Natural GasThe Carbon Light Energy SourceThe Carbon Light Energy Source

Abundant, Clean, DomesticReduces air pollution, carbon emissions and

our reliance on foreign oil

Abundant, Clean, DomesticReduces air pollution, carbon emissions and

our reliance on foreign oil

2

What to Look For

What are policy aspirations?

What is Natural Gas?

How important is it as an energy source today?

How much do we have?

Can we increase production appreciably?

Is it a clean energy source?

Plans to achieve aspirations?

Summary

3

What is the Green Energy Goal?

Obama Administration Goal “25% of Electricity from Renewables by 2025”

and A 14% reduction of GHG by 2020

Waxman-Markey Revised Goal“20% of Electricity from Renewables by 2025”,(also provides a 5% allowance for efficiency improvement)

and A 17% reduction of GHG by 2020”

What if we accomplished these Goals Today using Clean Burning Natural Gas?

Note: Waxman-Markey passed the House, waiting on Senate approval

4

What is Natural Gas?

Technically 96-98% ……. CH4 (Methane)

It is NOT … Gasoline, Natural Gasoline, LPG, Propane, Butane, etc.

1 Carbon atom with 4 Hydrogen atoms around it In Carbon based fuels it has the highest ratio of Hydrogen to Carbon Highest energy content per carbon

It is a gas at room temperature and a liquid at -258 degF

It IS ……… Natural Gas, LNG, CNG

5

2008 US Energy Supply

Wind, Solar, Other

0.6 (0.6%)

Wood 2.0 (2%)

Hydro 2.5 (3%)

Biofuels 1.4 (1%)

Geothermal 0.4 (0.4%)

Waste 0.4 (0.4%)

107 Quads Total

Coal 23.9 (22% )

Natural Gas 21.2 (20% )

Crude Imports

27.6 (26% )

Nuclear 8.5 (8% )

Other5.3 (5% )

Renewables 7.3 (7% )

Crude-NGL 12.9 (12% )

6

How Much Natural Gas Do We Have?

“Attainable potential is about 287 TCF of Natural Gas …… More than a hundred of our geologists and geophysicists contributed to this comprehensive study” JD Langston, VP Explor,

Exxon Co, 1976

“Natural gas has had it” John O’Leary, Federal Energy Administration, 1977

Cumulative Production since 1977 is 582 TCF

Proven Remaining Reserves exceed 238 TCF

All Sources Potential Reserves now exceed 2,000 TCF

7

U.S. Gas Reserve GrowthGas Inventory in Years

15 14 13 12

29 30

6168 67 65 65 64 66 68 68

83

101

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1977 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008Year

Gro

ss

Rem

ain

ing

G

as

Re

se

rve

s (

BC

F)

-

50

100

150

200

250

Ye

ars

of

Cu

rre

nt

Pro

du

cti

on

Sources: EIA 2007 Annual Proven Reserve Report and Potential Gas Committee Report - June 2009

2008

Pro

ven

Est

Current All Sources Gas Reserves over 2,000 TCFOver a 100 Year Supply!

NGPA Regulation

First BarnettLarge Water

FracsWellhead De-Control

Act

Total Potential ReservesYears of Production

8

ME

NHVT

MARI

NY

NJ

DEMD

PA

VA

NC

WV

OH

MIWI

MN

IA

IL IN

KY

TNSC

FL

GAAL

MS

LA

AR

MO

TX

OK

KS

NE

NM

CO

WY

MT ND

SD

UT

AZ

NV

ID

WA

OR

CA

CT

San Juan

UintaPiceance

Green River

CodyBakken

Mowry

Hillard-Baxter-Manco

sMancos

Hermosa

Lewis Pierre

Barnett-Woodford

Barnett

Woodford

Haynesville

Fayetteville

Excello-Mulky

Marcellus

New Albany

Antrim

Utica

Niobrara

Floyd

U.S. Tight Gas and Shale Gas Plays

9

U.S. Gas Production GrowthProduction Additions

17,000

17,500

18,000

18,500

19,000

19,500

20,000

20,500

21,000

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008

Year

An

nu

al P

rod

uct

ion

(B

CF

)

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

To

tal

Gas

Rig

s

Annual Production GAS RIGS

CBM & Tight Gas

GOM Declines

New

Sha

le P

lays

10

US Natural Gas Production Growth

For every 100 incremental Natural Gas Rigs Actively Drilling on a Continuous Basis:

We can expect Gas Production to increase approximately 1 TCF per Year

andWe will also add over 100,000 New Jobs!

