Regulation and Investment in the U S GIE

Regulation and Investment in the U. S. GIE Annual Conference Bratislava, Slovakia September 28, 2006 Robert J. Cupina, Deputy Director Office of Energy Projects Federal Energy Regulatory Commission

FERC Basis of U. S. Regulation: Natural Gas Act NATURAL GAS ACT Section 7(c) Interstate • Pipelines • Storage 2 Section 3 Import/Export • LNG Terminals Office of Energy Projects

FERC Pipeline Regulation • Construction and Operation • Tariffs • Rate Schedules • Terms and Conditions of Service Source: Based on Platts Power. Map 3 Office of Energy Projects

FERC Storage Regulation • Construction and Operation • Tariffs • Rate Schedules • Terms and Conditions of Service Source: Based on Platts Power. Map. 4 Office of Energy Projects

FERC LNG Regulation • Construction and Operation • Ongoing Safety • No Tariff • Any Business Model Acceptable EVERETT COVE POINT ELBA ISLAND LAKE CHARLES ENERGY BRIDGE (Coast Guard Jurisdiction) 5 Office of Energy Projects

FERC Evaluation of Pipeline Proposals • Certificate Policy Statement – Existing Shippers Do Not Subsidize New Facilities – Develop Record on Impacts (positive and negative) and Allow Commission to Make Decision • Environmental/Engineering Review 6 Office of Energy Projects

FERC Evaluation of Storage Proposals • Storage Policy for Market-based Rates – Relevant product market for market power analysis includes many substitutes, or – MBRs allowed even if lack of market power has not been demonstrated in situations to encourage infrastructure • Environmental/Engineering Review 7 Office of Energy Projects

FERC Evaluation of LNG Terminals • Environmental/Engineering Review • Safety Review • No Tariff – Hackberry Decision (December 2002) no need for tariffs or third party access. Treats re-gas as production. 8 Office of Energy Projects

FERC Hackberry Decision Liquid to Vapor Flow B LNG Buyers B Open Access At Delivery of Vapor into Interstate Pipeline System 9 A LNG Suppliers A Open Access At Delivery of Liquid to Terminal Office of Energy Projects

FERC Major Pipeline Projects Certificated (MMcf/d) January 2005 to September 2006 1. Trans. Colorado (300) 2. Rendezvous (300) 3. WIC (350) 4. Entrega (En. Cana) (1, 500) 5. Questar (102) 6. Northwest (450) 7. Questar Overthrust (550) 7 5 2 4 3 1 Midwestern (120) CIG (105) 10 ANR (168) NE Conne. Xion (Tennessee) Transcontinental (136) Mill River (105) (800) Dominion (700) Northern Border (Chicago III) Columbia (172) (130) 6 El Paso (502) Essex-Middlesex (Tennessee) (82) Jewell Ridge Pipeline (East Tennessee) (235) Center. Point(113) Port Arthur (3, 000) Golden Pass (2, 500) Dominion South (200) San Patricio (1, 000) 12. 6 BCF/D Total 26. 88 BCF/D Total 903 Miles 1, 511 Miles Florida Gas Petal (600) (160) Transcontinental (100) Logan Lateral (Texas Eastern) (900) Cove Point Pipeline (800) Cypress Pipeline (Southern Natural) (500) Mc. Mo. Ran (1, 500) Triple-T Extension (Tennessee) (200) Cheniere Creole Trail (3, 300) Cameron (1, 500) Vista Del Sol Cheniere Corpus Christi (1, 100) (2, 600) Office of Energy Projects

FERC Major Pipeline Projects Pending (MMcf/d) September 2006 Bradwood Landing (Northern. Star) (1, 300) Millennium (525) Wamsutter Expansion (Questar Overthrust) (750) Northern Lights (Northern Natural) Empire Connector (374) (Empire Pipeline) (250) 2007 Expansion (Vector Pipeline) (245) Rockies Express REX West (Rockies Express Pipeline) (1, 800) Blanco to Meeker (Trans. Colorado) (250) North Baja Expansion (North Baja Pipeline) (2, 700) 18. 72 BCF/D Total 1, 976 Miles 11 TIME II (Texas Eastern) (150) Big Sandy Pipeline (Equitrans) (130) Maritimes Phase IV (Maritimes) Market Access (418) (Iroquois) (100) Algonquin (325) Algonquin (800) Broadwater Pipeline (Broadwater) (1, 000) Potomac Expansion (Transcontinental) (167) Gulf LNG Pipeline (1, 500) Carthage to Perryville (Center. Point) (1, 237) Compass Pass (1, 000) Point Comfort (1, 000) East TX Mississippi Expansion (Gulf South) Phase III Project (1, 700) (Gulfstream) (200) Seafarer Pipeline (El Paso) (800) Office of Energy Projects

