Overview

1
Overview Status

• July 18, 2001

2
Outline

• Brief Overview
• Current Activity / Progress
• Government Engagement Issues
• Forward Plan

3
Joint Team Objectives

• Assess the economic viability of the project
• Focus on route evaluation
• Cost and environmental considerations
• Prepare sufficient information to support
  potential permit applications

Safe and Environmentally Responsible
4
Overall Project Scope
5
The Seven Lenses of Evaluation

• Economics
• Environment
• Gas Access
• Jobs
• Revenues
• Safety
• Timing

6
Current Activity / Progress

• Contractors On-Board (approx. 500)
• Technical / Regulatory Work Proceeding
• Defining Commercial Issues
• Ongoing Discussions with Interested Parties
• Hundreds of public/private meetings
• Engaging Governments Communities

7
Current Technical Studies

• Process Development
• Acid Gas (CO2, H2S) Removal Technology
• NGL Removal Processes
• Pipeline Hydraulic Simulations (Over 1,000 Cases)
• Pressure (1,750-3,000 psi) vs Diameter (42-56)
• Comparisons of Compressor Drivers
• Throughput and Expandability

8
Compressor Stations vs. Throughput
System Optimization Plot Example
50
45
40
35
44
75 mile station spacing
48
30
52
Compressor Stations
56
25
(_at_2500 psig)
20
150 mile station spacing
15
10
5
0
0
1
2
3
4
5
6
7
Nominal Volume BCFD
9
Current Technical Studies

• Materials
• Feasibility of High Strength Steel
• Logistics
• Port Surveys in Anchorage, Seward, Valdez and
  West Coast
• Review of Potential Fabrication Site Locations
• Trucking and Highway Analyses
• GTP Sealift Analyses Potentially Largest Ever
• Construction Technology
• Directionally Drilled River Crossings
• Trenching Technology
• Construction Equipment Requirements Availability

10
Regulatory / Environmental Land Activities

• Summer field work / center line studies
• Cultural resource surveys
• Land owner discussions
• Beaufort Sea survey

11
Government Engagement

• Ongoing Discussions with Governments
• US and Canadian Federal
• State of Alaska
• Canadian Provincial/Territorial/First Nations

12
State Engagement Issues

• Initiate dialogue between Producers and State of
  Alaska regarding fiscal stability / certainty
• Objective is to have key terms understood prior
  to the January legislative session
• Key discussion items
• Valuation clarity (severance and royalty)
• Pipeline vs Producer issues
• Pipeline Ad Valorem certainty
• Gas take-in-kind and nomination process
• Project risk and long-term certainty

June
July
Aug
Sep
Oct
Nov
Dec
Agree ground
-
rules
Working discussions
Draft valuation, AVT
contract terms
Agreed terms pre
-
session
13
Simplification of State Royalty, Severance
Valuation

• Common royalty and severance methodologies
• Transparent pricing
• Simplicity best way to minimize future concerns
• Wellhead price for royalty and severance linked
  to Lower 48 with transportation differential
• Define market price
• Agreement on gas valuation terms
• Concurrence with FERC/NEB tariff terms
• Processing fees

14
Wrap-up

• We are fully engaged in a joint program to
  evaluate and progress a large, modern pipeline
  from Alaska to Canada and the lower 48 states
• There is a growing market for Alaskan gas, but we
  must be cost-competitive to be a viable project
• It is not yet clear that we can develop an
  economic project
• It is premature to preclude any options at this
  point
• Still targeting completion of engineering and
  route studies by year end