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                       ALTERNATIVE ENERGY REPORT 12/23/09

                           Natural Gas as a More “Carbon Friendly” Energy Source

Natural gas is an extremely important source of energy for reducing pollution and maintaining a clean and healthy
environment. In addition to being a domestically abundant and secure source of energy, the use of natural gas also
offers a number of environmental benefits over other sources of energy, particularly other fossil fuels.

As many proponents have suggested, natural gas could bridge the gap from the current high greenhouse gas emitting
fuels, to other alternative energy or cleaner energy technologies, used for electricity generation and possibly

The rush to drill more natural gas wells comes in part because newly identified gas reserves offer the nation an
opportunity to wean itself from oil.

Emissions from the Combustion of Natural Gas

Natural gas is the cleanest of all the fossil fuels. Composed primarily of methane, the main products of the combustion
of natural gas are carbon dioxide and water vapor, the same compounds we exhale when we breathe. Coal and oil are
composed of much more complex molecules, with a higher carbon ratio and higher nitrogen and sulfur contents. This
means that when combusted, coal and oil release higher levels of harmful emissions, including a higher ratio of carbon
emissions, nitrogen oxides (NOx), and sulfur dioxide (SO2). Coal and fuel oil also release ash particles into the
environment, substances that do not burn but instead are carried into the atmosphere and contribute to pollution. The
combustion of natural gas, on the other hand, releases very small amounts of sulfur dioxide and nitrogen oxides,
virtually no ash or particulate matter, and lower levels of carbon dioxide, carbon monoxide, and other reactive

                                                    Fossil Fuel Emission Levels
                                              - Pounds per Billion Btu of Energy Input
                           Pollutant                            Natural Gas                Oil             Coal
                           Carbon Dioxide                          117,000              164,000          208,000
                           Carbon Monoxide                             40                   33              208
                           Nitrogen Oxides                             92                  448              457
                           Sulfur Dioxide                              1                  1,122            2,591
                           Particulates                                7                    84             2,744
                           Mercury                                   0.000                0.007            0.016
                                                 Source: EIA - Natural Gas Issues and Trends 1998

One of the principle greenhouse gases is carbon dioxide. Although carbon dioxide does not trap heat as effectively as
other greenhouse gases (making it a less potent greenhouse gas), the sheer volume of carbon dioxide emissions into the
atmosphere is very high, particularly from the burning of fossil fuels. In fact, according to the EIA in its report
'Emissions of Greenhouse Gases in the United States 2000', 81.2 percent of greenhouse gas emissions in the United
States in 2000 came from carbon dioxide directly attributable to the combustion of fossil fuels.

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Because carbon dioxide makes up such a high proportion of U.S. greenhouse gas emissions, reducing carbon dioxide
emissions can play a huge role in combating the greenhouse effect and global warming. The combustion of natural gas
emits almost 30 percent less carbon dioxide than oil, and just under 45 percent less carbon dioxide than coal.

           One issue that has arisen with respect to natural gas and the greenhouse effect is the fact that methane, the
           principle component of natural gas, is itself a very potent greenhouse gas. In fact, methane has an ability to
           trap heat almost 21 times more effectively than carbon dioxide. According to the Energy Information
           Administration, although methane emissions account for only 1.1 percent of total U.S. greenhouse gas
           emissions, they account for 8.5 percent of the greenhouse gas emissions based on global warming potential.
           Sources of methane emissions in the U.S. include the waste management and operations industry, the
           agricultural industry, as well as leaks and emissions from the oil and gas industry itself. A major study
           performed by the Environmental Protection Agency (EPA) and the Gas Research Institute (GRI) in 1997
           sought to discover whether the reduction in carbon dioxide emissions from increased natural gas use would be
           offset by a possible increased level of methane emissions. The study concluded that the reduction in
           emissions from increased natural gas use strongly outweighs the detrimental effects of increased methane
           emissions. Thus the increased use of natural gas in the place of other, dirtier fossil fuels can serve to lessen
           the emission of greenhouse gases in the United States.

