Mayor’s Energy Task ForceAugust 18, 2010

Agenda

• New Legislation• New Entrants• Gas Storage• E & P Activities

New Legislation• HB 369 - Creates Alaska Gas Development Corporation

In-state Pipeline plan to Legislature

July 1, 2011 due date

Address needs of Railbelt consumers (residential and commercial)

• HB 280 Cook Inlet Incentives Gas Storage

$1.50 / M Credit

10 year rent holiday, LIFO treatment

Investment Incentives 40% production tax credit on qualified capital

25% Income tax credit on qualified expenditures

HB 309 Jack-up Rig - 100%, 90%, and 80% credit (up to $25MM) on 1st three wells drilled from jack-up

New Entrants to Alaska• Apache - $34 B company, start-up 1954

– S-48, Canada, Egypt, North Sea, Australia

• Buccaneer Alaska• Linc Energy

Alaskan Clear & Equitable Share (ACES)

• In 2007 the Alaskan Government introduced the ACES program to incent new entrants to explore within Alaska. This program takes the form of a rebate of between 45 - 65% of direct exploration costs and up to 55% on development costs. This is a significant incentive and substantially reduces the commercial discovery threshold.

• On 19 April 2010 the Alaskan Legislature approved a significant amendment to Alaska’s AC ES program. The Governor

• signed this legislation into law on May 10, 2010. Most significantly, the statutory amendments enacted with this legislation will establish a tax credit of up to US $25 million for new wells drilled into the pre-Tertiary strata of the Cook Inlet with a jack-up drilling rig. The new incentive provides for the following:

– • If Buccaneer drills the first well in the Cook Inlet using a jack-up rig, it will be eligible to claim up to US $25 million of all drilling costs (including rig mobilization costs).

– If it drills the second well, the claim will be US $22.5 million.– if its drills the third well, it is entitled to claim US $20 million. A company is eligible for

only one of these incentives and is required to repay one-half (50%) the incentive equally over 10 years, but only if hydrocarbons are successfully produced.

• On any subsequent well Buccaneer will still be eligible for the standard AC ES incentive of 45 – 65% of drilling and development costs.

• The above incentives apply irrespective of the success of any well or development program.

Gas Storage Proposals

• CINGS, 11 BCF initial capacity

• Nicolai Creek, 1 BCF

CINGS

• SEMCO (Enstar parent) – formerly TransCanada

• Initial Capacity 11 BCF expandable, $180 MM

• Applications in to RCA, AOGCC, DNR

• Initial deliveries during Winter 2012 / 2013

• Customers, capacity, withdrawal, injection

• CEA, 2.4 B, 35 MM/D, 27 MM/D

• Enstar, 5B, 91 MM/D, 113 MM/D

• ML&P, 0.6B, 10 MM/D, 10 MM/D

Nicolai Creek

• Aurora Gas is developer

• Initial Capacity 0.7 BCF

• Applications in to AOGCC, DNR

• Initial deliveries during Winter 2011 / 2012?

• Likely customer is a Utility