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JOINT MINERALS, BUSINESS AND ECONOMIC

DEVELOPMENT COMMITTEEDecember 5, 2005

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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”.

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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!

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Production

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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

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Flow

(M

cfd)

2005

2004

2003

2002

2001

2000

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1998

1997

1996

1995

1994

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1992

1991

Pre-1990 Total (Mcfd)

Updated October 3, 2005 (Data accurate through June 1, 2005)

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Garfield County, Colorado

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

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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

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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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Pricing

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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

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$/M

MB

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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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Making Sure Prices and Production Stay in Sync

Rockies Express Pipeline Proposed Route

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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

Which Brings Us Full Circle to……….

Proposed Legislative Changes

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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.

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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.

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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.

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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 – uep1@comcast.net

Office (303) 748-6473Fax (303) 948-1428

Carla Hubbard – AdministratorE-mail – wyomingpipelinea@qwest.net

Website – www.wyopipeline.com

152 N. Durbin Street – Suite 230Casper, Wyoming 82601

Office (307) 237-5009