Natural Gas Supply Association

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Natural Gas: Helping to
Ensure Our Energy Future
Clean, Abundant and Secure in the United States
AUGUST 2013
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2
Why Natural Gas? Why Now?
 Why Natural Gas? Proven contributor to economy, environment and energy security
 Jobs and economic growth
 Creates nearly 3 million jobs – direct and indirect – resulting in $180 billion in labor income
between 2005 - 2010
 Contributes to economy – over $3.5 billion per year average in government revenues
between 2005 and 2010
 Contributes to global competitiveness
 Environmental benefits
 Low emissions
 Small land footprint
 Sustainable
 Essential to complement renewable energy sources
 Domestic energy security
 More than a 100-year supply and growing
 Why Now? Abundant, secure and domestic
 Huge untapped shale gas resource newly unleashed by innovation and technology
3
2001 to 2013 - A Decade Makes a Difference
Then
Now
 60-year supply and falling
 100+ years supply and growing
 Shale known but uneconomic to
develop
 Flourishing production, vast shale
resources now accessible
 Underground gas storage primarily
traditional reservoir, operationally not
very flexible
 Storage boom with more flexible saltcavern facilities and additional market
area storage
 Pipeline capacity growing
incrementally
 16,000+ miles of interstate pipeline
added since 2000
 Rising prices with several spikes
 Plentiful supplies moderate prices and
provide supply diversity
4
More Than 100-Year Supply
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 Estimates are always
evolving and usually
growing with
improvements in
technology.
 If the 1966 estimate of 600
trillion cubic feet (Tcf) had
remained static, the U.S.
would have run out of
natural gas about 10 years
ago.
 Estimates fall on the
conservative side: history
shows us there is more to
be discovered.
5
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How The Game Has Changed

Improvements in technology
brought down costs and greatly
increased the scope of resource
development

Shale gas production quadrupled
between 2006 – 2012 and is poised
to comprise more than 40% of U.S.
gas production in 2020

Shale and other “unconventional’
gases could account for over 80%
of U.S. gas production by 2020,
compared to 66% today

Diversity of supply complements
strong and growing pipeline
system, reduces vulnerability to
hurricanes, brings natural gas
closer to consumers
Gas Production by Type Through 2040
Source: EIA Annual Energy Outlook 2013
6
Technology Makes It All Work
 Drilling technology improvements and
efficiencies in shale have emerged
 Longer horizontal laterals
 Multiple-stage hydraulic fractures per
lateral
 Small surface footprint for multiple,
extended wells
 Horizontal drilling and hydraulic
fracturing result in gas wells with long
stable production lives
 Ground water is separated by thousands
of feet and tons of impermeable rock and
protected by state and federal regulation
 Significant amount of water is recycled
 “Micro-seismic” technology evolving and
enabling even greater precision in
fracturing wells
Source: American Petroleum Institute
7
Abundant Unconventional Gas Widespread Across U.S.
U.S. Gas Reserves Increased 22% between 2006 – 2009 Primarily Due to Shale Development
Source: Energy Information Administration based on data from published studies
Updated: May 2011
8
Government Oversight of Natural Gas Production
Regulated by states and under the following federal laws:
 Clean Water Act – surface water discharge, storm water runoff
 Clean Air Act – air emissions associated with processing equipment and engines
 Safe Drinking Water Act – underground injection disposal/reuse of produced water and
flowback fluids
 Federal Land Policy and Management Act – permitting for federal onshore resources
 Outer Continental Shelf Lands Act – permitting for federal offshore resources
 National Environmental Policy Act – permits and environmental impact statements
 Occupational Safety and Health Act – requires information about chemicals used at
every site
 Emergency Planning and Community Right-to-Know Act – annual reporting to
emergency responders of chemicals stored and used above certain quantities
 Extensive State Oversight – implement federal laws and regulate drilling fluids and
produced water management
 Detailed state regulatory information available at www.STRONGERInc.org
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Taxes – The Industry Earns a Little and Pays a Lot -DRAFT
10
Shale Production Grows to Over 30 bcfd by 2025
By 2020, shale gas to comprise more than 40% of production, compared to 20% today
40
35
30
Other
Eagle Ford
bcfd
25
20
Marcellus
15
Haynesville
10
Woodford
Fayetteville
5
Barnett
0
2000
2005
2010
2015
2020
2025
2030
Source: Wood Mackenzie
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United States Total Energy and Natural Gas Demand 2000-2030
U.S. Natural Gas Demand By Sector
Total U.S. Primary Energy By Type
300
100
90
200
80
70
Gas
150
Other
60
bcfd
bcfd equivalent
250
Other
Nuclear
Power
50
40
100
Oil
50
Coal
2000 2005 2010 2015 2020 2025 2030
30
Industrial
20
Commercial
10
Residential
0
2000
2005
2010
2015
2020
2025
2030
Source: Wood Mackenzie
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Adequate Natural Gas Supply at Competitive Prices Helps
Grow the U.S. Economy
U.S. Industrial Demand for Natural Gas
 Lower gas prices have helped U.S.
industry
23
 Chemical and fertilizer facilities
seeing increased utilization with
lower gas prices
22
21
 Shale gas helping chemical sector to
create 17,000 jobs and build new
plants
bcfd
20
19
18
17
 Energy-intensive industry can be
more competitive in the global
market
 Additional potential demand from
natural gas vehicles
16
15
2000
2005
2010
2015
2020
2025
2030
Source: Wood Mackenzie
13
Natural Gas’ Impact on the U.S. Economy and Employment
 Natural gas companies contributed an
average of $3 billion per year in gas
royalty payments to the federal
government between 2008 and 2012
 Overall contribution to the economy in
jobs created and taxes paid is much
greater:
 $385 billion to the domestic economy
in 2008
 $180 billion in labor income alone
 Nearly 3 million American jobs

