1. 1 Alaska Gas Issues Ziff Energy Pacific Northwest Gas Strategies October 2, 2001 Roger Marks State of Alaska Department of Revenue

2. 2 ALASKA NORTH SLOPE Kenai

3. 3 The Prudhoe Bay Reservoir Gas Cap Oil Rim BP Arco/Exxon

4. 4 Intrinsic Economics Transportation chews up gas value Geography generally puts Alaska near back of the line Need for big project Big project = big risk Transportation chews up gas value Geography generally puts Alaska near back of the line Need for big project Big project = big risk

5. 5 Options for Stranded North Slope Gas LNG to Asia Gas-to-Liquids through TAPS Long pipeline to the Lower 48 LNG to Asia Gas-to-Liquids through TAPS Long pipeline to the Lower 48

6. 6 What has Changed High gas prices in Lower 48 Reduced oil losses to aging reservoir Re-alignment of interests at Prudhoe Bay High gas prices in Lower 48 Reduced oil losses to aging reservoir Re-alignment of interests at Prudhoe Bay

7. 7 Prudhoe Bay Mackenzie Delta Alberta Chicago Fairbanks Over the TopThe Highway

8. 8 ANGTA 1976 - Authorizes government to select route and entity to build ANGTS Canada - Northern Pipeline Act Expedited processes and limited judicial review 1977 - Alaska Northwest Partnership proposal selected - ALCAN route - (Now Foothills) Exclusivity questioned now 1976 - Authorizes government to select route and entity to build ANGTS Canada - Northern Pipeline Act Expedited processes and limited judicial review 1977 - Alaska Northwest Partnership proposal selected - ALCAN route - (Now Foothills) Exclusivity questioned now

9. 9 The $4 Billion “Meatball” Preconstruction costs incurred over 20 years ago have been accumulating with interest Some portion may be part of tariff May be less Preconstruction costs incurred over 20 years ago have been accumulating with interest Some portion may be part of tariff May be less

10. 10 Federal Legislation Re-affirm ANGTS route Expedited processes Tax incentives Priority for American & Canadian steel Alaska Native, Alaskan, and union hire Access to gas and pipeline capacity Re-affirm ANGTS route Expedited processes Tax incentives Priority for American & Canadian steel Alaska Native, Alaskan, and union hire Access to gas and pipeline capacity

11. 11 Access to Capacity Parties who may have gas in the future but do not have gas now want assurances of access to capacity Similarly, incentives for gas exploration and leasing are reduced However, risk of overbuilding Parties who may have gas in the future but do not have gas now want assurances of access to capacity Similarly, incentives for gas exploration and leasing are reduced However, risk of overbuilding

12. 12 Fiscal Issues Fiscal contract RIK commitments Transparent valuation based on realization Common value for taxes and royalties Agreement on tariffs Binding arbitration Fiscal contract RIK commitments Transparent valuation based on realization Common value for taxes and royalties Agreement on tariffs Binding arbitration

13. 13 Policy Council / Joint Legislative Committee Fiscal issues State ownership Environment Value-added industries In-state demand Alaska hire and training Fiscal issues State ownership Environment Value-added industries In-state demand Alaska hire and training

14. 14 Conclusion To be continued