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2. 2 U.S. Natural Gas Demand in Increasing North American Gas Supplies are Dwindling and Becoming More Expensive Options Have Problems –Coal and Nuclear –LNG Imports Domestic Gas in Alaska Must Get to the U.S. Market

3. 3 Anchorage North Slope Valdez WCSB MonchyEmerson Dawn Hub Huntingdon New York Boston Kingsgate Empress Chicago Hub Waha Hub Midcontinent Hub Henry Hub AECO Hub 35 TCF – Proven Reserves 200+ TCF – Undiscovered Technically Recoverable Resource 1000s TCF – Resources

4. 4 Anchorage North Slope Valdez WCSB MonchyEmerson Dawn Hub Huntingdon New York Boston Kingsgate Empress Chicago Hub Waha Hub Midcontinent Hub Henry Hub AECO Hub

5. 5 Anchorage North Slope Valdez WCSB MonchyEmerson Dawn Hub Huntingdon New York Boston Kingsgate Empress Chicago Hub Waha Hub Midcontinent Hub Henry Hub AECO Hub Current Producing Area Prudhoe Bay Kuparuk River Alpine 8 BCF Cycled Every Day

6. 6 Anchorage North Slope Valdez WCSB MonchyEmerson Dawn Hub Huntingdon New York Boston Kingsgate Empress Chicago Hub Waha Hub Midcontinent Hub Henry Hub AECO Hub ANWR

7. 7 Anchorage North Slope Valdez WCSB MonchyEmerson Dawn Hub Huntingdon New York Boston Kingsgate Empress Chicago Hub Waha Hub Midcontinent Hub Henry Hub AECO Hub NPR-A

8. 8 Anchorage North Slope Valdez WCSB 1 MonchyEmerson Dawn Hub Huntingdon New York Boston Kingsgate Empress Chicago Hub Waha Hub Midcontinent Hub Henry Hub AECO Hub 2 PIPELINE OPTIONS LEGEND Alaskan Hwy Route TransAlaska (LNG) 1 2 3 3 W. Canada to Chicago

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10. 10 Efforts in the 70’s and 80’s fizzled due to natural gas price collapses Renewed efforts began in 2001 with negotiations between the State and project proponents over state fiscal terms

11. 11 2003-2004: Federal Actions Alaska Gas Pipeline Enabling legislation –Federal Loan Guarantees –Accelerated Depreciation –Federal Coordinator Position –Study of Federal Sponsorship FERC Open Season Rules –Presumption of “Rolled-in” rates

12. 12 2006 - Negotiations resulted in a proposed fiscal contract with Producers (BP, CP, XOM) –Fiscal certainty for 35 – 45 years Gas production taxes Oil production taxes Income, Property, and other taxes State Royalty rights Judicial system replaced by arbitration –Commitment to pursue project with “diligence”

13. 13 2006 - Proposed fiscal contract rejected by State Legislature and Voters Sarah Palin elected Governor on promise to provide a competitive and transparent process for the Alaska Gasline Project

14. 14 Producers (BP, CP, Exxon) would only consider a pipeline they controlled, and would only discuss proposed fiscal contract and 35 years of “complete” fiscal certainty 3 rd Party Pipelines reluctant to make investment to reach open season due to risk of Producer refusal to participate

15. 15 Competitive Process For State Inducements to Build Pipeline – AGIA License –$500M in State matching grant to Licensee –“Exclusive” relationship with State –Requires Timelines –Open Season within 3 years Low Tariff “Open access” pipeline –Expansion Terms –Rolled in Tariffs Upstream Inducements tied to Gas Committed at initial open season –Royalty Valuation, Royalty-In-Kind switching –Tax Rate Stability for first 10 Years of Gas Flow

16. 16 July 2, 2007: Request for Applications (RFA) October 1, 2007: Proposal Due October – December: Public Comments January 2008: Administration selects licensee March 2008: Legislature approves selection Summer 2008: Field season

17. 17 We must have a successful Open Season to get transportation commitments –Producers –Explorers –Demand “Pull” Utilities need to have the regulatory flexibility to consider long-term supply contracts –Individually –Jointly

18. 18 Alaska Gasline Project can address North American gas supply challenges –100s of TCF to get to Market The project is advancing, but may need help The State of Alaska is aggressively taking action to move the project forward Stay tuned…

19. 19 www.gov.state.ak.us/agia