Pollution from the Transportation Sector - Natural Gas Vehicles

The transportation sector (particularly cars, trucks, and buses) is one of the greatest contributors to air pollution in the
United States. Emissions from vehicles contribute to smog, low visibility, and various greenhouse gas emissions.
According to the Department of Energy (DOE), about half of all air pollution and more than 80 percent of air pollution
in cities are produced by cars and trucks in the United States.

Natural gas can be used in the transportation sector to cut down on these high levels of pollution from gasoline and
diesel powered cars, trucks, and buses. In fact, according to the EPA, compared to traditional vehicles, vehicles
operating on compressed natural gas have reductions in carbon monoxide emissions of 90 to 97 percent, and
reductions in carbon dioxide emissions of 25 percent. Nitrogen oxide emissions can be reduced by 35 to 60 percent,
and other non-methane hydrocarbon emissions could be reduced by as much as 50 to 75 percent. In addition, because
of the relatively simple makeup of natural gas in comparison to traditional vehicle fuels, there are fewer toxic and
carcinogenic emissions from natural gas vehicles, and virtually no particulate emissions. Thus the environmentally
friendly attributes of natural gas may be used in the transportation sector to reduce air pollution.

Natural gas is the cleanest of the fossil fuels, and thus its many applications can serve to decrease harmful pollution
levels from all sectors, particularly when used together with or replacing other fossil fuels.

Accounting Problem

Burning wood is considered "carbon neutral" because, as trees grow, they pull carbon out of the atmosphere and when
they die, decompose, or are burned they release that same amount of carbon. With this, there is no net gain of CO2 in
the atmosphere and growing plants and trees will continue to cycle that CO2. Compare this to the burning of fossil
fuels like petroleum and natural gas, which release old carbon that has been deep in the earth for millions of years,
creating a carbon imbalance in the atmosphere which contributes to global warming.

However, a biomass co-generation plant converts carbon sequestered over a tree’s 50- to 60-year growing cycle to
greenhouse gases. While existing greenhouse gas tracking and trading systems account only for emissions from fossil
fuels, new tracking systems, which are already in development, will soon need to include emissions of biogenic

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Conventional and Unconventional Natural Gas
Conventional natural gas is gas that may exist in the earth, trapped in a reservoir. 'Unconventional’ natural gas does
not exist in these conventional reservoirs - rather, this natural gas takes another form, or is present in a peculiar
formation that makes its extraction quite different from conventional resources. Unconventional natural gas, despite
existing in non-traditional forms, is usually included in estimations of the amount of natural gas available for use.

Historically, conventional natural gas deposits have been the most practical, and easiest, deposits to mine. However, as
technology and geological knowledge advances, unconventional natural gas deposits are beginning to make up an
increasingly larger percent of the supply picture.
What was unconventional yesterday, may through some technological advance, or ingenious new process, become
conventional tomorrow. In the broadest sense, unconventional natural gas is gas that is more difficult, and less
economically sound, to extract, usually because the technology to reach it has not been developed fully, or is too

For example, according to the Natural site, prior to 1978, natural gas that had been discovered buried deep
underground in the Anadarko basin was virtually untouched. It simply wasn't economical, or possible, to extract this
natural gas. It was unconventional natural gas. However, deregulation of the area (and particularly the passage of the
Natural Gas Policy Act, which provided incentives towards searching and extracting unconventional natural gas),
spurred investment into deep exploration and development drilling, making much of the deep gas in the basin
conventionally extractable.

Industry and Market Structure
The structure of the natural gas industry has changed dramatically since the mid-1980's, and is much more open to
competition and choice. Wellhead prices are no longer regulated; meaning the price of natural gas is dependent on
supply and demand interactions. Interstate pipelines no longer take ownership of the natural gas commodity; instead
they offer only the transportation component, which is still under federal regulation. LDCs (local distribution
companies) continue to offer bundled products to their customers, although retail unbundling taking place in many
states allows the use of their distribution network for the transportation component alone. End users may purchase
natural gas directly from producers or LDCs.

One of the primary differences in the current structure of the market is the existence of natural gas marketers.
Marketers serve to facilitate the movement of natural gas from the producer to the end user. Essentially, marketers can
serve as a middle-man between any two parties, and can offer either bundled or unbundled service to its customers.
Thus, in the structure mentioned above, marketers may be present between any two parties to facilitate the sale or
purchase of natural gas, and can also contract for transportation and storage. Marketers may own the natural gas being
transferred, or may simply facilitate its transportation and storage. Essentially, a myriad of different ownership
pathways exist for natural gas to proceed from producer to end user.

