Regional Natural Gas Constraints:Challenges & Opportunities

Presentation to:

New Hampshire Business & IndustryAssociation Annual Energy Seminar

Thomas KileyNortheast Gas Association

December 10, 2014Manchester, NH

Continued on NGA web site…

http://www.northeastgas.org/about-nga/antitrust-guidelines

About NGA

Non-profit trade association

Local gas utilities (LDCs) serving New England, New York, and New Jersey

Several interstate pipeline companies

LNG importers (Distrigas, Repsol) and LNG trucking companies

Over 200 “associate member” companies, from industry suppliers and contractors to electric grid operators

www.northeastgas.org

Points

Marcellus production continues to be robust and low-priced

Pipelines entering NE from the “west” are essentially full, leaving NE market subject to high spot prices, notably in the winter

New gas transmission infrastructure into New England not available until late 2016 at the earliest

New England’s (and New Hampshire’s) natural gas utilities are signing up for capacity on proposed pipeline projects, while the power sector is not – a persistent dilemma for the regional power market

Major market impact of spot prices: NE wholesale power market and electric customers

Changing Supply Dynamic

Source: U.S. EIA, 7-14

Marcellus Shale Production

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

18,000,000

Jan-

07

Jun-

07

Nov

-07

Apr-

08

Sep-

08

Feb-

09

Jul-0

9

Dec

-09

May

-10

Oct

-10

Mar

-11

Aug-

11

Jan-

12

Jun-

12

Nov

-12

Apr-

13

Sep-

13

Feb-

14

Jul-1

4

Marcellus Natural Gas Production, 2007-14

Source: U.S. EIA, 11-14

Source: National Energy Board of Canada, 1-14

Changing Pipeline Flows

Increased flows from MarcellusDecreased flows from Gulf Coast & Canada

Canadian Natural Gas Exports to U.S. Regions, 2009-2013

LNG

LNG essential to meeting peak day demand in New England

Important part of gas utilities’ supply portfolios

3 LNG satellite tanks in NH

But decreasing imports – drawn to higher cost markets

020406080

100120140160180200

Source: U.S. Dept. of Energy/Office of Fossil Energy, 2-14

LNG Imports by New England-Based Terminals, (Bcf/yr),

2003-13

Distrigas NE Gateway Neptune

Delivery System

Copyright: Northeast Gas AssociationPrepared by: Coler & Colantonio, Inc.February 2012

M&NEPNGTS

Iroquois

Tennessee Algonquin

5 InterstatePipelinesWithin New England

Northern New England

Market Growth

Source: U.S. EIA, 10-14

Home Heating Sector: Growing Share

Percent of Homes, MainHeating Fuels, Northeast

2005-2013

Natural Gas

Fuel Oil & Kerosene

Electricity

LPG & Other

2005 2013

Chart: U.S. EIA, 9-14

0

500000

1000000

1500000

2000000

2500000

1990 2000 2005 2012

Growth in Natural Gas Residential Customers,

New England, 1990 - 2012

Demand: Growth Shaped by Price Advantage

0

500

1,000

1,500

2,000

2,500

Source: U.S. EIA, Nov. 12, 2014. Natural gas data is for Northeast states of CT, ME, MA, NH, NJ, NY, PA, RI, VT. Heating oil is U.S. average.

Average Consumer Expenditures for Heating Fuels, $, 2008-2014

Natural Gas

Heating Oil

(Forecast)

Proposed Power Plants by Fuel, Northeast

Source: ISO-NE

Natural Gas, 55

Other, 1

Wind, 44

GENERATOR PROPOSALS IN THEISO NEW ENGLAND QUEUE

Percentage, 2014

NEW YORK ISO SYSTEM, 2014Proposed Power Projects by Fuel Type

Megawatts

Source: NY ISO

NEW JERSEY, 2013Queued Capacity by Fuel Type,

Percentage (In-State Only)Approx. 9,351 MW

Source: PJM

55% 70%

74%

“Portable” Natural Gas

• Growth in off-system deliveries of CNG, via “virtual pipeline”.

• Clean Energy opened CNG station in July in Pembroke. NG Advantage’s customers include a paper mill and a medical center.

• Liberty Utilities and AVSG developing station in Concord.

• Companies in the market include:

• Global CNG• iNatGas (AVSG)• NG Advantage• Xpress Natural Gas.

Clean Energy’s compressed natural gas fueling station, Pembroke, NH, which opened in July 2014.

Delivery Constraints

Capacity Constraints:Essentially, a Traffic Jam

Source: U.S. EIA, 1-25-13

Price Variations at DifferentMarket Hubs: annual

0

1

2

3

4

5

6

7

8

9

10

AlgonquinCitygates

Transco Zone 6 NY ColumbiaAppalachia

Henry Hub

Source: U.S. FERC, 10-9-14. 2014 data is "year to date as of early Oct."

Average Annual Day-Ahead Prices ($/MMBtu)

2011 2012 2013 2014*

Price Variations at DifferentMarket Hubs: winter

0

2

4

6

8

10

12

14

16

18

AlgonquinCitygates

Transco Zone 6NY

ColumbiaAppalachia

Henry Hub

Source: U.S. FERC, 10-9-14

Average Winter Day-Ahead Prices,Select Delivery Hubs ($/MMBtu)

2011/12 2012/13 2013/14

Futures Prices for This Coming Winter, Gas & Power, U.S. Markets

Chart: U.S. Federal Energy Regulatory Commission (FERC), 10-14

Copyright: Northeast Gas AssociationPrepared by: Coler & Colantonio, Inc.February 2012

Electric Bill ForecastsThis Winter

NY PSC, 10-23-14: Average resid. electric customer to pay 20% less this winter CT:

25 - 57% higher this winter

MA: 29-37% higher this winter

NH: 29 - 50% higher this winter

Gas TransmissionProposals

Interstate Transmission Projects In-Service in 2014:Outside New England

Tennessee’s “Rose Lake” Spectra’s “TEAM 2014” National Fuel Gas’s “Mercer Expansion” …and others

Chart: U.S. EIA, 11-14

Prepared by NGA, based on publicly available information. Project locations approximate. As of 11-14.

