Presented to:

1
Major New U.S. Pipeline ProjectsReasons and
Implications

• Presented to
• National Association of Regulatory Utility
  CommissionersStaff Subcommittee on Accounting
  and Finance
• Spring 2008 MeetingNew Orleans, Lousiana
• April 1, 2008
• Presented by
• Richard G. Smead
• Director, Energy

2
Gas Pipeline InfrastructureWhats the Big Deal?

• PhysicalCan Enough Gas Get to Market?
• Shifting Supply Patterns
• Power Demand in the Northeast
• LNG OK with Existing InfrastructureYou Can Pick
  Your Spot
• Not So with New Domestic Production
• Rockies
• Shale Plays
• EconomicBasis Blowout Inadequate
  Infrastructure
• Not enough into market, becomes a sellers market
• Not enough out of supply area, becomes a buyers
  market
• Either one means unconstrained price fly-up or
  fly-down

3
The Impact of Inadequate InfrastructureNew
Yorks Basis Blowout
4
The Same Kind of Impact for ProducersThe Rockies
Last Year
5
A Massive US Pipeline Infrastructure, Moving 66
Bcfd to Market
6
The Market Is Reacting with Pipe Solutions

• Rockies Express
• 2 Bcfd, Wyoming to Ohio
• Multiple other takeaway pipes emerging
• Intersects most major south-to-north long-lines
• Maritimes
• Nova Scotia to Boston
• Not New, but filling it would be new
• Relieves the Power Gen Capacity Issue in New
  England
• Big Shale Plays, and the Pipes that Love Them
• Barnett ShaleCenterPoints Carthage-Perryville
  Pipelin
• Oklahoma ShaleMEP, Gulf Crossing, with Feeder
  Pipes
• Rockies to California
• Spectras Bronco
• El Pasos Ruby

7
U.S. Natural Gas Flow Through Producing and
Consuming Regions
8
(No Transcript)
9
Rockies ExpressA 2 Bcfd Rifle Shot to the
Market
10
Rockies ExpressMultiple Opportunities for
Short-Hauls to Market
11
Filling MaritimesDoes More for New England than
Another Pipe
12
New Domestic SupplyBig Pipes out of the Shale
Plays
13
Rockies to CaliforniaRuby or Bronco
14
Nothing Affects Prices as Much as Infrastucture
Adequacy

• Each constraint creates trading chaos
• But new capacity can destroy basis, making
  project underwriters look stupid
• So its a continuing balancing act
• Dont allow chronic inadequacy
• Dont promote significant excess capacity
• Each big new pipeline totally reorients the
  market
• After ReX, the world will never be the same.
  Porter Bennett, Bentek
• Build it and they will come. Shoeless Joe in
  Field of Dreams
• Dont do anything stupid. My old boss.