FERC Major Pipeline Projects Pre-Filing (MMcf/d) September 2006 Pacific Connector (Williams Pacific) (1, 000) GII Project (Guardian Pipeline) (537) Brookhaven Lateral (Iroquois) (80) Kanda & Mainline (WIC) (225) Southern Expansion (Questar Pipeline) (170) Phoenix Lateral (Transwestern) (500) 11. 71 BCF/D Total 2, 386 Miles 12 Rockies Express REX East (Rockies Express Pipeline) (1, 800) Sentinel Expansion (Transcontinental) (151) Continental Connector Southeast Expansion (El Paso) (Gulf South) (1, 000) (700) Southeast Supply Header Louisiana Pipeline (Center. Point) (Kinder Morgan) (1, 000) (3, 395) Phase IV Project (Gulfstream) Sonora Pipeline (155) (1, 000) Office of Energy Projects

FERC Major Pipeline Projects On The Horizon (MMcf/d) August 2006 Alaska (4, 000) Coronado (500) Painter Lateral (Overthrust) (200) En. Cana Extension (Entrega) (1, 000) Questar Expansion (160) Uinta Basin (WIC) (300) Greasewood Lateral (Northwest) (200) 15. 22 BCF/D Total 6, 976 Miles 13 Panhandle Eastern (750) KM Illinois Pipeline (Kinder Morgan) (360) Kinder Morgan (170) Northwinds Pipeline (NFG) (500) Dracut Interconnect (Tennessee) (250) Natural (232) Henry Hub Expansion (Natural) (200) North Texas Expansion (Trunkline) (510) Carthage Pipeline(KM Interstate)(700) A/G Line Expansion (Natural)(139) Mid-Continent Express (Kinder Morgan) (1, 500) Mid-Continent Crossing (Center. Point) (1, 750) Transcontinental (Mobile Bay) (700) Boardwalk PL (1, 000) Shenzi Lateral (Enbridge) (100) Office of Energy Projects

FERC Pipeline Infrastructure • Least speculative gas infrastructure project – If approved, usually gets built – Cost-based rates required as an option, but usually rates are negotiated • Contracts or binding precedent agreements with shippers usually required by sponsor, not the Commission, prior to filing application. • Since 2000, the Commission has approved 57. 1 Bcf per day of capacity; over 9, 000 miles of pipeline; and 2. 2 million horsepower of compression – Estimated cost of $16. 9 billion. 14 Office of Energy Projects

FERC Pipeline Infrastructure Approvals 2000 -2006 Typical long-line and replacement pipeline projects 15 Short, high capacity pipelines to deliverregasified LNG to grid Office of Energy Projects

FERC Pipeline Infrastructure Future Additions • The INGAA Foundation estimates that between 2006 and 2020, $50. 9 billion will need to be invested in 26, 000 miles of pipelines and 5. 2 milllion HP in the U. S. and Canada – Replacement of facilities: $16. 4 billion • 9, 300 miles, 1. 2 million HP – New facilities (16, 900 miles): $34. 5 billion • 16, 900 miles, 4. 0 million HP 16 – Alaska and Mac. Kenzie Delta – Other facilities Office of Energy Projects

FERC Storage Projects (Capacity in Bcf) Sem. Gas (5. 5) Bluewater (29. 2) Dominion (9. 4) Columbia (16. 4) Unocal Windy Hill (6. 0) Arizona Natural Gas (3. 5) Texas Gas (8. 2) Texas Gas (6. 8) Natural (10. 0) Center. Point (15. 0) Bobcat (12. 0) Natural (10. 0) En. Cana (8. 0) Falcon Worsham-Steed (12. 0) Falcon Hill-Lake (10. 4) Starks (19. 2) 1/1/05 Certificated Since Currently Pending On The Horizon 17 Dominion (18. 0) Liberty (17. 6) Columbia (12. 4) County Line (6. 0) Freebird (6. 1) Caledonia (11. 7) Caledonia (1. 7) Falcon Mo. Bay (50. 0) Petal (5. 0) Office of Energy Projects

FERC Storage Infrastructure Additions • More speculative gas infrastructure project than pipelines – Not all gas users need storage service • New storage pricing policy to promote storage development • Since 2000, the Commission has approved 275 Bcf of storage capacity and daily deliverability from storage of 14. 6 Bcf. 18 Office of Energy Projects

FERC Storage Infrastructure Future Additions • The INGAA Foundation estimates that between 2006 and 2020, $5. 5 billion will need to be invested in underground storage. • The NPC estimates that between 2005 and 2025, 492 Bcf of storage capacity needs to be added in the U. S. at an estimated cost of about $4. 5 billion. 19 Office of Energy Projects

