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ALASKA GASLINE PORT AUTHORITYALASKA GASLINE PORT AUTHORITY

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Alaska Gasline Port AuthorityAlaska Gasline Port Authority

The Alaska Gasline Port Authority consists of three municipalities

– North Slope Borough

– Fairbanks North Star Borough

– City of Valdez

The Alaska Gasline Port Authority consists of three municipalities

– North Slope Borough

– Fairbanks North Star Borough

– City of Valdez

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Alaska Gasline Port AuthorityAlaska Gasline Port Authority

Board of DirectorsBoard of Directors

North Slope BoroughMayor George Ahmaogak, ChairAl AdamsRichard Glenn

North Slope BoroughMayor George Ahmaogak, ChairAl AdamsRichard Glenn

City of ValdezMayor Bert CottleDave Cobb, SecretaryJohn Kelsey

City of ValdezMayor Bert CottleDave Cobb, SecretaryJohn Kelsey

Fairbanks North Star BoroughMayor Rhonda Boyles, TreasurerCharlie Cole, Vice ChairBarbara Schuhmann

Fairbanks North Star BoroughMayor Rhonda Boyles, TreasurerCharlie Cole, Vice ChairBarbara Schuhmann

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Alaska Gasline Port Authority’s MissionAlaska Gasline Port Authority’s Mission

The mission of the Alaska Gasline Port Authority is to enable the development of Alaska’s North Slope gas to the maximum benefit of all Alaskans.

The mission of the Alaska Gasline Port Authority is to enable the development of Alaska’s North Slope gas to the maximum benefit of all Alaskans.

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Evolution of the Alaska Gasline Port AuthorityEvolution of the Alaska Gasline Port Authority

Preparation of the project development plan; engineering, procurement and construction plan; project cost estimate and alternatives analyses

Preparation of economic and financial models

IRS granting of federal income tax exemption

Preparation of the project development plan; engineering, procurement and construction plan; project cost estimate and alternatives analyses

Preparation of economic and financial models

IRS granting of federal income tax exemption

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The Project TeamThe Project Team

Alaska Gasline Port Authority Bechtel Corporation – technical and

development support Taylor DeJongh – financial analysis and

formation O’Melveny and Myers – development counsel Walker Walker and Associates – general

counsel

Alaska Gasline Port Authority Bechtel Corporation – technical and

development support Taylor DeJongh – financial analysis and

formation O’Melveny and Myers – development counsel Walker Walker and Associates – general

counsel

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Advantages of a Y-LineAdvantages of a Y-Line

Combining a gasline to the lower 48 with a gasline to an LNG and/or GTL project will lower the cost of gas transportation down each branch of the line by approximately 33 percent

Combining a gasline to the lower 48 with a gasline to an LNG and/or GTL project will lower the cost of gas transportation down each branch of the line by approximately 33 percent

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Construction CostConstruction Cost

A single line to carry 3 bcf per day = $7.0 billion

A Y-line to carry 3 bcf to the Canadian border and 3 bcf to an LNG/GTL facility = $9.7 billion

A single line to carry 3 bcf per day = $7.0 billion

A Y-line to carry 3 bcf to the Canadian border and 3 bcf to an LNG/GTL facility = $9.7 billion

9.72

9.72

= $4.85 billion= $4.85 billion

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Project Scope – Y-LineProject Scope – Y-Line

Gas conditioning plant on the North Slope 550-mile, 56-inch diameter pipeline from North

Slope to Delta Junction 150-mile, 44-inch diameter pipeline to Canadian

border for interconnect to lower 48 256-mile, 46-inch diameter branch line to Valdez Spur line to Anchorage from Glennallen 15 million ton per year LNG plant, LPG

fractionation plant and port facilities in Valdez

Gas conditioning plant on the North Slope 550-mile, 56-inch diameter pipeline from North

Slope to Delta Junction 150-mile, 44-inch diameter pipeline to Canadian

border for interconnect to lower 48 256-mile, 46-inch diameter branch line to Valdez Spur line to Anchorage from Glennallen 15 million ton per year LNG plant, LPG

fractionation plant and port facilities in Valdez

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Cost of Y-Line for Two ProjectsCost of Y-Line for Two Projects