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Simplified Structure of Industry after Pipeline Unbundling

The diagram shows a simplified representation of the structure of the natural gas industry after pipeline unbundling
and wellhead price deregulation. It is important to note that the actual ownership pathway of the gas may be
significantly more complicated, as the marketer or the local distribution company (LDC) are not the final users. Either
of these two entities may sell directly to the end user, or to other marketers or LDCs.

                      Source: NGSA

Global Statistics
According to a June 2009 BP report on natural gas statistics for 2008, global gas consumption grew by 2.5%, below
the 10-year average. In North America, spot gas prices for the year remained well below oil prices and consumption
grew by an above-average 1.3%. Elsewhere only the Middle East saw above-average growth, driven by strong
domestic consumption among energy-exporting nations and a rapid expansion of intra-regional trade. In OECD
Europe and the Asia-Pacific region, oil-indexed gas prices rose more rapidly and consumption growth was below
average. Chinese consumption grew by 15.8%, and China accounted for the largest incremental growth in world gas

Global gas production grew by 3.8%, above the 10-year average of 3%. Strong growth was driven by the US, which
for the second consecutive year accounted for the largest increment to global production. In the US output rose by
7.5%, 10 times the 10-year average and the strongest volumetric growth on record. The development of
unconventional resources and strong drilling activity (which began to decline later in the year as prices weakened)
drove the US increase.

Natural gas accounts for 24.1% of world energy use, the highest share on record. See attached report

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See chart for comparison of fuel consumption in the U. S. Note that the legend is opposite that of the chart. So for
example, U. S. oil consumption is shown at the bottom of the chart.

           Data source:

Natural Gas Prices

More pricing and other data
BP site

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Natural gas conversions
According to Sourcewatch, some coal-fired power plants have been converted to burn natural gas, the environmental
impacts of which are better understood than those of biomass. Natural gas combustion produces almost 45 percent
fewer carbon dioxide emissions than coal, emits lower levels of nitrogen oxides and particulates, and produces
virtually no sulfur dioxide and mercury emissions. The lower levels of these emissions mean that the use of natural gas
does not contribute significantly to smog or acid rain formation. In addition, because natural gas boilers do not need
the scrubbers required by coal-fired power plants to reduce SO2 emissions, natural gas plants create much less toxic

However, natural gas is still a fossil fuel. Although its carbon content is lower than that of coal, it nonetheless releases
harmful CO2 into the atmosphere when burned. Its extraction from shale, the most significant new source of natural
gas, can have harmful impacts on water, land use, and wildlife, if the process is not managed properly. As with
biofuels, many environmentalists do not see natural gas as a long-term solution for the nation's fuel needs. In July
2009, Robert F. Kennedy Jr. published a column acknowledging the "environmental caveats" that come with
converting coal plants to natural gas. He and other environmental advocates, however, do support natural gas as a
short-term solution to reduce the environmental burden of coal until renewable solar, wind, and geothermal
technologies can be implemented to their full potential.
Below is a list of existing, in progress, and proposed coal plant conversion projects.

McDonough Steam Generating Plant
In August, 2009, the Chattanooga Times Free Press reported that Georgia Power is moving ahead with plans to replace
the McDonough Steam Generating Plant in Smyrna, Ga., with a natural gas-fired plant.
Progress Energy plants in N.C.
Progress Energy Corp. announced in August 2009 that it will shut down the three-unit 397-megawatt Lee Steam Plant
near Goldsboro, N.C., and apply for regulatory approval to replace the coal generation with 950 megawatts of natural
gas-fired generation. North Carolina State regulators approved the plan on October 1.

Riverside and High Bridge Plants: Minneapolis/St. Paul, MN
In September 2003, Xcel Energy announced plans to convert its Riverside and High Bridge coal plants to natural gas.
The move came in response to an emissions reduction bill passed in 2001 by the Minnesota Legislature, allowing any
utility company in the state to convert its coal plants to natural gas and then recover the costs of conversion through
rate increases. The facilities were part of a $1 billion upgrade of Xcel power plants in Minnesota. The new 570 MW
High Bridge Plant went online in May 2008 and the new 511 MW Riverside Plant in April 2009.

