Gas Quality Interchangeability - Nicor Gas

1 1 Gas QualityInterchangeabilityMaureen WilliamsSenior Manager,Gas Control & Transmission2 Interchangeability The overall ability to substitute one gas for another without materially impacting the safety, efficiency and operability of existing end-use applications Blending gas3 Why is this an issue now? Domestic and Canadian production (supply) in a holding pattern Demand is expected to continue to rise Two main sources of expanded supplies near to mid-term Domestic production Outer Continental Shelf (OCS) Liquefied Natural Gas (LNG) Additional Sources Coal Gasification Landfill Gas Alaskan Gas still more than 10 years out4 Working To Understand the Impact 2004 National Petroleum Council publishes a report commissioned by the Department of Energy regarding the future of US energy supply where LNG is identified as a viable alternative National Gas Council forms a working group NGC+ to study Interchangeability issues, and develop industry consensus on standards and specifications for pipeline gas Quality Publish the NGC+ White Paper5 Looking Toward LNG Currently 6 operating LNG import terminals in North America 17 proposed LNG import terminals have been approved 25 are on file in Canada.

2 US and Mexico 21 projects are in the planning stages Many are in the Gulf Region Some Illinois supplies are aggregated and sourced from the Gulf of Mexico67 FERC Action June 2006, the US Federal Energy Regulatory Commission (FERC) issues a policy statement on LNG Interchangeability Supports the NGC+ White Paper and accepted its guidelines as an interim step Pipelines need to work with LDC s and customers to develop tariff language for Gas Quality8 Interchangeability The overall ability to substitute one gas for another without materially impacting the safety, efficiency and operability of existing end-use applications Blending gas End product will not lookthe same, but should workthe same9 Blending (Btu)110010351050 MixingBlending106110 Pipeline Quality Traditional Btu Specific volumes of gas components CO2, Nitrogen, Total Sulfur, H2S, Oxygen Water and liquids Dust Temperature New WOBBE11 Components of Natural GasComponent%moleMethane C2H6 Propane C3H8 Butanes C4H10 Pentanes C5H12 Hexanes+ C6+Nitrogen N2 Carbon Dioxide CO2 Helium HeHydrogen H212 Interchangeability Index WOBBE = Btu/ (specific gravity)

3 NGC+ Guidelines 4% of local historical WOBBE Subject to 1400 max WOBBE Subject to 1110 Btu/scf max HHV Nicor historic WOBBE 1327 1273 1380 Nicor historic Btu 102513 Understanding the WOBBEWO B B E B ox1327 Gas Pipeline Supplies 7 Interstate Suppliers NGPL Northern Natural ANR Northern Border Alliance Midwestern Panhandle Eastern Nicor Gas Aquifer Storage(Winter Only)15 Nicor Supply Capabilities Much of the Nicor Gas system is integrated to facilitate further blending Storage Market transmission pipeline system Some customers may have only a single source of gas16 Why are these issues important? Anticipation of LNG into supply chain by 2008 Higher Btu gas Burner tip issues (industrial, power plants)

4 Process issues Current processing plants at times can generate more value of heavier hydrocarbons in gas stream Creates more variability in Gas Composition17 Nicor s Participation Industry technical conferences Writing and editing the technical papers white paper Supporting pipeline gas Quality tariff changes with testimony, technical conference presentation and brief filings before FERC Webinar series to educate customers Customer survey to help better understand the customers energy needs18 Nicor Gas knows what we have historically delivered to meet our customers energy needs What is the appropriate energy level for our customers ?Does Variability = Reliability?19 Next Steps Collect and analyze the survey information20 Questions?