600,000 directly employed in natural
gas development
 Shale development projected to add 1.4
million more U.S. jobs by 2035
Sources: IHS Global Insight, 2010 and 2013
U.S. Department of the Interior’s
Office of Natural Resources Revenue, 2013
PricewaterhouseCoopers, 2013
14
As Supply Increases, Price Forecasts Have Dropped, With
Henry Hub Now Forecast Under $6.00 to Mid - 2020s
Source: EIA, Annual Energy Outlook 2011
15
DRAFT – NOTE that AEO 2013 shows price climb after 2035
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As Supply Increases, Price Forecasts Have Dropped, With
Henry Hub Now Forecast Under $6.00 to Mid - 2020s
Source: EIA, Annual Energy Outlook 2013
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NEEDS UPDATE
Industry Already Recognizing Importance of Natural Gas by
Investing in Storage, Pipelines, and Gas Generation
17
Pipeline System Extensive and Expanding at Record Pace
 Between 2000 and
2010, FERC approved
more than 16,000 miles
of new interstate
pipeline, with capacity
to move an additional
113 bcf per day
 Pipeline system
connects U.S. with
Canada and Mexico
 Storage capacity grew
22% from 2006 - 2010
 Half of new storage is
flexible high-turnover
salt dome and is closer
to customers
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Market Responsive Infrastructure
Additions
Major Gas Pipeline Projects Certificated (MMcf/d)
January 2000 to February 2011
Source: Federal Energy Regulatory Commission
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U.S. Natural Gas Infrastructure:
Anticipated Investment Through 2035
$205B in midstream
infrastructure
investments
125,000 jobs every
year for 20 years
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$57B in federal, state
& local tax revenue
since 2005, pipeline avg. cap/ex:
$8.8 Billion/yr
Source: INGAA Foundation’s North American Natural Gas Midstream Infrastructure Through 2035
Natural Gas and Power Generation