Capitol Power Plant: Washington, DC
On February 26, 2009, Speaker of the House Nancy Pelosi and Senate Majority Leader Harry Reid directed the
Architect of the Capitol, Stephen T. Ayers, to switch the Capitol Power Plant to run on natural gas. The letter came
just four days before a planned protest at the plant, where several thousand demonstrators gathered to protest global
warming. The announcement was viewed by many as a victory for grassroots activism, but the rally went forward to
call attention to coal issues around the country.

In April 2009, Ayers responded that he was shifting the plant's fuel source to natural gas. As part of the transition, he
requested $10 million to redesign and convert the second burner to use natural gas, a process that could be complete as
early as November 2010. Ayers noted that the plant would continue to use coal as a backup fuel during abnormally
cold weather or equipment outages.

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Arapahoe Station and Cameo Station
In August 2008, Colorado regulators approved Xcel Energy’s plan to shut down two coal plants: the Arapahoe Station
(Denver) and the Cameo Station (east of Grand Junction). According to Western Resource Advocates, "The utility’s
decision to shut down the plants has been praised as the nation’s first voluntary effort to cut coal power generation in
an attempt to reduce greenhouse gas emissions. In its decision to support Xcel’s plan, the Colorado Public Utilities
Commission (PUC) cited public health benefits and shared concerns about carbon emissions as major selling-points in
the company’s groundbreaking proposal. The verdict marks a collective effort to move the state and its utilities toward
the carbon reduction goals outlined in Governor Bill Ritter’s Climate Action Plan."

Xcel plans to replace the combined 229 MW of coal power with 850 MW of wind power and a 200 MW utility-scale
solar power plant with storage capacity by 2015. Another key component of Xcel’s proposal, to build a 480 MW
natural gas plant at the Arapahoe station, has been postponed pending approval by the Colorado PUC.

Recent Innovation (now in the popular press)

According to a 11/3/09 WSJ article….
The biggest energy innovation of the decade is natural gas—more specifically what is called "unconventional" natural
gas. Some call it a revolution.

Yet the natural gas revolution has unfolded with no great fanfare, no grand opening ceremony, no ribbon cutting. It
just crept up. In 1990, unconventional gas—from shales, coal-bed methane and so-called "tight" formations—was
about 10% of total U.S. production. Today it is around 40%, and growing fast, with shale gas by far the biggest part.

Prices had gone up, but increased drilling failed to bring forth additional supplies. But a few companies were trying to
solve a perennial problem: how to liberate shale gas—the plentiful natural gas supplies locked away in the
impermeable shale. The experimental lab was a sprawling area called the Barnett Shale in the environs of Fort Worth,

The companies were experimenting with two technologies. One was horizontal drilling. Instead of merely drilling
straight down into the resource, horizontal wells go sideways after a certain depth, opening up a much larger area of
the resource-bearing formation.

The other technology is known as hydraulic fracturing, or "fraccing." Here, the producer injects a mixture of water and
sand at high pressure to create multiple fractures throughout the rock, liberating the trapped gas to flow into the well.

The critical but little-recognized breakthrough was early in this decade—finding a way to meld together these two
increasingly complex technologies to finally crack the shale rock, and thus crack the code for a major new resource. It
was not a single eureka moment, but rather the result of incremental experimentation and technical skill. The success
freed the gas to flow in greater volumes and at a much lower unit cost than previously thought possible.

In the last few years, the revolution has spread into other shale plays, from Louisiana and Arkansas to Pennsylvania
and New York State, and British Columbia as well.

The supply impact has been dramatic. In the lower 48, states thought to be in decline as a natural gas source,
production surged an astonishing 15% from the beginning of 2007 to mid-2008. This increase is more than most other
countries produce in total.

Equally dramatic is the effect on U.S. reserves. With more drilling experience, U.S. estimates are likely to rise
dramatically in the next few years. At current levels of demand, the U.S. has about 90 years of proven and potential
supply—a number that is bound to go up as more and more shale gas is found.