FERC Existing and Proposed North American LNG Terminals 21 20 19 34 33 42 A 43 8 29 37 27 11 36 B, 13 38 4639 25 24 23 C, 35 26 45 2 3 1, 32 5 14 D 28 15 44 4, 16 12 30 9 6 40 7 10 31 41 E 18 17 22 US Jurisdiction As of September 22, 2006 US pipeline approved; LNG terminal pending in Bahamas ** Construction suspended FERC MARAD/USCG * Office of Energy Projects 1 CONSTRUCTED A. Everett, MA : 1. 035 Bcfd (SUEZ/Tractebel - DOMAC) B. Cove Point, MD : 1. 0 Bcfd (Dominion - Cove Point LNG) C. Elba Island, GA : 1. 2 Bcfd (El Paso - Southern LNG) D. Lake Charles, LA : 2. 1 Bcfd (Southern Union - Trunkline LNG) E. Gulf of Mexico: Bcfd (Gulf Gateway Energy Bridge - Excelerate Energy) 0. 5 APPROVED BY FERC 1. Hackberry, LA : Bcfd (Cameron LNG - Sempra Energy) 1. 5 2. Bahamas : 0. 84 Bcfd (AES Ocean Express)* 3. Bahamas : 0. 83 Bcfd (Calypso Tractebel)* 4. Freeport, TX : 1. 5 Bcfd (Cheniere/Freeport LNG Dev. ) 5. Sabine, LA : 2. 6 Bcfd (Sabine Pass Cheniere LNG) 6. Corpus Christi, TX: Bcfd (Cheniere LNG) 2. 6 7. Corpus Christi, TX : 1. 1 Bcfd (Vista Del Sol - Exxon. Mobil) 8. Fall River, MA : Bcfd (Weaver's Cove Energy/Hess LNG) 0. 8 9. Sabine, TX : 2. 0 Bcfd (Golden Pass - Exxon. Mobil) 10. Corpus Christi, TX 1. 0 Bcfd (Ingleside Energy - Occidental Energy Ventures) : 11. Logan Township, NJ : Bcfd (Crown Landing LNG - BP) 1. 2 12. Port Arthur, TX: 3. 0 Bcfd (Sempra) 13. Cove Point, MD : 0. 8 Bcfd (Dominion) 14. Cameron, LA: 3. 3 Bcfd (Creole Trail LNG - Cheniere LNG) 15. Sabine, LA: 1. 4 Bcfd (Sabine Pass Cheniere LNG - Expansion) 16. Freeport, TX: 2. 5 Bcfd (Cheniere/Freeport LNG Dev. - Expansion) APPROVED BY MARAD/COAST GUARD 17. Port Pelican: Bcfd (Chevron Texaco) 1. 6 18. Louisiana Offshore : 1. 0 Bcfd (Gulf Landing - Shell) CANADIAN APPROVED TERMINALS 19. St. John, NB : 1. 0 Bcfd (Canaport - Irving Oil) 20. Point Tupper, NS 1. 0 Bcf/d (Bear Head LNG - Anadarko) 21. Kitimat BC: 0. 61 Bcfd (Galveston LNG) , MEXICAN APPROVED TERMINALS 22. Altamira Tamulipas: 0. 7 Bcfd (Shell/Total/Mitsui) , 23. Baja California, MX : Bcfd (Energy Costa Azul - Sempra) 1. 0 24. Baja California - Offshore 1. 4 Bcfd (Chevron Texaco) : PROPOSED TO FERC 25. Long Beach, CA : Bcfd, (Mitsubishi/Conoco. Phillips - Sound Energy Solutions) 0. 7 26. Bahamas : 1. 0 Bcfd, (Seafarer - El Paso/FPL ) 27. LI Sound, NY: 1. 0 Bcfd (Broadwater Energy - Trans. Canada/Shell) 28. Pascagoula, MS: 1. 5 Bcfd (Gulf LNG Energy LLC) 29. Bradwood OR: 1. 0 Bcfd (Northern Star LNG - Northern Star Natural Gas LLC ) , 30. Pascagoula, MS: 1. 3 Bcfd (Casotte Landing - Chevron. Texaco) 31. Port Lavaca, TX: 1. 0 Bcfd (Calhoun LNG - Gulf Coast LNG Partners) 32. Hackberry LA : 1. 15 Bcfd (Cameron LNG - Sempra Energy - Expansion) , 33. Pleasant Point, ME : Bcfd (Quoddy Bay, LLC) 2. 0 34. Robbinston. ME: 0. 5 Bcfd (Downeast LNG - Kestrel Energy) , 35. Elba Island, GA: 0. 9 Bcfd (El Paso - Southern LNG) 36. Baltimore, MD: 1. 5 Bcfd (AES Sparrows Point – AES Corp. ) 37. Coos Bay, OR: 1. 0 Bcfd (Jordan Cove Energy Project) PROPOSED TO MARAD/COAST GUARD 38. Offshore. California: 1. 5 Bcfd (Cabrillo Port - BHP Billiton) 39. Offshore California 0. 5 Bcfd, (Clearwater Port LLC - Northern. Star NG LLC) : 40. Offshore Louisiana : Bcfd (Main Pass Mc. Mo. Ran Exp. ) 1. 0 41. Gulf of Mexico: 1. 5 Bcfd (Beacon Port Clean Energy Terminal - Conoco. Phillips) 42. Offshore Boston: 0. 4 Bcfd (Neptune LNG - SUEZ LNG) 43. Offshore Boston: 0. 8 Bcfd (Northeast Gateway - Excelerate Energy) 44. Gulf of Mexico: 1. 4 Bcfd (Bienville Offshore Energy Terminal - TORP) 45. Offshore Florida: Bcfd (SUEZ Calypso - SUEZ LNG) ? 46. Offshore California: Bcfd (Ocean. Way - Woodside Natural Gas) 1. 2