Low capital and operating costs relative to other technologies

Clean burning – low carbon, GHGs, mercury, particulates, SOx, NOx

Low water use compared to other technology

Small land footprint

Easier to permit, finance and build

Natural gas key to making intermittent resources viable
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Capital and Operating Costs Make Gas a Preferred Choice for
Power Generation
200
180
160
Operating & Maintenance
Capital
Fuel
AirControl
140
$/MWH
120
100
80
60
40
20
0
Natural Gas
@$5.50
Natural Gas
@$7.00
Biomass
Coal @$2
Wind
Nuclear
Solar Thermal
Source: Wood Mackenzie
Renewable sources & nuclear include a federal tax credit
Assumes $2.00/mmbtu coal prices
A combined-cycle gas turbine (CCGT) natural gas facility is the least expensive, full-cycle
generation alternative.
22
Natural Gas Is Among the Cleanest Electric Generation
Alternatives
Tons per year per thousand
households
Biomass
(Wood)
Coal
Natural Gas
Nuclear &
Renewables
Carbon Monoxide (CO)
51
5.8
1.5
0.0
Carbon Dioxide (CO2)
Low
9,362
3,558
0.0
Nitrogen Oxides (NOx)
28
3.4
0.3
0.0
Particulate Matter
2.7
0.9
0.0
0.0
Volatile Organic
Compounds (VOC)
5.6
0.2
0.0
0.0
Sulfur Dioxide (SO2)
2.8
5.0
0.2
0.0
Mercury
0.0
0.0001
0.0
0.0
Most emissions
Middle emissions
Least emissions
Natural gas is clean burning
Sources: R.W. Beck data and, EPA “Mercury in Petroleum and
Natural Gas Report”
23
Land Usage Also Makes Gas a Preferred Choice for Power
Generation
9
Acres of land needed to produce the fuel and generate enough electricity
to serve 1,000 households for one year
8.4
8
7
6
Acres
6
5
4
3
Natural gas has the smallest
footprint of any energy source
2
1
0.4
0.7
0.7
0.8
Coal
Nuclear
Biomass
0
Natural Gas
Wind
Solar
Source: R.W. Beck and Black and Veatch for NGSA
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To Make It All Happen, Industry Is Committed to Good
Stewardship
 Listening to and addressing community concerns
 Use of stringent industry and government standards on land reclamation,
well construction, water management and pipeline safety
 Responsible hydraulic fracturing practices
 Minimizing surface effects on land and infrastructure
 Offshore safety and spill containment
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… And Government Must Do Its Part As Well

Fair access to onshore and offshore resources

Continued strong and effective state regulation of hydraulic fracturing

Level playing field: avoid picking winners and losers through mandates

Tax policy must be fair, not burdensome, and compatible with resource
development and job creation

Financial regulations must not create “economic drain” on investment

Current regulatory model for pipelines ensures safe, reliable operations
and infrastructure investment
26
Back-up Slides
27
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Greater Use of Natural Gas Resulted in a Plunge In U.S.
Greenhouse Gas Emissions in 2012
“Greater use of natural gas in early 2012 resulted in the lowest U.S. carbon emissions since
1992.”
-- Today in Energy, U.S. Energy Information Administration, August 1, 2012.
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Water Intensity for Various Power Generation Technologies
2000
1800
1600
1400
1200
1000
800
Gallons / MWh
Steam Cycle*
Other Use**
Fuel Production
600
400
200
0
Combined
Cycle Conv.
Gas
Combined
Cycle Shale
Gas
Coal Thermal
Nuclear
Solar trough
Geothermal
Gas-fired combined cycle power plants use much less water than thermal power
plants with only a small contribution from gas production
Sources: U.S. Department of Energy, “Energy Demands on Water Resources”, December 2006; NREL, “A Review of Operational Water Consumption and
Withdrawal Factors for Electricity Generating Technologies,” March 2011; Chesapeake for shale gas water use
* Assumes closed loop cooling tower
**Other use includes water for other process uses such as emissions treatment, facilities
29
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Natural Gas Spurring 50 Major
Industrial Projects 2012-2018
30
NEEDS UPDATE
Storage Allows Flexibility and Reliability in Delivery
Natural gas storage
capacity grew 22%
between 2006 and
2010 to over 4.3 Tcf
working capacity
Much of the new
storage capacity has
been high delivery,
flexible salt storage
The new storage
provides additional
reliability to the
pipeline system, as
well as allowing quick
response to peaking
electric generation
requirements
Southwest
Type
= Depleted Reservoir
= Aquifer
= Salt Cavern
Sites
326
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Resource Estimates Show Transformed Supply Outlook
Shale gas exponentially
increased the size of the
natural gas resource base
Improvements in
technology brought down
costs to develop
Diversity of supply
complements strong and
growing pipeline system,
reduces vulnerability to
hurricanes, brings natural
gas closer to consumers
Resource size has
increased with each
successive report -- even
though more than 200
trillion cubic feet drawn
down in last decade alone
Source: NPC Prudent Development Report, September 2011
32
Typical Shale Well: Horizontal Drilling and Hydraulic Fracturing
Provide Long, Stable Production Life
Initial Production from Typical Shale Well
2 to 15 million cubic feet per day*
Initial Production
Typical conventional well decline, 3 – 5 years
Supply Stability
High initial production rates
Long and stable production lives
First
Production
40+ Years After
First Production
* Based on one company’s experience of typical
production from the Haynesville shale wells
33
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Distance of about 8 Empire
State Buildings separates
groundwater from fractures
34
Source: National Petroleum
States and Industry Cooperate
on Hydraulic Fracturing Fluid Disclosure

FracFocus – Public registry created and
managed by state regulators in 2011.
FracFocus 2.0 launched in 2013.

