Www.eia.gov U.S. Energy Information Administration Independent Statistics & Analysis Natural Gas Markets: Recent Changes and Key Drivers for LDC Gas Forum.

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U.S. Energy Information Administration Independent Statistics & Analysis Natural Gas Markets: Recent Changes and Key Drivers for LDC Gas Forum September 11, 2012| Chicago, Il by Howard Gruenspecht, Deputy Administrator

U.S. Natural Gas Injection Season Billion Cubic Feet Source: U.S. Energy Information Administration Short Term Energy Outlook 2 Howard Gruenspecht, LDC Forum September 11, 2012

Natural Gas use for electric power Billion cubic feet per day Source: U.S. Energy Information Administration based on Bentek Energy, LLC 3 Howard Gruenspecht, LDC Forum September 11, 2012

U.S. Electricity Output from Natural Gas and Coal Gigawatthours Source: U.S. Energy Information Administration Electric Power Monthly 4 Howard Gruenspecht, LDC Forum September 11, 2012

Electric Power Sector Natural Gas Consumption: Sept thru March Billion cubic feet Source: U.S. Energy Information Administration Short Term Energy Outlook 5 Howard Gruenspecht, LDC Forum September 11, 2012

Henry Hub Natural Gas Price Dollars per million btu Source: U.S. Energy Information Administration Short Term Energy Outlook 6 Howard Gruenspecht, LDC Forum September 11, 2012

Probability of the December 2012 Henry Hub contract expiring above price levels 7 Source: U.S. Energy Information Administration, based on the CME Group Howard Gruenspecht, LDC Forum September 11, 2012

September Probability Distributions of December Future Contracts With Actual Contract Prices Traded in September Source: U.S. Energy Information Administration based on Bloomberg, LLC 8 Howard Gruenspecht, LDC Forum September 11, 2012

Primary energy use by fuel, U.S. energy consumption quadrillion Btu Source: EIA, Annual Energy Outlook 2012 ProjectionsHistory 2010 Other Renewables Liquid biofuels Petroleum and other liquids Coal Nuclear Natural gas 21% 37% 9% 25% 2% 1% 20% 32% 9% 26% 6% 4% Share of total U.S. energy use Howard Gruenspecht, LDC Forum September 11, 2012 Wind, solar, geothermal and biomass 5%

Technically recoverable dry gas resources Howard Gruenspecht, LDC Forum September 11, U.S. dry gas resources trillion cubic feet *Alaska resource estimates prior to AEO2009 reflect resources from the North Slope that were not included in previously published documentation. Source: EIA, Annual Energy Outlook 2012

Domestic natural gas production grows faster than consumption U.S. dry gas trillion cubic feet per year Source: EIA, Annual Energy Outlook 2012 ProjectionsHistory 2010 Consumption Domestic supply Net imports 11 Howard Gruenspecht, LDC Forum September 11, 2012

,460 Global spot natural gas and crude oil prices vary widely Source: EIA based on Bloomberg as of 6/25/2012 Global spot natural gas and crude oil prices U.S. dollars per million British thermal unit 12 Howard Gruenspecht, LDC Forum September 11, 2012

2% Shale gas offsets declines in other U.S. natural gas production sources U.S. dry gas production trillion cubic feet per year Source: EIA, Annual Energy Outlook 2012 Non-associated offshore ProjectionsHistory Associated with oil Coalbed methane Non-associated onshore Shale gas % 6% 9% 7% 21% 23% 9% 6% 49% Alaska 1% Tight gas 26% 22% 13 Howard Gruenspecht, LDC Forum September 11, 2012

Electric power and industrial use drives much of the future domestic natural gas demand growth in the Reference case U.S. dry gas consumption trillion cubic feet per year *Includes combined heat-and-power and lease and plant fuel. **Includes pipeline fuel. Source: EIA, Annual Energy Outlook 2012 ProjectionsHistory Industrial* Electric power Commercial Residential Transportation** 34% 17% 14% 32% 3% 31% 21% 13% 33% 3% 14 Howard Gruenspecht, LDC Forum September 11, 2012

U.S. production of shale gas in four cases, dry natural gas production trillion cubic feet Source: EIA, Annual Energy Outlook 2012 Howard Gruenspecht, LDC Forum September 11, 2012 High EUR Reference Low EUR High TRR 2010 HistoryProjections Technically Recoverable Resource (TRR) Estimated Ultimate Recovery (EUR)

16 lower-48 average natural gas wellhead price 2010 dollars per thousand cubic feet Source: EIA, Annual Energy Outlook 2012 Natural gas price projections vary based on resource base assumptions Low EUR Reference High EUR Projections History 2010 High TRR Howard Gruenspecht, LDC Forum September 11, 2012

Operating costs: existing plants with and without a value on carbon The “crossover point” for least-cost dispatch of coal and natural gas capacity depends on both fuel prices and the carbon value. At lower natural gas prices, the “crossover” occurs at a lower carbon value. Environmental operating costs and retrofit costs for pollution controls at existing coal-fired plants can “raise the bar” for their continued operation. –For retrofit decisions, the unit’s perceived “useful life,” which plays a critical role, can be affected by views regarding future climate policies Coal at $3 Natural Gas CC at $7 Natural Gas CC at $3 Natural Gas CC at $ dollars per megawatthour Fuel Cost for Existing Coal and Combined Cycle Natural Gas Units with a Value Placed on Carbon Dioxide Emissions Coal at $2 17 Howard Gruenspecht, LDC Forum September 11, 2012

While electricity consumption grows by 21% over the projection, the annual rate of growth slows percent growth (3-year rolling average) Projections History Period Annual Growth 1950s s s s s Structural Change in Economy - Higher prices - Standards - Improved efficiency 2010 Source: EIA, Annual Energy Outlook Howard Gruenspecht, LDC Forum September 11, 2012

18% 15% Electricity mix gradually shifts to lower-carbon options, led by growth in renewables and natural gas electricity net generation trillion kilowatthours per year Source: EIA, Annual Energy Outlook % 20% 45% 10% 1% 38% 28% 1% Nuclear Oil and other liquids Natural gas Coal Renewables 19 Howard Gruenspecht, LDC Forum September 11, 2012

The ratio of oil to natural gas prices remains high through 2035 in EIA’s AEO2012 Reference case projection ratio of oil price to natural gas price Source: EIA, Annual Energy Outlook 2012 HistoryProjections2010 Oil and natural gas prices 2010 dollars per million Btu HistoryProjections Howard Gruenspecht, LDC Forum September 11, 2012

For more information Howard Gruenspecht August 28, U.S. Energy Information Administration home page | Today In Energy | Short-Term Energy Outlook | Annual Energy Outlook | Monthly Energy Review | EIA Information Center Our average response time is within three business days. (202) hour automated information line about EIA and frequently asked questions.

Howard Gruenspecht August 28, 2012 U.S. Energy Breakdown by Fuel and Sector 22 Source: EIA Annual Energy Review 2010

Underground sources of natural gas Source: modified from U.S. Geological Survey Fact Sheet U.S. Geological Survey Fact Sheet Howard Gruenspecht Washington, DC - May 16, 2011

Working Underground Natural Gas Storage Capacity Additions, Billion cubic feet Source: U.S. Energy Information Administration Peak Underground Working Natural Gas Storage Capacity Report 24 Howard Gruenspecht, LDC Forum September 11, 2012