FERC Potential North American LNG Terminals 58 60 57 56 59 52 50 48 51 4953 54 47 55 47 66 62 65 63 US Jurisdiction 64 61 As of September 22, 2006 Office of Energy Projects FERC MARAD/USCG 1 POTENTIAL U. S. SITES IDENTIFIED BY PROJECT SPONSORS 47. Offshore. California: 0. 75 Bcfd, (Chevron Texaco) 48. St. Helens, OR: 0. 7 Bcfd (Port Westward LNG LLC) 49. Philadelphia, PA: Bcfd (Freedom Energy Center - PGW) 0. 6 50. Astoria, OR: 1. 0 Bcfd (Skipanon LNG - Calpine) 51. Boston, MA: 0. 8 Bcfd (AES Battery Rock LLC - AES Corp. ) 52. Calais, ME: ? Bcfd (BP Consulting LLC) 53. Offshore New York: Bcfd (Safe Harbor Energy - ASIC, LLC) 2. 0 54. Offshore California: Bcfd (Pacific Gateway - Excelerate Energy) 0. 6 55. Offshore California: Bcfd (Esperanza Energy - Tidelands) ? POTENTIAL CANADIAN SITES IDENTIFIED BY PROJECT SPONSORS 56. Quebec City, QC : 0. 5 Bcfd (Project Rabaska - Enbridge/Gaz Met/Gaz de France) 57. Rivière-du Loup, QC: 0. 5 Bcfd (Cacouna Energy - Trans. Canada/Petro. Canada) 58. Prince Rupert, BC: 0. 30 Bcfd (West. Pac Terminals) 59. Goldboro NS 1. 0 Bcfd (Keltic Petrochemicals) , 60. Énergie. Grande- nse QC: 1. 0 Bcfd A POTENTIAL MEXICAN SITES IDENTIFIED BY PROJECT SPONSORS 61. Lázaro. Cárdenas, MX : 0. 5 Bcfd (Tractebel/Repsol) 62. Puerto. Libertad MX: 1. 3 Bcfd (Sonora Pacific LNG) , 63. Offshore Gulf, MX: 1. 0 Bcfd (Dorado - Tidelands) 64. Manzanillo. MX: 0. 5 Bcfd , 65. Topolobampo MX: 0. 5 Bcfd , 66. Baja California, MX : Bcfd (Energy Costa Azul - Sempra - Expansion) 1. 5

FERC LNG Infrastructure Additions • Most speculative gas infrastructure project – Capacity usually reserved by marketers • Hackberry Decision encourages new LNG facilities by removing some of the economic and regulatory barriers to investment. 22 Office of Energy Projects

FERC LNG Infrastructure Additions (Cont. ) • Existing Deliverability = 5. 8 Bcf per day • Since Hackberry Decision: – Approved by FERC = 25. 3 Bcf per day – Pending before FERC = 13. 6 Bcf per day • Potential Deliverability = 48. 9 Bcf per day 23 Office of Energy Projects

FERC LNG Infrastructure Future Additions • The NPC projects up to 9 new terminals and 9 expansions in North America are necessary by 2025 to provide a total of 15 Bcf per day of LNG imports. • The INGAA Foundation estimates that $9. 4 billion in investment will be needed to develop LNG terminals in the U. S. and Canada between 2006 and 2020 to support LNG imports of about 19 Bcf per day. 24 Office of Energy Projects

FERC Conclusions • Infrastructure construction necessitates firm contracts for capacity. • The Commission is a responsible and responsive regulator - to both the public and the industry-the public interest. • We approve the siting of infrastructure, but the market ultimately decides what is built. • Contact robert. cupina@ferc. gov 25 Office of Energy Projects