1 legislative session february 17, 2006. 2 proposed legislative changes increase wpa bonding...
TRANSCRIPT
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Legislative SessionFebruary 17, 2006
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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.
• Change name from “Wyoming Natural Gas Pipeline Authority” to the “Wyoming Pipeline Authority”.
• Constitutional amendment allowing Wyoming to invest in works of internal improvement associated with pipeline projects.
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Market Assessment
• Production of Rockies gas will continue to increase.
• There is insufficient pipeline capacity to export this increasing supply – especially in the spring, fall and summer.
• Increased LNG deliveries to the West Coast and Gulf Coast will compete with the Rockies supplies and impact prices.
• 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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Production Will Increase From These Wyoming Areas
• Jonah/Pinedale Anticline – Record of Decision due on Jonah EIS Q1-06 which will allow for more than 3,000 additional wells.
• BP has proposed spending $2 billion in the Wamsutter/Echo Springs area to double capacity.
• 10’s of thousands of wells remain to be drilled in the Powder River Basin where production is once again increasing.
• Devon has proposed drilling over 1250 new wells in their Creston/Blue Gap Project area.
• Anadarko and Double Eagle awaiting Record of Decision on coal bed methane development in their Atlantic Rim project area.
• Anticipate renewed interest in developing or accelerating production from deep sour productive intervals knows to exist in SW Wyoming and the Madden area.
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First Year Natural Gas Production, Hoback-Farson, WY
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000Se
p-00
Sep-
01
Sep-
02
Sep-
03
Sep-
04
Sep-
05
Year
Flo
w (M
cfd)
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
Pre-1990 Total (Mcfd)
Updated December 4, 2005 (Data accurate through September 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
Wyoming Needs to Look Over Its Back
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Rockies Production Will Grow
High Rockies Case
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Year
Vo
lum
e
S WY N WY E WY NE CO SE CO CO W Slope Montana Utah
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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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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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What’s In It for Wyoming4.3 Bcfd
Annual Revenue - $millionsPrice
$/MMBtuSeverance Tax (6%)
Ad Valorem
Tax (6%)
State Royalty (13% on 7%)
State Share of Fed Royalty (50% of
12.5% Royalty on 67% of Minerals)
Total
** $2 $188 $188 $29 $131 $537
$5 $471 $471 $71 $329 $1,342
$7 $659 $659 $100 $460 $1,878
$9 $848 $848 $129 $592 $2,415
$11 $1,036 $1,036 $157 $723 $2,952
** Approx average Wyoming Price – 2002
Note: State royalty % for illustration only – actual royalty higher
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Making Sure Prices and Production Stay in Sync
Rockies Express Pipeline Proposed Route
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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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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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Constitutional Amendment
• If industry doesn’t step to the plate………Wyoming needs to have the ability to defend its revenue stream.
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Contact Information
Bryan Hassler - Executive DirectorE-mail – [email protected]
Carla Hubbard – AdministratorE-mail – [email protected] Colby Drechsel - Associate Director
E-mail – [email protected]
152 N. Durbin Street – Suite 230Casper, Wyoming 82601
Office (307) 237-5009
www.wyopipeline.com