Natural Gas Market Conditions in New England

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1 December 11, 2013 Manchester, NH Natural Gas Market Conditions in New England Presentation to: New Hampshire Business & Industry Association Annual Energy Seminar Stephen Leahy Northeast Gas Association

2 About NGA Non-profit trade association Local gas utilities (LDCs) serving New England, New York, and New Jersey Several interstate pipeline companies LNG importers (Distrigas, Repsol) and LNG trucking companies Over 200 associate member companies, from industry suppliers and contractors to electric grid operators

3 Continued on NGA web site

4

5 Changing Northeast (and New England) Supply Dynamic Traditionally, end of the pipeline ; long-haul transportation from Gulf Coast, western Canada Changes: Marcellus Shale volumes increasing, displacing Gulf and other long-haul supplies Lower imports from Canada and LNG Exports from the Northeast U.S. to Canada Off-system virtual pipeline developments Higher pipeline utilization and more frequent capacity constraints at western points

6 U.S. Production Levels Remain Robust 100 years of potential supply EIA: U.S. in 2013 is largest producer of natural gas in the world U.S. monthly production in lower 48- states hit new record in mid-2013 Source: U.S. EIA, Source: Potential Gas Committee,

7 Commodity Price

8 Home Heating Expenditures 2,500 Average Consumer Expenditures for Heating Fuels, $, ,000 1,500 1,000 Natural Gas Heating Oil (Forecast) Source: U.S. EIA, Oct. 8, Natural gas data is for Northeast states of CT, ME, MA, NH, NJ, NY, PA, RI, VT. Heating oil is U.S. average.

9 Northeast Production Continues Growth Chart: U.S. EIA, October 9, 2013.

10 Imports from LNG and Canada are Lowering LNG IMPORTS, Canadian Natural Gas Exports to Eastern U.S., *Brunswick Pipeline Flows Source: Distrigas, m Source: National Energy Board of Canada

11 PNGTS M&NE Iroquois Tennessee Algonquin 5 Interstate Pipelines Serve New England Copyright: Northeast Gas Association Prepared by: Coler & Colantonio, Inc. February 2012

12 Northern New England

13 Growing Regional Interest in System Expansion CT Comprehensive Energy Strategy enacted, utility expansion plans just approved by regulatory agency Maine Natural Gas Task Force and June 2013 legislation MA Department of Energy is conducting study on natural gas expansion New York City is phasing out #4 and #6 oil in buildings over coming years natural gas as key alternative option NYS DPS looking at existing natural gas franchise expansion policy statewide VT Gas expansion project.

14 Projects In-Service This Year (all outside New England) Tennessee s Northeast Upgrade : 636 MMcf/d Tennessee s MPP Project : 240 MMcf/d Millennium s Minisink Compressor : 150 MMcf/d National Fuel Gas s Line N : 30 MMcf/d Transco s Northeast Supply Link : 250 MMcf/d Spectra s NJ-NY Expansion : 800 MMcf/d Photos courtesy of Spectra Energy.

15 Proposed Pipeline Projects Prepared by NGA, based on publicly available information. Project locations approximate. As of National Fuel / Empire, Tuscarora Lateral Iroquois, Wright Interconnect Iroquois, SoNo Project Tennessee, Northeast Expansion PNGTS, C2C Spectra, Expansion to Maritimes VERMONT Empire, Tioga County II Tennessee, Rose Lake Tennessee, Connecticut Expansion Spectra, AIM Iroquois, Eastern Long Island Columbia, East Side Expansion Project Williams & Cabot, Constitution Pipeline Williams, Rockaway Lateral/Northeast Connector Spectra/Texas Eastern, TEAM 2014 Millennium, North -South Upstate Connector Project Millennium, Hancock Compression Project

16 Capacity Constraints: Example from Last Winter Source: U.S. EIA,

17 This Winter? In October, staff of the Federal Energy Regulatory Commission (FERC) released the Winter Energy Market Assessment. Among its observations: Natural gas and power futures prices for the winter are comparable to last year, except in New England. Natural gas storage is more than adequate for a normal winter, and gas production continues to grow, particularly in the Northeast. We anticipate localized price spikes in New England during periods of high demand, due to ongoing constraints. Gas utility customers are basically protected from spot market price fluctuations as utilities have in place long-term supply and storage arrangements.

18 Securing Pipeline Capacity The pipelines operate as they are designed on peak days Facilities are designed to support primary firm obligations Most generators in region do not have firm contracts back to a liquid supply point On peak days, only firm services will be assured flow Absent firm commitments, generators may not have gas supplies to meet electric generation needs Generators indicate that the regional electric market does not provide incentives for them to enter into firm contract arrangements, or to utilize alternate fuel back-up Infrastructure counts Pipeline investments would ease regional gas constraint points and lower prices pending customer commitments

19 75 Second Avenue, Suite 510 Needham, MA Tel Waterview Boulevard, 4 th Floor Parsippany, NJ Tel