1. Unconventional Gas & LNG: A Regulator’s Perspective Paul Jeakins, Chief Operating Officer, BC Oil and Gas Commission B.C. Oil & Gas Conference | September 2011

2. Topics Mission Resource Overview An Evolving Resource Evolving Regulation Pieces of the LNG Puzzle Proposed LNG Projects in B.C. Moving Forward Unconventional Gas & LNG: A Regulator’s Perspective

3. MISSION We regulate oil and gas activities for the benefit of British Columbians. We achieve this by: Protecting public safety, Respecting those affected by oil and gas activities, Conserving the environment, and Supporting resource development. Through the active engagement of our stakeholders and partners, we provide fair and timely decisions within our regulatory framework. We support opportunities for employee growth, recognize individual and group contributions, demonstrate accountability at all levels, and instill pride and confidence in our organization. We serve with a passion for excellence.

4. Canada 3 rd in natural gas production worldwide (159 BCM, 5.1%) 3 rd in net export of natural gas (76 BCM) 87% of US natural gas imports in 2009 came from Canada British Columbia Expansive unconventional gas reserves 2 nd in Canada for natural gas production Reserves on the rise Pacific coast Market diversification with LNG Resource Overview

5. Horn River Basin Shale 11,900 sq km 75-170 Tcf marketable natural gas 97 Bcf cumulative production* Montney Tight gas/shale 15,281 sq km 77-176 Tcf marketable gas 577 Bcf cumulative production* Cordova Embayment Shale 2,590 sq km 30-68 Tcf marketable gas Early development Liard Basin Shale 1,150 sq km Early development Shift to unconventional gas Northeast British Columbia is home to four geographic basins which are recognized sources of shale gas. * 2010 production numbers Resource Overview

6. UNDERGROUND ABOVE GROUND Hydraulic fracturing Larger pools More predictable development Longer development timeframes Less H 2 S Opportunity to analyze surface footprint and manage surface impacts Different development of footprint Shift in resource needs – water, access An Evolving Resource

7. From One Wellpad to the Basin Level 1.2 hectares 1 million hectares Evolving Regulation

8. 8 Strategic Geographic Scale: NE BC – 10 million ha Temporal Scale: >10 years Leads: Government agencies Input: First Nations, Stakeholders, Public, Commission and Industry Feedback Products: Laws; LRMPs; specific policy guidance (i.e. boreal caribou) Direction Tactical Geographic Scale: Basin – 1 million ha Temporal Scale: 5-10 years Leads: Commission Input: Government agencies, First Nations, Stakeholders and Industry Products: Oil and gas basin analysis, footprint analysis, monitoring plan, required best practices Operational Geographic Scale: 2-600 ha Temporal Scale: 1 year + Products: Permit conditions Leads: Commission Input: Industry, First Nations and Stakeholders Feedback Products: Permit conditions Direction Using Tactical Analysis & Strategic Direction Evolving Regulation

9. Total Footprints & Identifying Trends Evolving Regulation

10. Consultation and notification by Industry Industry application to Commission Commission First Nations consultation Commission application review and assessment Industry exploration activity commences Commission compliance and inspection Application for production and production activity commences Commission enforcement Decision by Commission with terms and conditions The Project Lifecycle of Industry Applications… 2 1 345 6 7 8 9 10 Community Relations involved throughout the whole process Site reclamation and restoration Pipeline regulation from application through to reclamation/restoration. Collaborate with other agencies as needed, such as National Energy Board and Environmental Assessment Office. Evolving Regulation

11. Pipeline regulation from application through to reclamation/restoration. Collaborate with other agencies as needed, such as National Energy Board and Environmental Assessment Office. Activities

13. Project Assessment Fiscal Year to Date Activities - WELLS April 1, 2011 - September 2, 2011

14. Activities Project Assessment Fiscal Year to Date Activities - PIPELINE April 1, 2011 - September 2, 2011

15. Montney Tight gas/shale 15,281 sq km 77-176 Tcf marketable gas 577 Bcf cumulative production* Source Transport (pipes) Deep water port LNG Plant Ships Receiving LNG Plant Graphics courtesy of Douglas Channel Energy Partnership Pieces of the LNG Puzzle

16. 24 days round trip to sail from B.C. to Asia Graphics courtesy of Douglas Channel Energy Partnership Pieces of the LNG Puzzle

17. Montney Tight gas/shale 15,281 sq km 77-176 Tcf marketable gas 577 Bcf cumulative production* LNG applications will be submitted as Facility Permits, and the process will be very similar to that of a gas processing plant application in regard to timelines, submission requirements, and Commission engineering review protocols. Plans underway to prepare for new projects:  The use of experts/consultants that specialize in the area of LNG.  First Nations participation.  A continued effort to improve efficiencies in application review procedures and increase technical capacity to manage new and complex applications.  As new regions and projects are identified for oil and gas activity, the Commission will continue to build internal capacity for First Nations consultation, landowner support and increasing public awareness of oil and gas regulations. … Being Ready for LNG Applications Pieces of the LNG Puzzle

18. Montney Tight gas/shale 15,281 sq km 77-176 Tcf marketable gas 577 Bcf cumulative production* Graphics courtesy of Pacific Trail Pipelines Website Quick Facts Estimated cost of project: Approximately $1 billion Pipeline location: Summit Lake to Kitimat, British Columbia Pipeline Length: Approximately 463 km Pipeline Capacity: Approximately 1,000 mmcf/d Compressor stations: One Date of Operation: 2015 Pieces of the LNG Puzzle

19. Project Interest in LNG  Kitimat LNG  Douglas Channel Energy Partnership (DCEP) Future plans to construct and operate a small-scale natural gas liquefaction facility on the west bank of the Douglas Channel, within the district of Kitimat.  BC LNG Export Co-operative LLC. Application to build a 125-million cubic feet per day terminal. Proposed LNG Projects in B.C.

20. Montney Tight gas/shale 15,281 sq km 77-176 Tcf marketable gas 577 Bcf cumulative production* Kitimat LNG Partnership between Apache Canada Ltd., Encana Corp. and EOG Resources Canada Inc. Potential of a $4.7-billion export terminal capable of processing 700 million cubic feet of gas/day. Target for the first shipment is 2015. Kitimat LNG Regulation Commission asked to be regulator. Federal government, Haisla, Industry, other government agencies. Federal regulations. The Kitimat-Summit Lake Natural Gas Pipeline Looping (KSL) Project Purpose will be a 460 km natural gas transmission pipeline system to deliver natural gas from the Spectra Energy Transmission (SET) pipeline system at Summit Lake, B.C. to the Kitimat LNG export terminal near Kitimat, B.C. Proposed LNG Projects in B.C.

21. Moving Forward  First year of the Oil and Gas Activities Act o Opportunities o Flexibility  Regulatory oversight  Commitment to transparency  Emphasis on environmental values

22. More information: www.bcogc.ca Paul Jeakins BC Oil and Gas Commission Chief Operating Officer Paul.Jeakins@bcogc.ca 250-419-4411 Unconventional Gas & LNG: A Regulator’s Perspective