Overview & Status

July 18, 2001

Outline

• Brief Overview

• Current Activity / Progress

• Government Engagement Issues

• Forward Plan

Joint Team Objectives

• Assess the economic viability of the project

• Focus on route evaluation– Cost and environmental considerations

• Prepare sufficient information to support potential permit applications

Safe and Environmentally ResponsibleSafe and Environmentally Responsible

Overall Project Scope

Alberta to MarketPipeline System (B-C) :New-Build and/or Expansion

The AlasCan Group

Land – Canada (2)Scott Land and LeaseProgress Land Services

Environmental / Regulatory – USField studies

URS

Land – US Lower 48

Wilbanks Resource Corporation

Environmental / Regulatory – CanadaField studies

AMEC Earth and Environmental

NGL Extraction Facility:Removal of C2+

Fluor Veco

Alaska to AlbertaPipeline System (A-B) :– Buried, High Pressure, Chilled Pipeline– Intermediate Compression– Block Valve Stations– Intermediate Pigging Facilities

Fluor Veco

Gas Treatment Facility (Prudhoe Bay) :Removal of Acid Gases - CO2, H2SCompress / Chill gas to P/L entry conditions

Natchiq Parsons

Land – US Alaska

American Reclamation Group

The “Seven Lenses” of Evaluation

• Economics

• Environment

• Gas Access

• Jobs

• Revenues

• Safety

• Timing

Current Activity / Progress

• Contractors On-Board (approx. 500)

• Technical / Regulatory Work Proceeding

• Defining Commercial Issues

• Ongoing Discussions with Interested Parties

– Hundreds of public/private meetings

• Engaging Governments & Communities

Current Technical Studies

• Process Development– Acid Gas (CO2, H2S) Removal Technology– NGL Removal Processes

• Pipeline Hydraulic Simulations (Over 1,000 Cases)

– Pressure (1,750-3,000 psi) vs Diameter (42”-56”)

– Comparisons of Compressor Drivers– Throughput and Expandability

Compressor Stations vs. Throughput

System Optimization Plot Example

0

5

10

15

20

25

30

35

40

45

50

0 1 2 3 4 5 6 7

Nominal Volume BCFD

Com

pre

ssor

Sta

tion

s

44”48”52”56”

150 mile station spacing

75 mile station spacing

(@2500 psig)

Current Technical Studies

• Materials– Feasibility of High Strength Steel

• Logistics– Port Surveys in Anchorage, Seward, Valdez and West Coast– Review of Potential Fabrication Site Locations– Trucking and Highway Analyses– GTP Sealift Analyses – Potentially Largest Ever

• Construction Technology– Directionally Drilled River Crossings– Trenching Technology– Construction Equipment Requirements & Availability

Regulatory / Environmental & Land Activities

• Summer field work / center line studies

• Cultural resource surveys

• Land owner discussions

• Beaufort Sea survey

Government Engagement

• Ongoing Discussions with Governments– US and Canadian Federal – State of Alaska– Canadian Provincial/Territorial/First Nations

State Engagement Issues

• Initiate dialogue between Producers and State of Alaska regarding fiscal stability / certainty

• Objective is to have key terms understood prior to the January legislative session

• Key discussion items– Valuation clarity (severance and royalty)– Pipeline vs Producer issues– Pipeline Ad Valorem certainty– Gas take-in-kind and nomination process– Project risk and long-term certainty

June July Aug Sep Oct Nov Dec

Agree ground-rules

Working discussions

Draft valuation, AVTcontract terms

Agreed terms pre-session

Simplification of State Royalty, Severance Valuation

• Common royalty and severance methodologies

• Transparent pricing

• Simplicity best way to minimize future concerns

• Wellhead price for royalty and severance linked to Lower 48 with transportation differential– Define market price– Agreement on gas valuation terms– Concurrence with FERC/NEB tariff terms– Processing fees

Wrap-up

• We are fully engaged in a joint program to evaluate and progress a large, modern pipeline from Alaska to Canada and the lower 48 states

• There is a growing market for Alaskan gas, but we must be cost-competitive to be a viable project

• It is not yet clear that we can develop an economic project

• It is premature to preclude any options at this point

• Still targeting completion of engineering and route studies by year end