1. LNG Advocacy Update “You have every right to protect yourself from LNG cartel prices” March 11, 2014 Paul N. Cicio 1

2. Low cost natural gas has given us this once in a lifetime opportunity to rejuvenate the manufacturing sector – will we squander it? Yes. Not because we cannot win, but because of company inaction. 2

3. The Threat  Short-term (pre-2020) – domestic prices will be influenced by LNG exports.  Long-term – domestic prices will rise to international cartel levels (Australia).  If you do not act to protect yourself, significant and permanent economic damage may be incurred.  It is an important competitiveness issue! 3

4. DOE There is no sign that DOE will stop approving LNG export applications unless political pressure is applied. DOE says they will approval an export facility every 60 days. 4

5. LNG & Pipeline Exports  Six approved by DOE for shipments to non-free trade countries – Demand of 8.7 bcf/d or +12.4%;  30 others pending – Potential demand of 14.1 Tcf/year, + 54% (DOE).  Pipeline exports to Mexico and Canada to increase by 37% to 6 bcf/d by 2020 (EIA). 5

6. Net U.S. Natural Gas Demand to Increase by 20.9% 6 Source: EIA

7. U.S. natural gas imports and exports trillion cubic feet per year Alaska LNG exports Pipeline exports to Mexico Pipeline exports to Canada Lower 48 states LNG exports Pipeline imports from Canada LNG imports Source: EIA, Annual Energy Outlook 2014 Early Release Adam Sieminski, December 16, 2013 7 -15 -10 -5 0 5 10 15 20 25 billion cubic feet per day 5.4 tcf of exports (14.8 bcf/day) 2.0 tcf of imports (5.4 bcf/day) U.S. Natural Gas Gross Exports Exceed 5 Tcf in 2025 ProjectionsHistory 2012 2025

8. Ukraine Crisis  Speaker of the House John Boehner – Urges DOE to approve all applications.  Chairman Upton – Same. Potential legislative action. (Probably Rep. Gardner legislation.) 8

9. LNG Export Legislation  Rep Cory Gardner (R-CO): Strikes free trade agreement with WTO. Approves all pending applications.  Senator Udall (D-CO): Essentially same as above.  Senator Markey (D-MA): Strengthens public interest determination and provides extensive list, EITE; applies to all foreign governments (regardless of FTA or NFTA). 9

10. IECA LNG Export Position  Not against exports – however, DOE must comply with the law. Complete a public interest determination (PID) for each export application to NFTA countries. Use up-to-date market info.  The PID is the law, yet DOE is not complying.  DOE to take time-out, complete new impact study.  DOE to complete rulemaking.  Condition export applications with consumer protections. 10

11. Industrial Companies Remain Reluctant to Engage! Reasons:  Viewed as a “free-trade” issue and companies do not want to be tagged as being against free trade.  Maybe some companies believe there is so much supply that they need not worry.  Short-term low prices drive companies into complacency?  Other? 11

12. The LNG Export Issue is About Two Things 1.Failure of the DOE to comply, or remotely take serious its statutory obligation under the Natural Gas Act to protect the public interest. 2.Not a “free-trade” issue, it is a “fair trade” issue. 12

13. Not a Free Trade Issue  LNG OPEC induced cartel prices – is not a market! It’s a cartel. It is not free trade.  Natural gas producers plan to use LNG exports as a means to raise domestic prices to international levels. (Using a cartel price to achieve success.) Can you do that in your market?  This is not about how “companies” are using their hard fought competitive advantage to win. These are “countries” that are “controlling” the market price. 13

14. Points to Consider Why should manufacturers pay higher natural gas, feedstock and electricity prices because of a “cartel-induced” pricing structure? This is about as anti-free trade as you can get. Question: Do you have competitors that are countries that control supply to keep your prices up? 14

15. - Not a Free Trade Issue - The Industrial Products Markets are Completely Different  International buyers of LNG are countries (not companies) and their agents are price insensitive and will be able to buy the natural gas away from price sensitive EITE industries.  Domestic consumers competing with governments for natural gas is not fair trade!  Domestic supply and demand of natural gas should determine our prices, not an international cartel. 15

16. - Not a Free Trade Issue - The Industrial Products Markets are Completely Different  Domestic natural gas production is “hugely influenced by regulation.” i.e. IDCs, access to federal lands, regulation of hydraulic fracturing, ability to get drilling permits on private or public lands, etc.  Your supply of widgets is not dictated by state and federal government.  Domestic consumption of natural gas is greatly influenced by regulation. i.e. EPA Mercury MACT, Industrial Boiler MACT, GHG regulation.  Consumption of your products are not determined or dictated by regulation. 16

