1 joint minerals, business and economic development committee december 5, 2005
TRANSCRIPT
2
Proposed Legislative Changes
• Increase WPA bonding capacity from $1 billion to $3 billion
• Expand State Treasurer’s investment authority to invest in WPA bonds from funds other than just the Permanent Wyoming Mineral Trust Fund.
• Authorize a $50 million State loan to the WPA to provide for credit security required to procure pipeline capacity in WPA’s name.
• Change name from “Wyoming Natural Gas Pipeline Authority” to the “Wyoming Pipeline Authority”.
3
Market Assessment
• Production of Rockies gas is expected to increase
• There is insufficient pipeline capacity to export this increasing supply
• Increased LNG deliveries to the West Coast and Gulf Coast will compete with the Rockies
• The highest premium-priced market for gas is the Northeast
• Large basis differentials exist between the Rockies and the East Coast
• At the end of the day – a substantial amount of Wyoming revenue is a function of natural gas production and price!
5
First Year Natural Gas Production, Jonah/Pinedale Anticline
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000Ju
n-00
Jun-
01
Jun-
02
Jun-
03
Jun-
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Jun-
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Year
Flow
(M
cfd)
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
Pre-1990 Total (Mcfd)
Updated October 3, 2005 (Data accurate through June 1, 2005)
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Rockies Production
0
2,000
4,000
6,000
8,000
10,000
12,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
MM
cf/D
ay
WY S CO W SL WY E UT CO NE WY N CO SE MT
8
Reserves - 2003
• U.S. Total Proved Reserves: 189 Tcf
• Wyoming 21.7 Tcf• Colorado 15.4 Tcf• Utah 3.5 Tcf• Total Rockies 40.6 Tcf Proven
• Probable/Possible exceeds an additional 200 Tcf!
Source : EIA
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Reserve Base Supports New Infrastructure
Huntsman
• 20 year supply requirement for existing pipes = 36 Tcf
• 20 year supply requirement for existing pipes + Rockies Express = 50 Tcf
• 20 year supply requirement for existing pipes + Rockies Express + 50% excess = 75 Tcf
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Basis Spreads Support New Pipeline
•Basis differential versus Henry Hub
•Source: Historical Prices – GasDat, Forward Prices – Sempra Commodities Oct 05 Curve
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NYMEX Pricing
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00Ja
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6F
eb-0
6M
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Apr-
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May-
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Jun-0
6Ju
l-06
Aug-0
6S
ep-0
6O
ct-0
6N
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Dec-
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Jan-0
7F
eb-0
7M
ar-
07
Apr-
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May-
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Jun-0
7Ju
l-07
Aug-0
7S
ep-0
7O
ct-0
7N
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Dec-
07
$/M
MB
tu
NYMEX Chicago Rockies CREG
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What’s In It for Wyoming4.3 Bcfd
Annual Revenue - $millionsPrice
$/MMBtuSeverance Tax (6%)
Ad Valorem
Tax (6%)
State Royalty (12% on 7%)
State Share of Fed Royalty (50% of
12.5% Royalty on 67% of Minerals)
Total
** $2 $188 $188 $26 $131 $534
$5 $471 $471 $66 $329 $1,336
$7 $659 $659 $92 $460 $1,950
$9 $848 $848 $119 $592 $2,405
$11 $1,036 $1,036 $145 $723 $2,940
** Approx average Wyoming Price - 2002
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Project Overview
• Entrega Pipeline. 330 miles of 36 and 42 inch, 126,000 Hp, from Meeker to Wamsutter to Cheyenne.
