1. Natural Gas For Industrial Users in 2004 “The Tipping Point?” Alexander E. Strawn, Jr. Chairman Process Gas Consumers Group October 27, 2004

3. Process Gas Consumers Group Broad Cross Section of U.S Industrial Companies Using Gas in Operations Broad Cross Section of U.S Industrial Companies Using Gas in Operations Works to Promote Coordinated, Rational and Consistent Federal & State Policies Relating to Natural Gas & Its Transport Works to Promote Coordinated, Rational and Consistent Federal & State Policies Relating to Natural Gas & Its Transport

4. PGC Advocacy Natural Gas Policies That Promote: Natural Gas Policies That Promote: -Competition and free market principles -Competition and free market principles -Open Access to Pipeline Transport -Open Access to Pipeline Transport -Equitable Responsible / Regulation -Equitable Responsible / Regulation -Unbundled Rates -Unbundled Rates -Rapid Approval of Interstate Projects -Rapid Approval of Interstate Projects

5. PGC Focus Issues: F.E.R.C. / Regulatory Interchangeability / Gas Quality Interchangeability / Gas Quality Surcharge Evaluation / Intervention Surcharge Evaluation / Intervention Pipeline Rate Case Activity Pipeline Rate Case Activity Shipper Creditworthiness Shipper Creditworthiness Access To Gas Supply Access To Gas Supply

6. Where are Industrials today? Prices at record levels--yet again Prices at record levels--yet again Industrial Demand seems to be returning…but slowly Industrial Demand seems to be returning…but slowly No real substitutes for natural gas No real substitutes for natural gas Global demand ruling the markets Global demand ruling the markets Gas infrastructure needs are critical Gas infrastructure needs are critical Weather effects are highly influential Weather effects are highly influential

7. Industrial Reaction To Gas Price Spiral New Project / Expansion Delays New Project / Expansion Delays Energy Substitution Energy Substitution Hedging Strategies Hedging Strategies Energy Conservation / Efficiency Energy Conservation / Efficiency Renewable Energy Options Renewable Energy Options Unconventional Sourcing Unconventional Sourcing Offshore Production Options Offshore Production Options Price Increases Price Increases

8. Fuel Substitution Capability Public information presents optimistic view on fuel switching capability Public information presents optimistic view on fuel switching capability Fuel switching inhibited by local siting restrictions and State/Federal air standards, multiple examples cited by range of industries Fuel switching inhibited by local siting restrictions and State/Federal air standards, multiple examples cited by range of industries 26%* 5-10% 1995Today Natural Gas and Oil-Based Industrial Consumption *EIA/Dept. of Commerce MECS Survey

9. Natural Gas Future: Over the Edge or Near The Horizon? Oil Tankers Booked To Capacity Oil Tankers Booked To Capacity East China Sea Gas Field Dispute East China Sea Gas Field Dispute Seasoned Coal Workers Retiring Seasoned Coal Workers Retiring Demand For LNG Spot Cargo Demand For LNG Spot Cargo Asian Energy Demand Asian Energy Demand Quebec City- LNG Safety Concerns Quebec City- LNG Safety Concerns

10. The “New Rules” of the Gas Market $7.00 / MMBTU is a great price!!!! (?) $7.00 / MMBTU is a great price!!!! (?) LNG is no longer marginal supply LNG is no longer marginal supply Full storage is a given….who cares? Full storage is a given….who cares? China is now on the table!!! China is now on the table!!! Global Warming is NOT a Strategy!!!! Global Warming is NOT a Strategy!!!!

11. Direction For Success Increase The Total Supply of Gas !!!!!! Increase The Total Supply of Gas !!!!!! Advocacy For LNG Expansion Advocacy For LNG Expansion Responsible Access To New Areas Responsible Access To New Areas Conservation of Existing Resources Conservation of Existing Resources Alternative Energy Development Alternative Energy Development Pipeline Infrastructure Focus Pipeline Infrastructure Focus