Plugging In To Natural GasPlugging In To Natural GasPortland, Oregon ‐ January 25

1914 Willamette Falls Dr., #255West Linn, OR 97068

(503) 344 6637(503) 344-6637www.nwga.org

NWGA Members:NWGA Members:Avista Corporation

Cascade Natural Gas Co.

F ti BC EFortisBC Energy

Intermountain Gas Co.

NW Natural

Puget Sound Energy

El Paso Ruby Pipeline

Spectra Energy Transmission

TransCanada GTN System

Williams NW Pipeline

Shale Gas: What Is It?

New Application of Existing Drilling TechsH i t l Di ti l D illi    H d li F t iHorizontal Directional Drilling + Hydraulic Fracturing Horizontal Drilling:

First in 1929; really took off in 90s  Average well site just 30% of  First in 1929; really took off in 90s. Average well site just 30% of the size of its 70s counterpart.

Accesses 60 times more subsurface areaF   ll   i   t     t  l   f   Fewer wells recovering greater reserves create less surface disturbance and generate less waste. 

Hydraulic fracturing: More than 60 years old. More than 1,000,000 wells safely fracked.

Conventional vs Horizontal DrillingConventional vs. Horizontal Drilling

Traditional Wells

Horizontal Drilling

Smaller footprint, greater access

Traditional Wells Horizontal Drilling

I ith H d li F t iIssues with Hydraulic FracturingDrinking WaterDrinking Water

Key is effectively sealing (casing) the well bore(casing) the well bore

Well construction subject to state/local oversightto state/local oversight

Reputation is only as good as the weakest player…as the weakest player…

Issues with Hydraulic FracturingIssues with Hydraulic Fracturing

W  UWater Use

P d d W

Issues with Hydraulic Fracturing

Produced Water Handled differently at different shale plays; even at different wells within a play. Recycling (e.g. Talisman):  In Marcellus, about 80% comes back as produced water; in BC  it’s only 20%  back as produced water; in BC, it s only 20%. 

When no longer useable: water is treated and disposed of

Disposal:Disposal:

Reinjection (regulated under the federal SDWA)

Surface impoundments (regulated by state statutes)

Treatment and disposal (regulated by the federal CWA)

Proven US Natural Gas Reserves (source: US EIA)300

250

300

200

Tcf

100

150

50

01995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

US Natural Gas Production ForecastUS Natural Gas Production Forecast30

(source: EIA AEO 2012)

25

15

20

Tcf

ProjectionsProjections

10

15Tc

5

0

US Sh l G P d tiUS Shale Gas Production (source: Navigant Consulting)18

14

16

10

12

eet p

er day

6

8

illion Cub

ic Fe

4

6B

0

2

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011est

Productivity Dramatically Improved1st Quarter 20071st Quarter 2008

80 930

Productivity Dramatically Improved Southwest EnergyFayetteville Shale

+341%

3rd Quarter 2010 80,930y

142%

Source: Southwestern Energy Financials

2,4394,503

+114%+142%

+8%33

+83%

1,0062,1042011

-45%$2.8

$2.6

+8%

18

33

18,36011

Time To Drill Wells Per Yr Average 30 Day Ave. Init Prod Drill & (Days) Per Rig Lateral Length

(Feet)Prod Rate

(Mcf/d)Additions

Per Rig Per Yr(Mcf/d)

CompleteCosts ($MM)

Price EffectPrice Effect$14

(Source: EIA Monthly NatGas Report; EIA Short Term Energy Outlook; NYMEX)

$11

$12

$13

U

$

$8

$9

$10

illion BTU

$4

$5

$6

$7

US$ per M

i

EIA Gas Forecast (01/10/12 STEO)

Henry Hub Spot Price

$1

$2

$3

$4U

NYMEX Gas (01/23/12)

Henry Hub Spot: $2.25 on 01/23/12

$0

Jan‐20

08

Apr‐200

8

Jul‐20

08

Oct‐200

8

Jan‐20

09

Apr‐200

9

Jul‐20

09

Oct‐200

9

Jan‐20

10

Apr‐2010

Jul‐20

10

Oct‐2010

Jan‐20

11

Apr‐2011

Jul‐20

11

Oct‐2011

Jan‐20

12

Apr‐2012

Jul‐20

12

Oct‐2012

Jan‐20

13

Apr‐2013

Jul‐20

13

Oct‐2013

Jan‐20

14

Apr‐2014

Jul‐20

14

Oct‐2014

Jan‐20

15

Apr‐2015

Jul‐20

15

Oct‐2015

Recent Gas Demand

1,000

PNW Gas Deliveries (source: US EIA, StatCan)Residential Commercial Industrial Generation Power Consumption

800

900

500

600

700

Dth

300

400

500

Mill

ion

D

100

200

01996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Base Case Forecast Growth: 0 9% per yearBase Case Forecast Growth: 0.9% per year

280

300

240

260

200

220

on D

th

160

180

200

Mill

io

120

140

160

Industrial Residential Generation Commercial Hi Gen

100

120

2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Demand CompositionDemand Composition1996 2020-21

Power3%

1996 2020-21

Res26%

Ind51%

Comm20%

AWild Card: GenerationA Wild Card: Generation

Northwest Power Conservation Council 6th Power Plan

M k & P li D i G i B ildMarket & Policy Drives Generation BuildsPacific Northwest Generating  Additions & Retirements (Capability)

1000

1200

1400

ity (M

Wa)

Pacific Northwest Generating  Additions & Retirements (Capability)

Wind

Solar

600

800

Cap

abili

Petroleum

Natural gas

Hydro

0

200

400

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Geothermal

Coal

Biomass

‐2002003 2004 2005 2006 2007 2008 2009 2010 2011 2012

NorthwestPower andConservation

Council

NorthwestPower andConservation

Council

October, 2011

Phasing out existing ResourcesPhasing out existing Resources

Phasing in new variable resourcesPhasing in new variable resources

2009 Energy By Source009 e gy y Sou ce

18,000

2009 Capability 2009 Actual

14,000

16,000

88%

10,000

12,000

MWa

6,000

8,000

74%

0

2,000

4,000 42%

72% 79%0

Hydro Coal Nat Gas Nuke Wind

October, 2011Northwest

Power andConservation

Council

NorthwestPower andConservation

Council

Peak Capacity I‐5 Corridorp yI-5 Total Firm Peak Day Supply/Demand Balance

Low Base High Pipeline Underground Storage Peak LNG

5

6

4

h/da

y

2

3

Mill

ion

Dth

1

02011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21

Year (Nov-Oct)

Capacity ProjectsPipelines• Southern Crossing Expansion

Kitimat LNG

• Southern Crossing Expansion• Palomar• Sunstone• Blue Bridge (reconfigured)Blue Bridge (reconfigured)• Ruby• Pacific Connector• Pacific Trail• Oregon LNGLNG Terminals

Kitimat LNG (export) Oregon LNG Bradwood Landing LNG

Bradwood LandingOregon LNGJordan Cove LNG

Storage FacilitiesJordan Cove LNG

24

Storage FacilitiesMistJackson Prairie

1914 Willamette Falls Dr., #255West Linn, OR 97068

(503) 344 6637(503) 344-6637www.nwga.org

NWGA Members:NWGA Members:Avista Corporation

Cascade Natural Gas Co.

F ti BC EFortisBC Energy

Intermountain Gas Co.

NW Natural

Puget Sound Energy

El Paso Ruby Pipeline

Spectra Energy Transmission

TransCanada GTN System

Williams NW Pipeline