• New certificate and construction of 42 inch or larger, 1350 mile pipeline from Cheyenne to Clarington, Ohio with 2 Bcfd transport capacity
• 15 compresor stations with up to 455,000 HP
• Over 20 interconnections with interstate pipelines
• Phased construction will enable access to mid-continent delivery points in Dec. 2007; access to Tuscola or Lebanon delivery points in Dec. 2008 and access to eastern Ohio, delivery points in July 2009
• Final design based on Open Season to be held in Nov - Dec ’05
• Expected rates of about $1 plus fuel of about 2% to 3%
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• Route follows over 90% of existing pipeline or utility ROW corridors
• Detailed engineering, environmental, and ROW studies due Nov. 15th
• Proposing 3 phase FERC filing process and construction schedule to maintain 4Q07 in-service date to mid-continent (ANR)– Phase I route follows Kinder´s Trailblazer and Terasen’s Platte
Valley pipelines
– Existing Trailblazer and Platte ROW and project records help accelerate permitting
• Discussions with FERC yielded positive feedback on staged development
Development Status
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Significant Developments
• Kinder & Sempra Joint Development– Kinder 2/3 equity and Sempra 1/3 equity– Sempra Affiliate committing to 200,000 Dth/d of FT
• Wyoming Natural Gas Pipeline Authority MOU
• EnCana & Entrega Support– 500,000 Dth/d of firm long haul commitment– Incorporation of Entrega into the project
• Exclusivity Agreements with End-Use Markets
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WNGPA MOU
• Provides for 90 period of exclusive negotiations
• Subjects of negotiations include:– WNGPA providing competitive financing
– WNGPA facilitating extension of Project to Opal Hub
– A conditional capacity commitment of up to 200 mmcfd under the proposed Aggregation Services
– Potential interim financing through 2008 or beyond for the Project’s acquisition and/or construction of assets upstream of Cheyenne
• Any transportation commitment will be subject to Board approval by January 31, 2006
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Next Steps
• Negotiate and execute shipper precedent agreements
• Start NEPA Pre-filing in late October, 2005• Conduct binding open season in Nov. – Dec, 2005• Shipper Board approval required by Jan. 31, 2006• A minimum of 1,500,000 Dth/d is needed• Determine economic viability by February, 2006
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Increasing Bonding Authority to $3 billion
• Pipe and pipelining costs have increased since $1 billion bonding authority added to legislation.
• Scope of Kinder/Sempra project significantly bigger than 36 inch, 1,000 mile line to Chicago.
• Pipeline companies want single debt issuer to economize on costs.
• If WPA is successful in financing Kinder project, additional capabilities necessary to finance CO2 lines, crude oil, coal derivative and natural gas products lines – all currently being contemplated in state.
• Note: WPA bonds are non-recourse to State and underwritten by contractual commitments to capacity on pipeline.
24
Expand Treasurers Investment Authority
• Treasurer has requested.
• Allows for diversity across portfolio of funds managed.
• Increases ability to invest in greater amount of WPA bonds.
• Decreases bond concentration in any one particular portfolio of managed funds.
• Note: This should also be considered for Wyoming Infrastructure Authority.
25
Authorize $50 million Loan to Authority for Transportation Procurement
• If Authority doesn’t step up to the plate for transportation on Rockies Express pipeline, sufficient capacity may not be procured by other shippers to get the project built.
• Loan would be repaid through price spread between Ohio and Wyoming as well as through fees collected from other shippers utilizing capacity.
• Provides capacity for producers in State who may not have “rated” debt in public marketplace or who may not be able to meet Kinder/Sempra credit requirements.
• Provides price support for Wyoming natural gas value currently received from severance and ad valorem taxes as well as from State and Federal royalties.
26
Name Change
• Wyoming Pipeline Authority better reflects future scope of work we will conduct.
• CO2, NGL, crude oil and coal derivative products lines will be needed in the State in the very near future.
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Contact Information
Bryan Hassler - Executive DirectorE-mail – [email protected]
Office (303) 748-6473Fax (303) 948-1428
Carla Hubbard – AdministratorE-mail – [email protected]
Website – www.wyopipeline.com
152 N. Durbin Street – Suite 230Casper, Wyoming 82601
Office (307) 237-5009