Algonquin Gas Quality Technical Conference August 21, 2007 Weaver s Cove Energy

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400 MMCF/day sendout capacity (800 MMCF/day peak capacity) Capability to load up to 100 LNG

1 Algonquin Gas Quality Technical Conference August 21, 2007 Weaver s Cove Energy FERC approval in July 2005 Project proposes to utilize Air Injection Facilities LNG Marine Import Terminal 400 MMCF/day sendout capacity (800 MMCF/day peak capacity) Capability to load up to 100 LNG trucks per day (90 MMCF/day) Connections to Algonquin Gas Transmission G System via Mill River Pipeline 1

2 Summary of Hess LNG Positions Algonquin historical data is flawed: Time period is too short Relies on daily averages versus daily maximum and minimum ranges* Does not consider the supply historically and safely accepted Algonquin will restrict Air versus Nitrogen Injection: Air more cost effective New proposed standard significantly limits Air Injection Algonquin has not supported: Oxygen limit Nitrogen limit Wobbe limit Tariff specifications should not be set to accommodate the least common denominator (limited LDC liquefaction facilities) GTI Report should be viewed in its proper context: Per disclaimer, the report is not a comprehensive analysis of LNG supply data End user data includes markets that are not connected to Algonquin 2

3 Algonquin G System Cape Cod Extension G System System Mill River Mill River 3

4 Algonquin G System There are no LDC liquefaction facilities located on the G System All natural gas fired generation on the G System has been in service since 1999 The closest existing receipt point into the Algonquin system is Tennessee Gas Pipeline at Mendon, MA, at the Head of the G System Depending upon the volume of gas delivered into Algonquin from its various interconnects and demand on any given day, customers on the G system have consumed natural gas from a variety of North American and regasified LNG sources Natural gas delivered by Weaver s Cove would be predominantly consumed on the G System regardless of the contractual path of the gas 4

5 Algonquin System Algonquin has stated that it expects its system to undergo fundamental change in the next few years essentially becoming an integrated header system in the market area New supply is coming, but the potential physical flow on the Algonquin system is uncertain: Which LNG projects will be constructed? Where will they be located in relationship to the Algonquin system? How much volume will move through the new LNG facilities? How much additional demand will be attached to the Algonquin system? What will be the impact of reduced Canadian supply and increased Canadian demand? How much new supply & where will it enter the Algonquin system? New England LNG Eastern CDN LNG Mid Atlantic LNG Rockies Deep Panuke Given this uncertainty, Algonquin s tariff needs to ensure that Algonquin can receive the broadest range of natural gas supplies from its traditional and proposed upstream interconnects, both interstate pipelines and LNG import terminals The amount of physical gas flows (non-displacement) exiting the Algonquin system to other pipelines is uncertain 5

6 Algonquin s Historical Time Period (May 2002 April 2007) Time period is too short and may be results oriented Distrigas delivered regasified LNG conditioned with Air Injection into the Algonquin system for several years commencing in the early/mid 1990s During the 5 year period selected by Algonquin, Distrigas only imported LNG supply from Trinidad, which is not representative of this historically accepted richer LNG supply that was conditioned utilizing Air Injection Iroquois provided 8 years of data in its recent gas quality filing Incorrectly utilizes daily average data* Tariff will establish minimum/maximum specifications 6

7 LNG Imports into Everett Excluding Trinidad Annual Algeria Australia UAE Total BCF BCF BCF BCF Several of these cargoes required air stabilization LNG Supply from Trinidad commenced in mid Source: EIA & Office of Fossil Fuels 7

8 LNG Conditioning for Northeast LNG Import Terminals Type AGT Connection Conditioning Algonquin Direct Connects Distrigas (E) Onshore J System Air Northeast Gateway (C) Offshore Buoy HubLine None Neptune (P) Offshore Buoy HubLine None Weaver s Cove (P) Onshore G System Air Canadian Maritime Canaport (C) Onshore HubLine None Mid Atlantic Cove Point (E) Onshore NY / NJ Nitrogen Broadwater (P) Offshore Storage Brookfield Nitrogen Crown Landing (P) Onshore NJ Nitrogen Quebec Rabaska (P) Onshore Brookfield Nitrogen Gros Cacouna (P) Onshore Brookfield Nitrogen Facilities that have received at least preliminary US & CDN Federal regulatory approvals. E Existing C Construction P - Proposed 8

9 Algonquin Tariff Proposal Air Injection Algonquin s current tariff has no limit on oxygen The NGC+ guidelines do not recommend setting a specific oxygen specification In mid 2005, FERC approved the Weaver s Cove import facility with Air Injection capability Distrigas installed Air Injection capability in the early / mid 1990 s Distrigas FERC approved tariff for Nitrogen ( max. 6.0%) equates to a 1.5% oxygen specification KeySpan and the New England LDC group have previously filed comments in support of Distrigas utilization of air injection facilities (CP00-76 in Feb & CP in Oct 1997) Algonquin has accepted natural gas with an oxygen specification of 1.04% within the recent past (March 7, 2006 Gas Quality presentation) Algonquin has provided data illustrating receipts where the oxygen level was greater than the proposed 0.25% Algonquin is a market area pipeline not a production area pipeline Regasified LNG has no water content, therefore additional LNG supply should not impact corrosion Air Injection is approximately 20% of the capital cost & has less annual operating costs for comparable Nitrogen Injection facilities The estimated capital cost difference for air vs. nitrogen injection is $40 to $80 million Algonquin has not justified any safety or reliability constraint related to oxygen, yet Algonquin s proposed oxygen specification could reduce supply availability 9