Source: CERI Annual Report 2007-1

Is Natural Gas Clean?

Cleanest-burning hydrocarbon fuel on the planetCombustion products are primarily CO2 and Water VaporDrilling for natural gas leaves a small footprintAt Least 95% Cleaner than Alternative Fuels for Toxics

Pollutant (1) Natural Gas Oil Coal

Carbon Dioxide 117,000 164,000 208,000

Carbon Monoxide 40 33 208

Nitrogen Oxides 92 448 457

Sulfur Dioxide 1 1,122 2,591

Particulates 7 84 2,744

Mercury 0.000 0.007 0.016

(1) Emissions in #'s per Billion BTU

Source: EIA National Gas Issues and Trends 1998

12

Where Does US Pollution Come From?

CO (Carbon-Monoxide) ---------------------------------- Reduces Pulmonary Function, small children, sick and elderlyNOx & VOC (NitrousOxide & Volatile Organics) --- Combine to form Ground Level Ozone which Reduces Pulmonary FunctionSO2 (Sulfur Dioxide) -------------------------------------- Acid Rain precursor and It smells like rotten eggsPM10 (~ 10 Micron Dust) -------------------------------- Stays in Your Lungs, Reduces Pulmonary Function and causes Haze

Source CO NOx SO2 PM10 VOC TOTAL

2008 Total (1000's Tons) 77,685 16,339 11,429 14,806 15,927 136,186

Vehicles (On & Off Road) 73% 58% 5% 3% 38% 54%Utilities 1% 18% 66% 4% 0.3% 9%Oil and Gas Production 0.0% 1.3% 0.5% 0.0% 2.3% 0.5%Service Stations - Gasoline 5% 1%Recyling,Waste Disposal 2% 1% 0.2% 2% 2% 2%Dust (Cars,) 53% 6%Solvent,Paint,Coating 27% 3%Forest Fires, Agriculture 13% 25% 12% 12%Industrial Process - Other 11% 22% 29% 13% 14% 14%

66%UtilitiesOil and Gas Production

2.3%

73% 58%Vehicles (On & Off Road) 38%

13

Here’s a BIG Idea

We can Achieve Stated US Goals for Clean and Domestically Sourced Energy for

25% of our Electricity generation NOW (Not in 2025!) simply by ………..

Shutting Down the 75 Worst Coal Fired Plants in the US

Turning Up the EXISTING Natural Gas Combined Cycle Turbines

Very Clean, Very Fuel Efficient, Under-Utilized

And we don’t SPEND ANY $$Capital to Do It !

14

Here’s Another BIG Idea

We can use Natural Gas asClean and Domestically Sourced Energy to Replace 25% of our Crude Oil Consumption

by …

Switching up to 33% of Vehicles to CNG(Compressed Natural Gas)

Very Clean, Very Fuel Efficient, Very Economical

15

What Do We Need to Do?

How Much NatGas Production?Add Domestic Natural Gas Production of:

4.6 TCF/YR to provide electricityAdd another 8 TCF/YR to Offset 25% of Crude Oil

How Do We Accomplish That?Put the 1,000 “Layed Down” Gas Rigs back to Work

Build or Re-Deploy 1200 New Gas Rigs

Plus

Create Up to 1.2 Million New Jobs !

Source: Industry Production Trend Analysis, CERI Annual Study 2007-1

Let’s Look at the Electric Power Sector

17

Nuclear 8.5 (21% )

Natural Gas 7.0 (17% )

Petroleum 0.5 (1% )

Other 0.2 (1% )

Renewables 3.9 (10%)

Coal 20.6 (50% )

Wood & Biomass 0.2 (0.4% )

Geothermal 0.3 (0.7% )

Wind & Solar0.5 (1% )

Waste 0.2 (0.6% )

Hydro 2.5 (6% )

2008 US Fuel Use for Electricity Production

40.7 Quads Total (25.8 Quads Waste Heat)

18

How is Electricity Generated?

