Byron S. Wright Vice President, Corporate Development

Transcription

1 Byron S. Wright Vice President, Corporate Development Greenhouse Gas Emissions- Prospects for Legislation and Regulation Gas/Electric Partnership February 10, 2010 Interstate Pipelines Exploration & Production

2 Cautionary Statement Regarding Forward-Looking Statements This presentation includes certain forward-looking statements and projections. The company has made every reasonable effort to ensure that the information and assumptions on which these statements and projections are based are current, reasonable, and complete. However, a variety of factors could cause actual results to differ materially from the projections, anticipated results or other expectations expressed in this release, including, without limitation, our ability to achieve the targeted costs savings from the announced reorganization; complete planned asset sales; change management risk associated with the reorganization; our ability to pay the dividends declared; changes in unaudited and/or unreviewed financial information; volatility in, and access to, the capital markets; our ability to implement and achieve our objectives in our 2010 plan as well as targets for future years included in this presentation; our ability to achieve our 2009 plan and updated guidance, including achieving our earnings and cash flow targets; the effects of any changes in accounting rules and guidance; our ability to meet production volume targets in our Exploration and Production segment; our ability to successfully identify and finance new Midstream opportunities; our ability to comply with the covenants in our various financing documents; our ability to obtain necessary governmental approvals for proposed pipeline and E&P projects and our ability to successfully construct and operate such projects; the risks associated with recontracting of transportation commitments by our pipelines; regulatory uncertainties associated with pipeline rate cases; actions by the credit rating agencies; the successful close of our financing transactions; credit and performance risk of our lenders, trading counterparties, customers, vendors and suppliers; changes in commodity prices and basis differentials for oil, natural gas, and power; general economic and weather conditions in geographic regions or markets served by the company and its affiliates, or where operations of the company and its affiliates are located, including the risk of a global recession and negative impact on natural gas demand; the uncertainties associated with governmental regulation; political and currency risks associated with international operations of the company and its affiliates; competition; and other factors described in the company's (and its affiliates') Securities and Exchange Commission filings. While the company makes these statements and projections in good faith, neither the company nor its management can guarantee that anticipated future results will be achieved. Reference must be made to those filings for additional important factors that may affect actual results. The company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the company, whether as a result of new information, future events, or otherwise. Certain of the production information in this presentation include the production attributable to El Paso s 49 percent interest in Four Star Oil & Gas Company ( Four Star ). El Paso s Supplemental Oil and Gas disclosures, which are included in its Annual Report on Form 10-K, reflect its proportionate share of the proved reserves of Four Star separate from its consolidated proved reserves. In addition, the proved reserves attributable to its proportionate share of Four Star represent estimates prepared by El Paso and not those of Four Star. Cautionary Note to U.S. Investors In this presentation, we have disclosed our proved reserves using the Securities and Exchange Commission s (SEC s) definition of proved reserves under rules effective December 31, Proved reserves, including proved undeveloped reserves are estimated quantities that geological and engineering data demonstrate with reasonable certainty to be recoverable in the future from known reservoirs under assumed economic conditions. Investors are urged to closely consider the disclosures and risk factors in our Forms 10-K and 10-Q, available from our offices or from our website at including the inherent uncertainties in estimating quantities of proved reserves. 2

3 Overview of El Paso Corporation Mojave Pipeline Colorado Interstate Gas Wyoming Interstate Cheyenne Plains Pipeline Tennessee Gas Pipeline Southern Natural Gas El Paso Natural Gas Elba Island LNG Gulf LNG (50%) 2011 Florida Gas Transmission (50%) Premier Pipeline Franchise 1 19% of total U.S. interstate pipeline mileage 26 Bcf/d capacity (15% of total U.S.) 19 Bcf/d throughput (30% of gas delivered to U.S. consumers) Leading Independent E&P Company 2.75 Tcfe proven reserves 1,2 Significant domestic unconventional opportunities International developments in Brazil & Egypt 1 Source: El Paso Corporation 2008 data for pipelines; proved reserves as of 12/31/09 2 Includes proportionate share of Four Star equity volumes Note: Includes El Paso Corporation and El Paso Pipeline Partners, L.P. 3

4 Agenda Policy Options Legislation Regulation Implications for Natural Gas Conclusions 4

5 GHG Control Policy Options Interstate Pipelines Exploration & Production

6 Legislative Action: House - Senate States Interstate Pipelines Exploration & Production

7 ACES (a.k.a. Waxman-Markey) Not Just Cap & Trade Renewables 25% by 2025 Efficiency Mandates Cap & Trade Carbon Capture and Sequestration Henry A. Waxman Edward J. Markey Passed the House of Representatives by a vote on June 26,

8 ACES Cap & Trade 8

9 Clean Energy Jobs and American Power Act (a.k.a. Kerry-Boxer Bill) Very similar to Waxman- Markey Voted out of Committee Awaiting floor consideration John F. Kerry Barbara Boxer 9

10 Clean Energy Jobs and American Power Act (a.k.a. Kerry-Boxer Bill) 9,000 8,000 7,000 6,000 Capped Sectors Non-Capped Res/Comm Industrial MMTonnes CO 2 e 5,000 4,000 Kerry-Boxer Cap Waxman-Markey Cap 3,000 Electric Power 2,000 1,000 Petroleum/Liquid Fuel Kerry-Boxer currently stalled 10

