DAVE DENGEL: Thanks, Jeff. On behalf of the Alaska Gas Line Port Authority I'd like to thank Commonwealth North for sponsoring this forum and giving all the projects an opportunity to explain what they are, who they are and what they'll do for the state.

For those of you that were expecting to hear from Bill Walker, our general counsel, Bill sends his apologies, yesterday afternoon he received an invitation from the U.S. Secretary of Energy, Spencer Abraham, to join him for a high level round table discussion in Los Angeles this morning to talk about the issue of natural gas supply and LNG supply into the west coast. So Bill is participating in that round table discussion with the secretary and others in California today.

The Alaska Gas Line Port Authority, as many of you know we've given this presentation a number of times to probably a majority of the folks here, we're a group that was formed by three municipalities in the state, the North Slope Borough, the Fairbanks NorthStar Borough and the City of Valdez. And in 1999 the voters in those three municipalities voted to form the Port Authority.

Our project is basically a three line project. It's a pipeline from the North Slope to Valdez for LNG, it's a pipeline from the North Slope to the Canadian border to interconnect in with the Canadian gas line project, and it's a gas line from the North Slope to the Sutton area to interconnect in with the Southcentral gas grid that would then provide gas into the Anchorage bowl and down into Kenai.

As we see it and the mission of the Port Authority was to maximize Alaska's natural gas resources to the maximum benefit of all Alaskans and the state of Alaska. Our project does that. As you can see just from the map alone it provides gas to the Canadian border and it provides gas into Valdez for LNG that would then go on into the west coast and Pacific Rim countries and it also provides gas into Southcentral Alaska.

Very briefly our project team is the Bechtel Corporation, Taylor-DeJongh, O'Melveny & Meyers and Walker and Levesque here within the state.

Our accomplishments to date, what I wanted to do is just kind of highlight what we've done to date so far. We have obtained an IRS ruling, we received that in the year 2000, basically which says that we are tax exempt. So any profits that we may make are exempt from federal income tax thereby giving more money back to the state and more money back to the wellhead.

We received a cost estimate from the Bendel Corporation and this is a not to exceed cost estimate, it's roughly $26 billion, but that includes all the costs, all the soft costs and all the hard costs and, like I said, it is a not to exceed so there would not be any cost overruns with that.

We also have an economic model that was prepared by Taylor-DeJongh. For those of you that are not familiar with Taylor-DeJongh, they are used -- most of the producers in the world have used Taylor-DeJongh to do their economic analysis. Taylor-DeJongh has also been used as advisors to just about every major LNG project in the world today. They have produced 18 different scenarios for us so that we can -- we in the state can determine which scenario would be best for the state of Alaska.

We are also exempt from FERC regulations. We are specifically -- as a municipal entity are specifically exempted out of any regulation by FERC.

We have an MOU. Approximately two months ago we signed an MOU with Crystal Energy which is a LNG receiving company in California that is looking to construct a receiving terminal in the Santa Barbara channel using an old oil platform.

We're also in the process of negotiating other MOUs with other companies for markets in the west coast.

The other thing and probably one of the most important things that we have done today is today the Alaska Gas Line Port Authority has submitted an application under the Stranded Gas Act to the Department of Revenue. We have a copy here and we have given that application to the Department of Revenue this morning.

And it is our intent to -- and the reason we submitted that application was we don't need anything from the state, the only thing we need right now is we need their commitment to the state's royalty gas. With that that'll make our -- that starts to make our project viable and it will also, as we've shown in the application, return up to $1.48 at the wellhead for the gas and will also provide approximately $1.5 billion per year to the state and the municipalities.

We've developed a municipal revenue sharing program whereby we would be giving money directly back to the municipalities and as an example the Municipality of Anchorage would receive anywhere from $33 million a year to $100 million a year. And every municipality within the state of Alaska would receive at least $50,000 a year down to the smallest municipality or village in the state of Alaska.

It would also give money back to the state of Alaska that they can use for operating the state as well as providing revenue sharing back to the municipalities.

That basically is what we are and who we are. Like I say, we've been working for the last four or five years, we have -- as you can see we have a very long list of accomplishments and we -- it is the intent of the board of directors of the Port Authority to actually get this project going and get it constructed within the near future.

Like I say we have a couple more MOUs that we're working on, once we get those we'll have enough of the market tied up that we can put a project together and actually start construction of that pipeline and putting gas not only into the state of Alaska, but into the Lower 48.

And that's -- I'd reserve the rest of my time for any questions people might have later on.

JEFF STASER: Thank you, Dave. Harold?