17. Oil and Gas Industry Actions  Using their political and spending power to influence public and Congressional opinion to stack the deck against domestic consumers while industrials are not defending themselves.  National TV ad campaign to convince policy makers there is a 100-year supply.  Advocacy in every beltway paper, magazine, website.  Funding a LNG export coalition. 17

18. Oil and Gas Industry Actions  They tell Congress not to worry – not all LNG export terminals will be built.  “Of the 19.21 bcf/d of LNG export facilities that have been proposed, 14 bcf/d of projects are financed!” (+27% in demand)  Positioned their people as key Congressional staffers in positions of influence.  They intervene in export cases against consumers. 18

19. Oil and Gas Industry Actions  Funded MIT (Moniz and Melanie Kinderdine) to do studies on how much shale natural gas there is. $$  Moniz: Post Obama era?  EIA Administrator, Adam Sieminski – EIA assumes the natural gas industry can turn a profit at producing gas at $4.00. 19

20. IECA Advocacy  Encourage Democrats to sign onto a letter with other Senators, or, an individual letter, or at minimum, call the Secretary to raise concerns. The letter:  Expresses concern that six have already been approved (a 12.4% +) and could impact prices.  Ask DOE to take a “time-out.”  Ask DOE to complete new study on potential U.S. impacts.  It is prudent to condition approval with consumer protections. 20

21. Senate Offices Visited  Gillibrand (D-NY)  Durbin (D-IL)  Menedez (D-NJ)  Levin (D-MI)  Stabenow (D-MI)  Donnelly (D-IN)  Markey (D-MA)  Franken (D-MN)  Klobuchar (D-MN)  Blunt (R-MO)  Alexander (R-TN)  Baldwin (D-W)  Harkin (D-IA)  McCaskill (D-MO)  Murray (D-WA)  Reid (D-NV)  Blumenthal (D-CT)  Murphy (D-CT) 21

22. Senate Offices Visited  Scott (R-SC)  Kaine (D-VA)  Warner (D-VA)  Merkley (OR)  Wyden (OR)  Cardin (D-MD)  Reed (D-RI)  Whitehouse (D-RI)  King (I-ME)  Sanders (I-VT)  Hirono (D-HI)  Coons (D-DE)  Brown (D-OH)  Manchin (D-WV)  Portman (R-OH)  Begich (D-AK)  Landrieu (D-LA)  Murkowski (R-AK)  Collins (R-ME) 22

23. Response  Concerned. Would like to help.  Will consider signing onto letter to DOE if someone else champions the letter.  Propane shortage got their attention.  Wants Senate Energy and Natural Resources Committee to lead on it. 23

24. Senate Energy and Resources Committee Democrats  Landrieu, LA  Wyden, OR  Cantwell, WA  Stabenow, MI  Franken, MN  Schatz HI  Baldwin, WS  Johnson, SD  Sanders, VT  Udall, CO  Manchin, WV  Heinrich, NM Republicans  Murkowski, AK  Barrasso, WY  Lee, UT  Flake, AZ  Alexander, TN  Hoeven, ND  Risch, ID  Heller, NV  Scott, SC  Portman, OH 24 *supports our position

25. Recommend Actions  April 2014 fly-in directed toward:  Senate Democrats  The White House  Studies and legal work funded by IECA companies and foundations to build our case. 25

26. 26 Paul Cicio Industrial Energy Consumers of America 202-223-1661 pcicio@ieca-us.org

27. -100 Year Supply- Natural Gas Resources are More Uncertain Than Believed 27

28. “Technically recoverable” does not mean that it is “economically” recoverable. 28

29. Important Caveats  Only the U.S. Geological Service (USGS) projections are “third-party” peer- reviewed.  There is no standard methodology for measuring reserves.  These points have raised concerns that reserve estimates are overly optimistic. 29

30. USGS Summary of Total Mean Undiscovered Technically Recoverable Resources – Tcf 30 Source: USGS August 2012: - Total Mean Undiscovered Gas Resources

31. Potential Gas Committee Assessment 2013 (“technically recoverable”) Tcf Probable (existing fields)708.5 Possible (“new fields”)952.3 Speculative (“frontier fields”)558.7 TOTAL2,225.6 Alaska-193.8 Available to Lower 482,031.8 31 Key Point: 74% of potential supply in lower 48 is from “uncertain” resource estimates. Source: Potential Gas Committee

32. Potential Gas Committee (Undiscovered Technically Recoverable Resources – Tcf) 32 Source: Potential Gas Committee, 2013