11 Current Prediction on Climate Legislation Senate does not have the votes to pass Cap and Trade Unlikely to be any action on Cap and Trade until after the elections Today the Senate would agree to: Renewable energy tax incentives Renewable and Efficiency electricity mandate (12 percent by 2020) Extension of expiring energy tax credits 11

12 State and Regional Confusion Western Climate Initiative (WCI) Signed: Feb 2007 Scheduled launch: 2012 Regional Greenhouse Gas Initiative (RGGI) Signed: 2005 Launch: Jan 2009 States with stripes have state-specific GHG reduction goals or mandates. Midwest Greenhouse Gas Reduction Accord (MGA) Signed: Nov 2007 Scheduled launch:

13 Regulation: The Administration is Not Done Yet Reporting Tailoring Rule Interstate Pipelines Exploration & Production

14 Who are these people? THE ADMINISTRATION IS COMMITTED TO REDUCING GHG EMISSIONS AND WILL USE WHATEVER TOOL THE CONGRESS MAKES AVAILABLE TO IT THE CLEAN AIR ACT MAY NOT BE THE BEST TOOL ONE COULD IMAGINE, BUT IF IT ALL THEY HAVE, THEY WILL USE IT Carol M. Browner Lisa P. Jackson 14

15 GHG Mandatory Reporting Rule EPA finalized on September 22, 2009 Applies to facilities with emissions greater than 25,000 tonnes per year of GHG emissions Initial compliance for combustion sources from January 1, 2010 First reports due on March 31, 2011 Fugitive emissions rule to be finalized in 2010 and will require compliance from 2011 EPA considering statistical approach 15

16 GHG Tailoring Rule Proposed on September 30, 2009 EPA proposes to regulate GHGs under Clean Air Act for large facilities/sources by March 2010 The Trigger: Regulation of GHGs as regulated pollutants from mobile sources by 3/2010 under Title II 16

17 GHG Tailoring Rule Establishes PSD and Title V thresholds on a temporary level basis for 6 years PSD permit is required for construction or modification Title V permit is required for operations 25,000 TPY of CO2e for new or minor facilities 10,000 25,000 TPY of CO 2e significance levels for existing major facilities Limits apply to potential to emit not actual emissions No clear road to BACT definition Over 5000 memos, guidance documents and court decisions govern the minutia of PSD & Title V permits 17

18 GHG Tailoring Rule - Misconceptions Natural gas a clear winner! Not quite.. Complexity Fugitive/vented vs. simple combustion Multiple emission points vs. few stacks Time consuming and costly for natural gas sector Permitting process can take years (especially in north-east) Delays to FERC permits Limits can conflict with FERC certificates 18

19 Implications for Natural Gas Interstate Pipelines Exploration & Production

20 Natural Gas Demand for natural gas in a carbon constrained environment Increases with Stronger or restrictive cap Allowance prices within a specific range Decreases if Low/zero carbon technologies grow Price of natural gas increases Price collars on allowance prices 20

21 H.R. 2454: EIA Capacity Additions (thousand MWs) 2030 (cumulative) EIA Scenarios show bulk of generating capacity added coming from zero/low carbon sources Advanced Coal w CCS Nuclear Renewables Only in the case where nuclear technology/ccs is limited with no international offsets does NGCC/CT show significant contribution 21

22 H.R. 2454: EIA Generation by Fuel type 2030 Natural gas generation grows when nuclear/ccs are limited or more expensive Limitation on international offsets results in greater nuclear and renewable generation in lieu of natural gas 22

23 Natural Gas Demand Natural Gas Demand Curves EIA Natural Gas Demand Curves EPA Natural Gas Demand (Quadrillion Btu) Limiting nuclear growth (low carbon source) will improve gas demand Increasing or limiting offsets has virtually no affect on natural gas demand relative to base case Natural Gas Demand (Quadrillion Btu) Limiting nuclear growth (low carbon source) will improve gas demand EIA Base Case EIA High Offsets EIA No Int'l Offsets EIA No Int'l/Limited Nuclear EPA Base Case EPA Limited Nuclear NG demand is flat to decreasing in most scenarios Limits on low carbon technologies (e.g. nuclear, renewables) will have greatest effect on increasing gas demand 23

24 Natural Gas Prices Delivered Price (2007$ per MMBtu) Natural Gas Price Curves EIA Base Case EPA Base Case EIA No Int'l/Limited Nuclear EPA Limited Nuclear NG prices increase more steeply with increased gas demand Again, this occurs with stricter limits on low carbon technologies 24

25 Conclusions CO 2 regulations are here Complex factors will dictate the role of natural gas in a carbon constrained environment Natural gas should be a foundation fuel under rational GHG regimes Industry must assess and incorporate carbon risks Need to initiate NOW Certifiable grade inventory took three years 25

26 Final Thought 26

27 Byron S. Wright Vice President, Corporate Development Greenhouse Gas Emissions- Prospects for Legislation and Regulation Gas/Electric Partnership February 10, 2010 Interstate Pipelines Exploration & Production