efficiency and renewables  More exploration, development, new power plants  Source – Ekos Research Associates Inc, January 2005  US – 78%  Canada – 80%  US – 21%  Canada – 17%

8. 8 Top priority for governments  Protect environment and health  Uninterrupted supplies  Low prices  Source – Ekos Research Associates Inc, January 2005  US – 61%  Canada – 68%  US - 21%  Canada – 15%  US – 15%  Canada – 16%

9. 9 Most important new source for the future  Hydro  Solar  Wind  Gas  Nuclear  Source – Ekos Research Associates Inc, January 2005  US – 28%  Canada – 22%  US – 25%  Canada – 26%  US – 15%  Canada – 37%  US – 17%  Canada – 6%  US – 6%  Canada – 4%

10. 10 What we sometimes hear around Ottawa  Energy debate is wholly dominated by environmental issues – getting a seat at the table requires that you stake a claim to being “sustainable”  Gas is not renewable so it doesn’t count as sustainable  Emissions of any sort in any quantity are out - and gas produces emissions  At today’s prices gas doesn’t look like an economic alternative so why worry anyway  Besides, we are running out of gas so why plan for gas as a long term option

11. 11 New supply will require policy support  Land access  Siting  Regulatory approvals  Fiscal treatment  Helping maintain public confidence

12. 12 Which we can’t take for granted  Sporadic, ad hoc support for many major projects  But an uphill struggle much of the time  And reliable, widespread and systematic policy support is harder to count on  Public attitudes probably moving in a negative direction

13. 13 Do we need to try to reposition gas?  In Canada, everything increasingly turns on “sustainability”  Not always clear what that means but it influences the political climate – and likely to grow in influence  Sustainability “debate” is dominated by conservation and renewables (whether or not anyone really understands what those terms mean)  Fossil fuels – including gas – need to be better understood as part of a sustainable future

14. 14 We need to get the debate back in perspective  Sustainability needs to be better understood for what it is and is not  If the energy system fails to deliver secure reliable energy then everything else is moot  Sustainability doesn’t equate to “environment” – nor to “renewable”  Sustainability, if its really a guide to policy, has to be viewed in multiple dimensions – long term, integrated at the level of systems and communities

15. 15 Attributes of a Sustainable Energy Mix  Environmental Performance Mitigable land, water, air impacts. Low life cycle emissions.  Inherent Efficiency In production, transformation, and end use Maximizing productivity of resources and capital. Right energy in the right application  Reliability Transportable & storable, responsive on-demand delivery when and where needed.  Adaptability Scalable applications, inter-fuel complimentarity, ease of siting, multiple end-use capability.  Long Term Security Resources adequate for relevant investment horizon

16. 16 Natural Gas: A Unique Confluence of Attributes  Environmental performance  Inherent efficiency  Reliability  Adaptability  Long term security

17. 17 Natural Gas: Environmental Performance  Lowest GHG emissions of all fossil fuels.  Low or zero emissions of air contaminants.  Upstream footprint small & can be managed.  Strong compliment to renewable energy sources.

18. 18 Natural Gas: Inherent Efficiency  Transportable & storable with moderate loss of energy potential.  High direct combustion efficiency and adaptability to combined (heat, cooling, power) applications.  Untapped efficiency potential in end use (eg., appliances and equipment) and conversion (eg., power generation) applications.  Potential can be tapped through more effective DSM ApplianceNatural Gas Overall Efficiency Electricity Overall Efficiency % Difference Furnace- Mid 0.680.4238% Furnace- High 0.760.4245% Water Heater 0.460.3426% Source: Canadian Gas Association Overall Efficiencies of Residential Appliances Fuelled by Natural Gas and Electricity

19. 19 Natural Gas: Reliability Source: EIA, ARC Financial Dawn  Continent-wide, transmission and distribution network.  Dense delivery network combined with storage capability handles peaks and disruptions.  Responsive, on demand deliverability.

20. 20 Natural Gas: Adaptability  Applications can be scaled with little loss of efficiency.  Strong inter-fuel compatibility and substitutability.  Compliment for both renewable sources and traditional large scale base load electrical generation.  Siting flexibility for distributed power generation allows combined applications and more efficient use of power grid

21. 21 Natural Gas: Long Term Security  North American proven reserves are 9 times annual consumption.  North American discovered resources are 15 times annual consumption.  North American total remaining natural gas resources are 75 times current annual consumption.

22. 22 Long Term Security: Global Gas Reserves  Global natural gas proven reserves total 6270 trillion cubic feet.  North America proven reserves account for 4% of this total.  Global resources base increasingly available.  Imported LNG will be a key part of NA supply by 2010 272 250 418 1980 445 2156 Source :BP Statistical Review of World Energy World Natural Gas Reserves (Tcf) 750

23. 23 Long Term Security: Hydrates  Estimate of gas in hydrate reservoirs greatly exceeds the volume of known conventional gas reserves.  Widespread in permafrost regions and in offshore marine sediments.  Still many engineering and cost challenges

24. 24 Conclusion  Current market tightness combines with environmental issues to produce perverse public attitudes respecting support for new supply  Public does not obviously share industry’s perspective on importance of gas to our long term energy future  Ensuring reliable policy support rests in good measure on reliable public support  Industry (and government) need to articulate why gas passes the test of sustainability (in multi-decade context) and how we are working to ensure that  Need a more systematic approach and need to get governments – and other communities - working with us