Captured over 50,000 wells and more than 400
participating companies; several states using
as tool for compliance reporting

Fluid is 99% water and sand, less than 1%
chemical additives

Searchable public database with well-by-well
information and glossary of chemicals
35
Water Management
Recycling wastewater reduces environmental footprint,
transportation costs and reliance on groundwater or
municipal sources of water
•Drilling companies in the Marcellus recycled more than 66
% of water June 2008-May 2010
•Re-used 44 million gallons of water & disposed of 21
million gallons (Source: Penn State University Hydrologist David
Yoxtheimer)
Producer goal: Recycle 100% of produced water in
Pennsylvania
State wide test results show recycled water meets all
federal radium standards
•Quote: “…all samples tested … showed levels at or below
the normal naturally occurring background levels of
radioactivity.” (Pennsylvania Department of Environmental
Protection, March 7, 2011)
State and local testing of water to continue on regular
basis, with strong support from natural gas companies
How Much Is 5 Million
Gallons?
The 5 million gallons of water
needed to drill and fracture a
typical deep shale gas well is
equivalent to the amount of
water consumed by:
• New York City in
approximately
seven minutes
• A 1,000 megawatt coal-fired
power plant in
12 hours
• A golf course in
25 days
• 10 acres of cotton
in a season
While these represent
continuing consumption, the
water used for a gas well is a
one-time use.
36
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Natural Gas Royalty Payments and Tax Treatment
In last 10 years, the natural gas industry paid the federal government more than $72
billion in natural gas royalties
Payments are in addition to: billions of dollars paid in federal taxes, $7.5 billion in royalty
payments to states, $2 billion in royalties to tribes and rent payments.
Existing tax treatment provides reasonable recovery of exploration, lease acquisition and
drilling costs and have enabled industry enough capital in recent years to produce a
record amount of natural gas, resulting in:
Billions in Royalty Payments
to U.S. Treasury
2001-2010
Affordable energy for households,
businesses and industries
Capital expenditures exceeding
$200 billion/year
Billions in revenues to federal, state and tribal
governments
Billions
Steady growth of jobs in natural
gas and supporting industries; with
projections of 1 million more by 2030
$7
$6
$5
$4
$3
$2
$1
$-
$5.3
$4.2
$4.8
$5.1
$6.1
$5.7
$4.7
$2.8
$2.8
2001
2002
2003
2004
2005
2006
2007
2008
Source: U.S. Office of Natural Resources Revenue, 2011
2009
$2.4
2010
37
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Natural Gas Royalty Payments and Tax Treatment
In last 10 years, the natural gas industry paid the federal government more than $72
billion in natural gas royalties
Payments are in addition to: billions of dollars paid in federal taxes, $7.5 billion in royalty
payments to states, $2 billion in royalties to tribes and rent payments.
Existing tax treatment provides reasonable recovery of exploration, lease acquisition and
drilling costs and have enabled industry enough capital in recent years to produce a
record amount of natural gas, resulting in:
Affordable energy for households,
businesses and industries
Steady growth of jobs in natural
gas and supporting industries; with
projections of 1 million more by 2030
Capital expenditures exceeding
$200 billion/year
Billions in revenues to federal, state and tribal
governments
Source: U.S. Office of Natural Resources Revenue,
Department of the Interior, 2013
38
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LNG Exports: Natural Gas Supply in
Abundance
Enough for all U.S. demand
 Plan: Bring dollars to U.S. and reduce trade deficit by
selling LNG to overseas trading partners.
• Reduces U.S. trade deficit by billions of dollars.
•
Each $1 billion LNG sold = 6,000 new jobs.
• Generates over $10 million/year in new tax revenue for
federal, state, and local governments.