VERMONT

Proposed Pipeline Projects

Spectra, “AIM”National Fuel /

Empire, “Tuscarora

Lateral”

Williams, “Rockaway Lateral /

Northeast Connector”

Williams & Cabot,

“Constitution Pipeline”

Tennessee, “Northeast

Energy Direct”

Iroquois, “Wright

Interconnect”

Iroquois, “Eastern Long

Island”Columbia, “East Side Expansion

Project”

PNGTS, “C2C”

Spectra, “Atlantic Bridge”

Tennessee, “ConnecticutExpansion”

Iroquois, “South to North”

National Fuel / Empire, “Northern

Access 2015 & 2016”

Dominion, “New Market

Project”

Tennessee, “Niagara

Expansion”

PennEastProject

Williams/Transco, “Diamond East”

Spectra/NU, “Access

Northeast”

> A 125-mile, 30-inch pipeline connecting Williams’ Midstream System in Susquehanna County, PA to Iroquois Gas Transmission and Tennessee Gas Pipeline in Schoharie County, NY

> Capacity: 650 MDth/d> Shipper: Cabot (500 MDthd); Southwestern

Energy (150 MDthd)> Owned (41%) and operated by WPZ; Cabot Oil

and Gas owns 25%, Piedmont Constitution Pipeline Company owns 24% and WGL Midstream owns 10%

> Target in-service date: Late 2015 to 2016> Approved by FERC last week

Constitution Pipeline /Wright Interconnect Project

Algonquin Incremental Market (AIM) Project: Spectra Energy

Project Scope: Providing 342 MMcf/d of additional

capacity to move Marcellus production to Algonquin City Gates

Customers:UIL Holdings Northeast Utilities National Grid NiSource City of Middleborough, MA City of Norwich, CT

Project Status: FERC pre-filing commenced June 2013 Filed FERC application February 2014 Receive FERC certificate 1Q15 Commence construction 2Q15 In-service 2H16

Regional Supply

Map and info: Spectra Energy

Connecticut Expansion Project:Kinder Morgan / TGP

Project Scope: Providing 72 MMcf/d of additional

capacity to meet utility demand

Customers:UIL Holdings (CT Natural Gas &

Southern CT Gas)Northeast Utilities (Yankee Gas)

Project Status: Receipts from Wright, NY FERC Certificate Application filed

on July 31, 2014 Docket No. CP14-529-000 Proposed Construction Start Date

– November 2015 Proposed In-Service Date

– November 2016Source: Kinder Morgan

Atlantic Bridge Project:Spectra Energy

Map and info: Spectra Energy

Location: New England and Maritime Provinces

Capacity: 100,000 to in excess of 600,000 dekatherms of natural gas per day, depending upon market commitments

Anchor Shipper: Unitil

Initial Project In-Service Date: November 2017; later in-service dates will be considered

Northeast Energy Direct Project:Kinder Morgan / TGP

Source: Kinder Morgan

Project Scope: Scalable up to 2.2 Bcf/d of

additional capacity to meet NE and Atlantic Canada market demand

Anchor Shipper Customers: 9 LDCs, with capacity of 500,000

Dth/d, including: The Berkshire Gas Company Columbia Gas of Massachusetts Connecticut Natural Gas Corp. Liberty Utilities (EnergyNorth

Natural Gas) CorporationNational Grid Southern Connecticut Gas Corp. City of Westfield Gas & Electric

Light 2 othersProject Status: Project Development and

Commercial Negotiations – OngoingOutreach Meetings at state, local

and town level - Ongoing

Project Status (cont’d): Route Selection and Permit Preparation – Ongoing Planned FERC filing – September 2015 Proposed Construction Start Date – January 2017 Proposed In-Service Date – November 2018

Access Northeast Project:Spectra Energy & NU

Map and info: Spectra Energy

Project Scope:“Electric power solution” could begin service as early as 2018.

The natural gas supply increase will be available in increments.

Expanding the Spectra pipelines, which already directly connect to ~ 60% of New England’s natural gas-fired electric generation, will provide natural gas to power plants critical for grid stability on the coldest and warmest days.

PNGTS’s “C2C Project”

Map and info: Portland Natural Gas Transmission

Iroquois’ “SoNo Project”

Map and info: Iroquois Gas Transmission

New England Governors’ Energy Infrastructure Initiative / NESCOE

A year ago, the New England Governors announced a joint energy initiative designed to accelerate regional cooperation on expanding renewable energy and energy infrastructure in New England.

NESCOE at NE Council event in Manchester in June: “Recent pipeline projects have had zero electric power generators subscribe for firm natural gas transportation.”

Next steps???

Summary

• New England remains highest spot price point for natural gas – new infrastructure needed, planned, in process.

• Customer bill impacts felt last winter – and challenging price outlook for coming years, notably on the electric side

• Utilities continue to see growth on systems - but new infrastructure key to assuring adequate capacity for future growth. New England (and NH) natural gas utilities are participating in new pipeline proposals.

• New Hampshire and New England well-positioned to take advantage of U.S. domestic resource base – if infrastructure can be added to access supplies.

75 Second Avenue, Suite 510Needham, MA 02494-2859

Tel. 781-455-6800

20 Waterview Boulevard, 4th FloorParsippany, NJ 07054

Tel. 973-265-1900

www.northeastgas.org

30.