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This transforms the debate over generating electricity. The U.S. electric power industry faces very big questions about
fuel choice and what kind of new generating capacity to build. In the face of new climate regulations, the increased
availability of gas will likely lead to more natural gas consumption in electric power because of gas's relatively lower
CO2 emissions. Natural gas power plants can also be built more quickly than coal-fired plants.

Some areas like Pennsylvania and New York, traditionally importers of the bulk of their energy from elsewhere, will
instead become energy producers. It could also mean that more buses and truck fleets will be converted to natural gas.
Energy-intensive manufacturing companies, which have been moving overseas in search of cheaper energy in order to
remain globally competitive, may now stay home.

So far only one serious obstacle to development of shale resources across the U.S. has appeared—water. The most
visible concern is the fear in some quarters that hydrocarbons or chemicals used in fraccing might flow into aquifers
that supply drinking water. However, in most instances, the gas-bearing and water-bearing layers are widely separated
by thousands of vertical feet, as well as by rock, with the gas being much deeper.

Therefore, the hydraulic fracturing of gas shales is unlikely to contaminate drinking water. The risks of contamination
from surface handling of wastes, common to all industrial processes, requires continued care. While fraccing uses a
good deal of water, it is actually less water-intensive than many other types of energy production.

This new innovation will take time to establish its global credentials. The U.S. is really only beginning to grapple with
the significance. It may be half a decade before the strength of the unconventional gas revolution outside North
America can be properly assessed. But what has begun as the shale gale in the U.S. could end up being an increasingly
powerful wind that blows through the world economy.
See full article

Water Quality Concerns

           Buried Secrets: Is Natural Gas Drilling Endangering U.S. Water Supplies?
           by Abrahm Lustgarten, ProPublica - November 19, 2008

In July, a hydrologist dropped a plastic sampling pipe 300 feet down a water well in rural Sublette County, Wyo., and
pulled up a load of brown oily water with a foul smell. Tests showed it contained benzene, a chemical believed to
cause aplastic anemia and leukemia, in a concentration 1,500 times the level safe for people.

The results sent shockwaves through the energy industry and state and federal regulatory agencies.

Sublette County is the home of one of the nation's largest natural gas fields, and many of its 6,000 wells have
undergone a process pioneered by Halliburton called hydraulic fracturing , which shoots vast amounts of water, sand
and chemicals several miles underground to break apart rock and release the gas. The process has been considered safe
since a 2004 study by the Environmental Protection Agency found that it posed no risk to drinking water. After that
study, Congress even exempted hydraulic fracturing from the Safe Drinking Water Act. Today fracturing is used in
nine out of 10 natural gas wells in the United States.

Over the last few years, however, a series of contamination incidents have raised questions about that EPA study and
ignited a debate over whether the chemicals used in hydraulic fracturing may threaten the nation's increasingly
precious drinking water supply.

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An investigation by ProPublica, which visited Sublette County and six other contamination sites, found that water
contamination in drilling areas around the country is far more prevalent than the EPA asserts. Our investigation also
found that the 2004 EPA study was not as conclusive as it claimed to be. A close review shows that the body of the
study contains damaging information that wasn't mentioned in the conclusion. In fact, the study foreshadowed many of
the problems now being reported across the country.

The contamination in Sublette County is significant because it is the first to be documented by a federal agency, the
U.S. Bureau of Land Management. But more than 1,000 other cases of contamination have been documented by courts
and state and local governments in Colorado, New Mexico, Alabama, Ohio and Pennsylvania.

It is difficult to pinpoint the exact cause of each contamination, or measure its spread across the environment
accurately, because the precise nature and concentrations of the chemicals used by industry are considered trade
secrets. Not even the EPA knows exactly what's in the drilling fluids. And that, EPA scientists say, makes it
impossible to vouch for the safety of the drilling process or precisely track its effects.

Of the 300-odd compounds that private researchers and the Bureau of Land Management suspect are being used, 65
are listed as hazardous by the federal government. Many of the rest are unstudied and unregulated, leaving a gaping
hole in the nation's scientific understanding of how widespread drilling might affect water resources.

"Halliburton's proprietary fluids are the result of years of extensive research, development testing," said Diana Gabriel,
a company spokeswoman, in an e-mail response. "We have gone to great lengths to ensure that we are able to protect
the fruits of the company's research…. We could lose our competitive advantage."