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LNG Exports: Global Perspective
Reality Check
•
Most analysts estimate global market for U.S. natural
gas to settle out at 5 and 6 Bcf/day.
•
With formidable competition emerging from overseas.
•
Proposed/potential 17 U.S. projects total about 23
Bcf/day.
•
Costs to build high and financiers must be convinced
price advantage is sustainable for 30 years.
•
Market will sort out how many get built.
40
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Proposed and Potential Export Terminals
PROPOSED TO FERC (8 Projects as of Feb. 2013)
TOTAL CAPACITY
Freeport LNG (Freeport, TX)
1.8 Bcfd
Cheniere (Corpus Christi, TX)
2.1 Bcfd
Jordan Cove Energy Project (Coos Bay, OR)
0.9 Bcfd
Southern Union-Trunkline LNG(Lake Charles, LA)
2.4 Bcfd
Sempra-Cameron LNG (Hackberry, LA)
1.7 Bcfd
Dominion-Cove Point LNG (Cove Point, MD)
0.75 Bcfd
Oregon LNG (Astoria, OR)
1.30 Bcfd
Excelerate Liquefaction (Lavaca Bay, TX)
1.38 Bcf/d
POTENTIAL (9 Projects as of Feb. 2013)
TOTAL CAPACITY
Gulf Coast LNG Export (Brownsville, TX)
2.8 Bcfd
Gulf LNG Liquefaction (Pascagoula, MS)
1.50 Bcfd
Southern LNG Company (Elba Island, GA)
0.50 Bcfd
ExxonMobil-Golden Pass (Sabine Pass, TX)
2.60 Bcfd
CE FLNG (Plaquemines Parish, LA)
1.07 Bcfd
Waller LNG Services (Cameron Parish, LA)
0.16 Bcfd
Pangea LNG (Ingleside, TX)
1.09 Bcfd
Magnolia LNG (Lake Charles, LA)
0.54 Bcfd
Gasfin Development (Cameron Parish, LA)
0.20 Bcfd
Source: FERC
Office of Energy
Projects, Feb.
2013
41
Natural Gas for Transportation Can Make Sense in Heavy-Duty
Fleet Vehicles
3,000,000
 Long term success of
passenger NGVs linked to
consumer confidence, not
government subsidies
 Reduces oil imports and
improves energy security
2,000,000
Vehicles
 Heavy-duty truck conversions
to natural gas can provide
very healthy returns, but will
be most successful in fleets
2,500,000
1,500,000
Realistic NGV Infiltration Lies
Somewhere in the Midst of
These Forecasts
1,000,000
500,000
0
2001
2004
2007
2010
2013
History
Base
Aggressive
NGV America
2016
2019
Moderate
Sources: Wood Mackenzie/NGV America
42
Natural Gas Supply Terminology
Resources
All natural gas technically
recoverable
(excludes hydrates)
Reserves
Resources profitable with known
technology
Possible Reserves
Probable Reserves
Proven Reserves
Resources profitable with known
technology, 10% confidence
Resources profitable with known
technology, 50% confidence
Resources profitable with known
technology, 90% confidence
43
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Industry Structure in the U.S. Physical Flow of Gas
Source: EIA
45
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INGAA Foundation Study Infrastructure Investment Summary
Source: INGAA (2011), http://www.ingaa.org/File.aspx?id=14911
U.S. Natural Gas Processing Plants
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Natural Gas:
Clean, Abundant, and Secure in the U.S.
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Contacts
America’s Natural Gas Alliance
Brian Kelly, Vice President, Legislative Affairs - bkelly@anga.us
American Exploration & Production Council
Bruce Thompson, President - bthompson@axpc.us
American Gas Association
Bree Raum, Director of Government Relations - braum@aga.org
American Petroleum Institute
Carrie Domnitch, Director of Federal Relations - domnitchc@api.org
Center for Liquefied Natural Gas
Bill Cooper, President - bill.cooper@LNGFacts.org
Gas Processors Association
Jeff Applekamp, Director of Government Affairs - japplekamp@GPAglobal.org
Independent Petroleum Association of America
Lee Fuller, Vice President of Government Relations - lfuller@ipaa.org
Interstate Natural Gas Association of America
Martin Edwards, Vice President, Legislative Affairs – medwards@ingaa.org
Natural Gas Supply Association
Jeff Schrade, Director of Political Communications – jeff.schrade@ngsa.org
US Oil & Gas Association
Albert Modiano, President – amodiano@usoga.org
SLIDE UPDATES: Daphne Magnuson, NGSA Director of Public Affairs, dmagnuson@ngsa.org
48
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