ALASKA GASLINE PORT AUTHORITY 00009 alska Alaska Gasline

ALASKA GASLINE PORT AUTHORITY 00009 alska/

Alaska Gasline Port Authority n The Alaska Gasline Port Authority consists of three municipalities – North Slope Borough – Fairbanks North Star Borough – City of Valdez 00009 alska/2

Alaska Gasline Port Authority Board of Directors Fairbanks North Star Borough Mayor Rhonda Boyles, Treasurer Charlie Cole, Vice Chair Barbara Schuhmann City of Valdez Mayor Bert Cottle Dave Cobb, Secretary John Kelsey North Slope Borough Mayor George Ahmaogak, Chair Al Adams Richard Glenn 00009 alska/3

Alaska Gasline Port Authority’s Mission n 00009 alska/4 The mission of the Alaska Gasline Port Authority is to enable the development of Alaska’s North Slope gas to the maximum benefit of all Alaskans.

Evolution of the Alaska Gasline Port Authority n n n 00009 alska/5 Preparation of the project development plan; engineering, procurement and construction plan; project cost estimate and alternatives analyses Preparation of economic and financial models IRS granting of federal income tax exemption

The Project Team n n n 00009 alska/6 Alaska Gasline Port Authority Bechtel Corporation – technical and development support Taylor De. Jongh – financial analysis and formation O’Melveny and Myers – development counsel Walker and Associates – general counsel

Advantages of a Y-Line n 00009 alska/7 Combining a gasline to the lower 48 with a gasline to an LNG and/or GTL project will lower the cost of gas transportation down each branch of the line by approximately 33 percent

Construction Cost n n A single line to carry 3 bcf per day = $7. 0 billion A Y-line to carry 3 bcf to the Canadian border and 3 bcf to an LNG/GTL facility = $9. 7 billion 9. 7 = $4. 85 billion 2 00009 alska/8

Project Scope – Y-Line n n n 00009 alska/9 Gas conditioning plant on the North Slope 550 -mile, 56 -inch diameter pipeline from North Slope to Delta Junction 150 -mile, 44 -inch diameter pipeline to Canadian border for interconnect to lower 48 256 -mile, 46 -inch diameter branch line to Valdez Spur line to Anchorage from Glennallen 15 million ton per year LNG plant, LPG fractionation plant and port facilities in

Cost of Y-Line for Two Projects n Construction cost – Conditioning plant (assuming no efficiencies from existing plant) $ 4. 2 billion – Pipeline (including the two branches) $ – LPG fractionation plant million 9. 7 billion $ 450 – LNG plant and port facilities $ (includes escalation and $1. 8 billion 3. 65 billion contingency) – Construction cost total billion 00009 alska/10 $ 18. 0

Cost of Y-Line for Two Projects (Cont’d) n Soft costs – Interest during construction $ billion 4. 9 – Owner’s contingency $ 900 million – Debt service reserve $ 1. 0 billion – Financing fees, working capital, etc. $ 1. 0 billion $ 7. 8 billion – Minus pre-completion revenue (for -3. 2 both LNG project and pipeline to Alaskanbillion Canadian border for Lower 48 sales) $ 22. 6 – Total financing required billion 00009 alska/11

Financial Results of the Y-Line n n n 00009 alska/12 Producers: $2 billion to $3 billion per year State – royalties, severance tax, and corporate income tax: $750 million to $980 million per year Payment in lieu of property taxes: $114 million per year All Alaskan Community Dividend: $111 million per year Assistance to Alaskan communities to lower energy costs: $37 million per year

Benefits of Port Authority Ownership n n 00009 alska/13 Guarantees maximum in state usage of North Slope gas Income is tax exempt (IRS ruling) Port Authority can access 100 percent project financing for the entire project Port Authority’s required return on investment is substantially lower than a privately-owned project

Benefits of Port Authority Ownership (Cont’d) n n 00009 alska/14 Some debt would be financed with taxexempt bonds Port Authority is not subject to FERC regulation Annual flow of revenue to state and local communities Port Authority creates local ownership of gasline

Benefits of Port Authority Ownership (Cont’d) n n 00009 alska/15 No need to give up state revenue (tax or royalties) to subsidize the project More certainty of gas available for instate usage and more control over price Example: $3. 00 Chicago price per million Btu -1. 20 Transportation cost Alaska. Canadian border to Chicago $1. 80 Total wholesale price to Anchorage or Fairbanks communities

ALASKA GASLINE PORT AUTHORITY 00009 alska/