"It is like Coke protecting its syrup formula for many of these service companies," said Scott Rotruck, vice president
of corporate development at Chesapeake Energy, the nation’s largest gas driller, which has been asked by New York
State regulators to disclose the chemicals it uses.

Thanks in large part to hydraulic fracturing, natural gas drilling has vastly expanded across the United States. In 2007,
there were 449,000 gas wells in 32 states, thirty percent more than in 2000. By 2012 the nation could be drilling
32,000 new wells a year, including some in the watershed that provides drinking water to New York City and
Philadelphia, some five percent of the nation's population.
See full article

Gas Supply
According to a Dec 2009 report from First Enercast Financial, U.S. Natural Gas Inventories. On October 30, 2009,
working natural gas in storage was 3,788 Bcf (U.S. Working Natural Gas in Storage Chart), 414 Bcf above the 5-year
average (2004–2008), 379 Bcf above the level during the corresponding week last year, and 223 Bcf above the
previous record of 3,565 Bcf reported for the end of October 2007. Assuming a winter storage withdrawal about 14
percent (240 Bcf) greater than the previous 5-year average (October 2004 – March 2009), end-of-winter (March 31,
2010) stocks will be about 1,739 Bcf. This would be the highest end-of-winter storage level since 1991, when
inventories measured 1,912 Bcf.

See full report

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Future Gas Prices
According to an Oct 2009 article from Bulk Transporter, natural gas is getting more attention as a commercial truck
fuel. EIA projects the monthly Henry Hub natural gas spot price to average $2.32 per thousand cubic feet (Mcf) in
October, the lowest monthly average spot price since September 2001. Natural gas inventories likely will set a new
record high at the end of this year's injection season (October 31), reaching more than 3.8 trillion cubic feet (Tcf). The
projected Henry Hub annual average spot price increases from $3.65 per Mcf in 2009 to $4.78 in 2010.
However, upward price pressure next year is limited by the sensitivity of natural gas use in the electric power sector to
higher natural gas prices and continued expansion of U.S. natural gas production from shale formations.

See full article

           See current pricing

Forecast Gas Prices
According to the EIA site, the Henry Hub Spot Price for the year 2035 is expected to be $8.88 (in 2008 dollars).
See full report

According to the James A. Baker III Institute for Public Policy at Rice University, Henry Hub averages for natural gas
is expected to be $6.98 (2010-2020) and $7.79 (2021-2030).
See full report North American Shale Gas, Russia and Europe: An Unexpected Intersection

Impacts of a Cap-and-Trade Program on Industries’ Production Costs (EPA report)

In the absence of any mitigating policy measures like those proposed in H.R. 2454 (H.R. 2454: American Clean Energy
and Security Act of 2009, the primary determinants of a cap-
and-trade program’s effect on an industry’s production costs are the emission allowance price, the emission-intensity
of the industry’s production — taking into account both its direct emissions and its indirect emissions from its
electricity use — and the industry’s ability to shift to less emission-intensive production methods. The higher the
allowance price, the more emission-intensive the industry’s production, and the less able an industry is to shift to less
emission-intensive production methods, the greater will be the cap-and trade program’s impact on the industry’s
production costs.

In addition to the above factors, through its broader effects on the economy, a cap-and trade program can have other
indirect effects on industries’ production costs. In particular, a cap-and-trade program can affect the cost of various
raw materials (e.g., steel) that an industry uses. Through its effect on the demand for various fuels, such as coal and
natural gas, a cap-and trade program can also affect the underlying price of those fuels (i.e., the price excluding any
allowance costs) beyond the effect directly arising from the emission allowance requirement.

A primary concern of many in industry, particularly those that use natural gas as a feedstock, is a cap-and-trade
program’s effect on the demand for and underlying price of natural gas. However, it is important to recognize that a
cap-and-trade program will not necessarily increase the underlying price of natural gas. In fact, it could reduce the
underlying price of natural gas. A cap-and-trade program will reduce demand for natural gas in some applications by
making energy efficiency improvements and renewable energy more economically attractive. At the same time,
demand for natural gas could increase in other applications where natural gas use becomes more attractive than using
coal or oil. Reflecting these countervailing effects, over the years, economic modeling has reached varying
conclusions about whether and to what extent a cap-and-trade program would increase or reduce the total demand for
and price of natural gas.