Construction cost

– Conditioning plant (assuming noefficiencies from existing plant) $ 4.2 billion

– Pipeline (including thetwo branches) $ 9.7 billion

– LPG fractionation plant $ 450 million

– LNG plant and port facilities $ 3.65 billion

– Construction cost total $ 18.0 billion

Construction cost

– Conditioning plant (assuming noefficiencies from existing plant) $ 4.2 billion

– Pipeline (including thetwo branches) $ 9.7 billion

– LPG fractionation plant $ 450 million

– LNG plant and port facilities $ 3.65 billion

– Construction cost total $ 18.0 billion

(includes escalation and $1.8 billion contingency)(includes escalation and $1.8 billion contingency)

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Cost of Y-Line for Two Projects (Cont’d)Cost of Y-Line for Two Projects (Cont’d)

Soft costs– Interest during construction $ 4.9 billion

– Owner’s contingency $ 900 million

– Debt service reserve $ 1.0 billion

– Financing fees, working capital, etc. $ 1.0 billion

$ 7.8 billion

– Minus pre-completion revenue -3.2 billion

– Total financing required $ 22.6 billion

Soft costs– Interest during construction $ 4.9 billion

– Owner’s contingency $ 900 million

– Debt service reserve $ 1.0 billion

– Financing fees, working capital, etc. $ 1.0 billion

$ 7.8 billion

– Minus pre-completion revenue -3.2 billion

– Total financing required $ 22.6 billion

(for both LNG project and pipeline to Alaskan-Canadian border for Lower 48 sales)

(for both LNG project and pipeline to Alaskan-Canadian border for Lower 48 sales)

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Financial Results of the Y-LineFinancial Results of the Y-Line

Producers: $2 billion to $3 billion per year State – royalties, severance tax, and corporate

income tax: $750 million to $980 million per year Payment in lieu of property taxes: $114 million

per year All Alaskan Community Dividend: $111 million

per year Assistance to Alaskan communities to lower

energy costs: $37 million per year

Producers: $2 billion to $3 billion per year State – royalties, severance tax, and corporate

income tax: $750 million to $980 million per year Payment in lieu of property taxes: $114 million

per year All Alaskan Community Dividend: $111 million

per year Assistance to Alaskan communities to lower

energy costs: $37 million per year

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Benefits of Port Authority OwnershipBenefits of Port Authority Ownership

Guarantees maximum in state usage of North Slope gas

Income is tax exempt (IRS ruling) Port Authority can access 100 percent

project financing for the entire project Port Authority’s required return on

investment is substantially lower than a privately-owned project

Guarantees maximum in state usage of North Slope gas

Income is tax exempt (IRS ruling) Port Authority can access 100 percent

project financing for the entire project Port Authority’s required return on

investment is substantially lower than a privately-owned project

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Benefits of Port Authority Ownership (Cont’d)Benefits of Port Authority Ownership (Cont’d)

Some debt would be financed with tax-exempt bonds

Port Authority is not subject to FERC regulation Annual flow of revenue to state and local

communities Port Authority creates local ownership of

gasline

Some debt would be financed with tax-exempt bonds

Port Authority is not subject to FERC regulation Annual flow of revenue to state and local

communities Port Authority creates local ownership of

gasline

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Benefits of Port Authority Ownership (Cont’d)Benefits of Port Authority Ownership (Cont’d)

No need to give up state revenue (tax or royalties) to subsidize the project

More certainty of gas available for in-state usage and more control over price

No need to give up state revenue (tax or royalties) to subsidize the project

More certainty of gas available for in-state usage and more control over price

Example:$3.00 Chicago price per million Btu-1.20 Transportation cost Alaska-Canadian

border to Chicago$1.80 Total wholesale price to Anchorage or

Fairbanks communities

Example:$3.00 Chicago price per million Btu-1.20 Transportation cost Alaska-Canadian

border to Chicago$1.80 Total wholesale price to Anchorage or

Fairbanks communities

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ALASKA GASLINE PORT AUTHORITYALASKA GASLINE PORT AUTHORITY