WHY PIPELINES ARE IMPORTANT TO WYOMING

L.E.A.D. Class XFebruary 2008Carla Hubbard

2006 Gross State Product

Wyoming Revenue

• Revenue to State of Wyoming from mineral production for

2006 = $2,307,397,038

(Includes: ad valorem, severance, sales & use taxes, US rent & royalty returns, State rents & royalties, General Fund income

Includes: oil, gas, coal, uranium, trona, other solid minerals)

Coal, Natural Gas, Coal Gasification

$0

$10

$20

$30

$40

$50

$60

0

2,000

4,000

6,000

8,000

10,000

12,000

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

US$

Bill

ions

Mill

ions

of M

MB

tue

Year

Production and Price Comparison of Wyoming Coal, Coal Gasified into Methane1 after 1997, and Natural Gas

Energy EquivalentsCoal (Million MMBtue)

Methane (Million MMBtue)

Methane Value (US$Billions)

Coal Value (US$Billions)

Coal Value in terms of methane price (US$Billions)$ Derivatives from

Prices & Trading Hubs

Energy Price SensitivityCrude Oil - $1.00/bbl change

+/- $6 million revenue change

Coal - $.25/ton change+/- $14 million revenue change

Natural Gas - $0.10/mcf change+/- $23 million revenue change

Source: Wyoming Economic Analysis Division

Pipeline Impacts

• 93% of WY natural gas production is exported out of state

• Without capacity: prices lower, production is shut in, drilling is curtailed and revenues are decreased

• Rockies Express Pipeline – if built one year sooner would have resulted in an additional $430 million revenue

Rockies Express Pipeline-In-service

Rockies Express Pipeline-REX East

Lease of Overthrust Pipeline Capacity

Natural Gas Pipeline Company of America

Kinder Morgan Interstate Gas Transmission

TransColorado Gas Transmission

Trailblazer Pipeline

REX Compressor Station

REX East Compressor Station

Hub

OpalKanda Wamsutter

GreasewoodMeeker

Blanco

Cheyenne Lebanon

Clarington

OVER-THRUST

CAPACITYLEASE

R O C K I E S E X P R E S S P I P E L I N EREX EASTREX

IN-SERVICE

1,800,000 Dth/d - 7/20091,500,000 Dth/d - 2/2008 1,600,000 Dth/d - 1/2009

PIPELINE – 1,679 MILES COMPRESSION – 460,000 Hp

Production Vs Pipeline Capacity

3

4

5

6

7

8

Jul-02 Jul-03 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09

Bcf

d

Natural Gas Interstate Pipeline Export Capacity vs. Production for Wyoming

REX

WBI Grasslands ExpansionPipeline Export Capacity

Wyoming Saleable ProductionWSP + Garfield Co., CO

21% increase, Kern River Expansion

14% increase, Cheyenne Plains

3.8

4.865

5.8 5.84

7.34

26% increase, REX

3% increase, Grasslands

How do pipelines get built?• Pipeline companies research & prepare

production/capacity forecasts• Start discussions with natural gas producers,

end users, utilities, etc to determine demand• Develop a project: Route/ROW, Size, Cost

Estimates & Rate Estimates, Start Permitting/Environmental Review

• Hold an Open Season

Ruby Pipeline

Malin

Opal Hub

U T A H

N E V A D A

O R E G O N

C O L O R A D O

I D A H O

C A L I F .

W Y O M I N G

CIG

Kern River

Paiute

Tuscarora

PG&E

GTN

Ruby PipelineOpal to Malin

WIC

CheyennePlains

Cheyenne

UintaBasin

PiceanceBasin

Wyoming Citizens

• Every Wyoming citizen should be concerned with pipeline capacity because:

It has direct effect on State revenues and thus State spending on projects and programs

It effects prices so the mineral and surface owners as well as the State does not receive full value for a nonrenewable resource