Most current modeling projects relatively small impacts on the underlying price of natural gas, with a majority of
studies projecting a small decline. For example, in its core scenario analysis, EPA’s modeling of H.R. 2454 projects
that the underlying price (without allowance value) of natural gas decreases 0.6 percent in 2015 and 1.5 percent in
2020 relative to business-as-usual (BAU) levels.

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Other influences
According to the James A. Baker III Institute for Public Policy at Rice University (a leading institution advancing
effective, nonpartisan foreign and domestic policy), twenty years ago, nearly 75% of federal lands were available for
lease to oil and gas exploration companies. In recent years, however, environmental and land-use considerations have
prompted the U.S. to withhold significant acreage from oil and gas development, and the share of Federal lands
available has fallen below 20%. Moreover, since U.S. demand for natural gas is projected to grow during the next two
decades, U.S. natural gas imports will have to rise significantly. This, in turn, raises concerns about security of supply
and appropriate national natural gas policy.

As U.S. natural gas demand grows, questions also arise about potential structural changes that might occur in the
marketplace and how they might influence the future pricing relationships with competing fuels. This, in turn, has
implications for future investments and the cost of various policies enacted today. In particular, the outlook for natural
gas markets in North America are complicated by factors such as (i) the possibility of extreme volatility in
international oil price trends, which are likely to be highly influenced by geopolitical factors, (ii) uncertainty about
future environmental regulations in the U.S. electricity sector, and (iii) natural gas developments in other key
consuming and producing regions around the world. Each of these will have implications for the competitiveness of
natural gas relative to other fuels as a choice in industrial applications, power generation, and residential and
commercial uses.

See full article

Natural gas now is in the spotlight
According to a Nov 2009 article from San Antonio’s web site, …With CPS Energy's nuclear expansion plans on shaky
ground, San Antonio soon could be looking for other ways to meet future energy needs.

Because of a $4 billion cost estimate increase, Mayor Julián Castro says he is committed to protecting the utility's
investment thus far, but he's ready to walk away from the deal and begin looking at alternatives.

For CPS Energy, which spent the summer touting the nuclear expansion as the most affordable choice, natural gas is
the next best option.

At dozens of public meetings across the city, CPS Energy officials had said nuclear energy would cost 8.5 cents per
kilo-watt hour, with natural gas coming in at 10.5 cents. The utility estimates wind would cost 12.5 cents, solar 21
cents. Yet CPS Energy also points out natural gas' weaknesses: its cost has been historically volatile — from highs
above $12 per unit to current lows of $3 to $4 — and there are long-held concerns that the supply is declining.

Consensus is growing within the energy industry, however, that new technological advances may have turned
conventional wisdom on its head.

Natural gas is viewed as a good alternative to coal because it emits about half the carbon dioxide. However, nuclear
power plants, once construction is complete, don't produce any carbon dioxide — one of the reasons CPS Energy is
pursuing the expansion so vigorously.

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San Antonio is no stranger to natural gas. Thirty years ago, all of the city's electricity was produced by burning the
fuel. That changed in 1974, when LoVaca Gathering Co.'s Oscar Wyatt violated his contracts with the city and boosted
the price of natural gas, sending residents' electric bills skyrocketing almost overnight.

The incident persuaded CPS Energy leaders to diversify from what had been the city's sole energy source. They began
building coal-fired power plants and bought into the two nuclear reactors opened at the South Texas Project in the late
1980s. Natural gas now makes up a little less than half of the city's power capacity.

If the price of nuclear increases much, or if the long-term price of natural gas decreases, gas soon became the better
option, he said. And with bigger, better-capitalized companies now in the natural gas business and the supply
potentially opening up, Williams said that may be exactly what's happening.
See full article


           Exxon report

           Rig Counts

           Other Pricing Estimates


           Shale Supplies
           See presentation "Energy Market Consequences of an Emerging U.S. Carbon Management Policy - Progress
           to Date" page 4 for US shale locations and page 8 for supply quantities.

Author                             Mike Chmela (Project Director, Market Research)

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