10 Algonquin Tariff Proposal Nitrogen Distrigas FERC approved tariff provides for delivery of regasified LNG with up to 6% nitrogen using air injection Interconnecting pipelines FERC approved tariffs, to the extent that they have a nitrogen specification, have set a limit of 4% NGC+ guidelines recommend a cap of 4% of total inerts with no individual limits Algonquin has received natural gas with a nitrogen content at Everett of %; Burrillville of %; Mendon of %; & Brookfield of 3.02% within the recent past (March 7, 2006 GQ Presentation), with no apparent negative impacts Algonquin s proposed 2.5% maximum nitrogen specification will limit the ability of LNG suppliers to reduce high Wobbe / Btu cargoes reducing supply Nitrogen specification of 2.5% is overly restrictive and is set for the least common denominator based upon unsubstantiated claims of LDC liquefaction facilities which comprise a very small (<1.5%) of the potential market Algonquin has stated that Algonquin could operationally take four percent total nonhydrocarbon gas of any makeup, including a makeup that is all nitrogen, into its system without concerns for its own system 10

11 AGT Tariff Proposal Wobbe Algonquin tariff currently does not have a Wobbe index limit Algonquin has provided average not minimum / maximum daily Wobbe readings Data provided in Mr. Bocock s testimony indicates Wobbe levels reaching 1400 Algonquin has received natural gas with a Wobbe index of within the recent past (March 7, 2006 GQ Presentation), with no apparent negative impacts Algonquin has proposed a Wobbe minimum of 1314 and a Wobbe maximum of 1400, with a midpoint of 1357, creating a range of +/- 3.17% Setting a slightly higher maximum Wobbe limit at 1405 could reduce the need for air or nitrogen injection to manage high Btu cargoes A 1405 Wobbe would be within the NGC+ recommended +/- 4% range of Algonquin s proposed midpoint 11

12 LNG Conditioning Injection of inert gas such as air or nitrogen into vaporized LNG reduces the heating value, increases the density, and consequently lowers the gas Wobbe Index (NGC+ White Paper) 1.0% injection of either air or nitrogen will reduce the Wobbe Index by approximately 1.3%,and HHV would also be reduced Air Injection has a substantially lower capital cost investment versus Nitrogen Injection The higher the acceptable Wobbe, the lower the amount of air or nitrogen (inerts) needed to meet the applicable specification Algonquin has received supply in excess of the 4.0% total inerts level (March 7, 2006 GQ Presentation), with no apparent negative impacts Algonquin has not presented evidence to suggest that it cannot continue to receive supply equal to or greater than the 4.0% total inerts level 12

13 Least Common Denominator - LDC Liquefaction Facilities There are 3 existing LDC liquefaction facilities, with another in construction, that have the potential to be directly served by Algonquin. All of these facilities have the capability of receiving LNG via truck, and at least one facility has the ability to be served by Tennessee Gas Pipeline. We believe these facilities predominately obtain LNG via truck in lieu of operating their liquefaction units. The total potential liquefaction capability of the 4 facilities when load factor adjusted is ~ BCF/d (55% of annual capacity based on 200 days of operation). Algonquin has stated that the pipeline has the existing potential capability to deliver 1.6 BCF per day. The maximum potential LDC liquefaction market served by Algonquin is therefore 1.5% of Algonquin s potential annual deliveries. Given truck deliveries, the ability to receive gas from Tennessee, and inventory levels at the end of the heating season, we believe that the actual market share is much less than 1.0%. Algonquin or the LDCs with liquefaction capability that could be directly served by Algonquin have not provided any data to suggest that the volume of natural gas delivered by Algonquin is material. The Northeast Gas Association has stated that the 2005 annual consumption data for the eight state Northeast Region (New England, New York & New Jersey) was 6.86 BCF/d (total pipeline delivery capacity is much greater). Within that region, there are 9 LDC & 1 pipeline liquefaction units. When load factor adjusted (55%), the potential liquefaction market (0.04 BCF/d) is therefore less than 1.0% of consumption, assuming no receipts via truck and a zero initial inventory level. 13

14 HESS LNG Proposal based upon currently available data AGT DOMAC NGC+ AGT Hess LNG Tariff Tariff Filing Proposal Wobbe Min. None None Wobbe Max. None None Midpoint Range +/- 4% +/- 3.17% +/- 3.35% Heating Value Min Heating Value Max. none CO2 & N combined none 4.0% N/A* N none 6.0% none 2.5% 4.0%* CO2 none none none 2.0% 2.0%* Oxygen (O2) none none none 0.25% 0.9%* Total Inerts / O2, CO2 & N combined none 4.0% 4.0%* * Hess LNG recommends that oxygen be included within a total inerts cap of 4.0%, with individual limitations as noted for CO2, N & O2. 14

15 Summary FERC should require a more representative record of Algonquin s historical gas quality: Consider historic period from July 1, 1994 through June 30, 2007 Consider historic gas quality data based upon daily minimums and maximums in lieu of daily averages * Total Inerts: Algonquin s standards should be consistent with NGC+ Guidelines on total inerts (4.0%) Algonquin s tariff standards should enable directly connected LNG import facilities to utilize Air Injection, in order to maximize LNG supply Algonquin s proposed standards would limit conditioning for Air Injection to 1.0% and Nitrogen Injection to 2.5% Hess LNG s proposal would allow for Air or Nitrogen Injection of 4% Algonquin s proposed Wobbe, oxygen & nitrogen limits: Have the potential to restrict historic and new supply from both North American production and regasified LNG, which is contrary to the public interest Increase conditioning cost of LNG suppliers by curtailing Air Injection capability Are not based upon any safety or reliability reasons Are proposed for least common denominator GTI Report should be viewed in its proper context 15

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