Percent Installed Capacity

30%

10%

40%

8%2%10%

Percent of 2008 Electricity

19%

48%

6%1%

20%

Percent of Time Online

0%

20%

40%

60%

80%

100%

19

Pollutants – Electric Sector

Percent Electricity Generated20%

19%

6%

1%

6%

48%

Percent of Pollution Emissions

0% 2%

0%5%

0%

93%

Percent of Greenhouse Gas

17%

10%

1%

72%

20

Focus on the Worst Coal Plants

There are 378 Large Coal fired Power Plants in the US

75 of the Worst Coal Plants in the US Emit :

55% of the SO2 32% of the Mercury38% of the NOx26% of the CO2

But provide only 14% of Total ElectricityMajority were installed before 1970 – Old Technology

Located in 22 States – primarily East of Mississippi“Locally” available Combined Cycle Natural Gas Turbine

capacity to offset all 75 plants

21

ME

NHVT

MARI

NY

NJ

DEMD

PA

VA

NC

WV

OH

MIWI

MN

IA

IL IN

KY

TNSC

FL

GAAL

MS

LA

AR

MO

TX

OK

KS

NE

NM

CO

WY

MT ND

SD

UT

AZ

NV

ID

WA

OR

CA

CT

75 Worst Coal Power Plants

3%4 plants

5% 3 plants

5% 3 plants

6% 5 plants

7% 6 plants

8% 6 plants

8% 8 plants

13% 9 plants

14% 8 plants

3%3 plants

3%3 plants

4%2 plants

2% 3 plants

2% 4 plants

1% 1 plant

1% 1 plant

1% 1 plant

1% 1 plant

1% 1 plant

1% 1 plant

0.4% 1 plant

0.3% 1 plant

Percent of Total Pollution

Population < 1 million 1-5 million 5-10 million10-15 million > 15 million

22

A Plan to Replace 30% of Coal

Alternative #1 – Utilize Existing Combined Cycle Gas Turbines

Alternative #2 – Purchase Large Scale 2.4 MW Wind Turbines

23

Alternative Replaced By

Reduction Total SO2 Emissions

1000's Tons

% Reduction of SO2

Emissions

Reduction Total

Mercury Emissions

Lbs

% Reduction of Mercury Emissions

Reduction Total GHG Emissions

MM's STons

% Reduction

of GHG Emissions

Status Quo None - - -

ALT #1 Existing CC Gas Turbines (5,040) -55% (15,680) -32% (469) -15%

ALT #2 Wind Turbines (5,300) -57% (15,680) -32% (641) -20%

Alternative Replaced By

Idle or New Installed Capacity

Required MW# of Units Purchased

Land Use 1000's Acres

Estimated Capital

Expense Billion $

Added Natural Gas

Fuel BCF / YR

Status Quo None 0 0 0 -$ 0

ALT #1 Existing CC Gas Turbines 68,252 0 0 -$ 4,630

ALT #2 Wind Turbines 136,503 56,876 6,235 287$ 2,792

Note: Wind Turbine Alternative assumed to require Conventional Gas Turbine backup during peak load times or 40% Wind Turbines assumed to be 2.4 MW units costing 2.0 MM$/ MW installed

How Do the Alternatives Compare?

FUEL / CAPITAL$

EMISSIONS

Let’s Look at the Crude Oil

Photos provided by: MC Oil

25

Oil Supply vs Consumption

Source

7%

20%

24%

49%

Domestic

Imports

Refined Imports

NGPL/ Refinery

Consumption

8%

29%

63%

Motor Fuels

LPG/ Resid/ Oth

Jet Fuel

Total Sector Comprises ~ 40 QUADS per Year

26

A Plan for NatGas to Displace Crude Oil

What if we replace 25% of Crude Oil with Natural Gas?

Over 54% of Total US Air Pollution results from Vehicles (On-Off Highway)The US Imports 65% of it’s Crude Oil (growing)6 Million Bbls per day comes from OPEC countries2008 Total Balance of Trade was -$816 Billion2008 Value of Crude & Products was $447 Billion (55%)

27

How Do We Do It?

Need 8 Quads (~TCF) of incremental US supply Activate 800 NatGas Drilling Rigs (800,000 jobs)Convert up to 33% of vehicles to CNG (trucks too)Provide CNG filling stations to facilitate on highways

This is a BIG Goal but Small Thinking Achieves Small Results

28

CNG(Compressed Natural Gas)

CNG Filling Station – safe, easy, similar to gasoline filling

29

Expected Results

Offset 38% of Imported Oil with Natural GasReduce the Trade Deficit by $130 Billion annually (-21%)Save US consumers $73 billion in fuel costs annuallyCreate 800,000 new jobsReduce total air pollution by nearly 30%

Note: Cost savings based upon EIA 2008 average Imported Oil ($96.98/Bbl) and Citygate Gas ($7.47/MCF) prices

Transportation Sector

Reduce SO2 emissions by 55% Reduce Mercury emissions by 32%Reduce GHG emissions by 15%

This is Huge!

Electric Power Sector

30

Questions?

Promote NatGas as the Realistic Green Energy

And Write Your Congressmen