HAROLD HEINZE: Good morning. I'm Harold Heinze, I'm here representing the Alaska Natural Gas Development Authority. I know I have at least a couple board members in the audience, John Kelsey, our vice chairman Scott Hayward's here, and if there's anybody else just hold your hands up and I'll -- okay. We have five other board members.

The Authority is your creation, you in the November, 2002 election setup the Authority. It was done by ballet measure, an initiative, and basically our mission and all the things about us is what I want to cover very briefly in 10 minutes.

Number one -- if we could have the next slide. Just for clarity in terms of the projects, the project specifically authorized in the ballet measure, was for a gas line running from Prudhoe Bay to a point on Prince William Sound, read Valdez, for liquefying the gas and shipping it by LNG tanker from there. It also included specifically a spur line coming from Glennallen into the Sutton area so that the Cook Inlet area could be supplied with gas also. That is our project.

Obviously the first 530 miles of that are in common with every other project you're going to hear described here today because as you go from the North Slope to Delta, all those things are in common. We have looked at the project in both sort of a stand alone basis, but much more recently in combination with any of the other projects that are out there.

Next slide, please. I want to talk a little bit about the Authority itself rather than the project to start with. And first of all realize that we are a public corporation of the state of Alaska. We know of other examples, the Alaska Railroad, Alaska Housing Finance, the Permanent Fund, for instance.

In this case we were given some very broad authorities as a state agency. We have the right to issue revenue bonds, we have the right of eminent domain and so on.

Additionally we were given all the attributes of a normal corporation in that we can own, operate, build things, we can buy and sell gas, we can sue, be sued, borrow money, whatever you want.

That's important because the concept that we bring to it is how to combine those two sets of ingredients in a unique sort of way that makes the gas project from the North Slope happen.

Next slide, please. Our business model -- and I chose to use this terminology with this group and by the way if you can't see those slides there is a handout at your table of them.

Our business model is a very simple one. We are not in the business of making a profit. Okay? We are a public corporation of the state, we are not a profit making organization. Not to say we don't pay a lot of attention to economics and profitability in the traditional sense of it, but what we're interested in and what we're driven by is benefits. And what we figured out very early was that the key to a gas line from the North Slope hooking to market was to provide the lowest cost of service possible. Whatever transportation scheme can do that, that helps the economics, that helps the gas be developed and it frankly increases the value at the wellhead which is good for everybody that's involved in the process. So that's our model.

As you can see we've worked on the benefits to Alaska which I'm going to talk some more about. We set as a goal to borrow the money commercially, we did not want the state to fund us in the traditional sense of some of the more major projects we remember from the past when we had a lot of money in Alaska. We're not going down that pathway, we will test ourself against the commercial market.

And then finally we work cooperatively and frankly supportively with all the other projects. We're not in competition with anybody. We believe we have a lot to augment any project that is put on the table.

Next slide, please. There's a simple diagram here and it's on the back of your handout there and it simply portrays in graphical form what we identified as some of the benefits to Alaska. Because one of the first things we saw was that as people compared and talked about the different ideas on how to get North Slope gas to market was they tended to either talk about it like an investor, they talked about rate of return or they took a very strict governmental view and said how much money does the state of Alaska get.

Well, what we realized was a project like this has much more impact than that. It could effect your heating bill in your homes around here, as a matter of fact it will. It could effect your property values, you may get a job out of it, your business may get work, the economy may grow. And right now Northern Economics is putting together for us an integrated spread sheet model that pulls together all those effects so that we can measure the benefits of the projects.

Next slide, please. I put up the business concepts again realizing most of you are business people, you're used to thinking this way. I don't think there's anything very profound on that list, but occasionally we need to remind ourselves that the Authority is not in the business of doing things just because we want to, the only things we will take on are those things that we can uniquely do better than somebody else. And we think we have something to contribute in that regard.

Next slide, please. The project basically we're looking at involves $12 billion and four major components. It may be that the Authority is not involved in all four of those components, it may be that the producers, for instance, are involved with gas treatment on the North Slope. And we certainly don't intend to own tankers, we believe you can contract for those and the service can be provided.

As you can see that type of number there is a pretty good size number, we believe over time there are opportunities to bring that number down, but again at this point we have not spent the money on the engineering to improve on that estimate. That is an estimate that's taken from the Yukon Pacific work and over a period of over 15 years.

Next slide, please. If you take the $12 billion and you try to translate that into a cost of service, think of it as a tariff, one number that captures the flavor of delivering the gas from the North Slope to a market.

In this case what I've shown here is three different sets of numbers and exactly what the numbers are doesn't matter except that the number on the left is the kind of a number a commercial entity expecting a high rate of return on their equity investment, having to pay taxes, and having to borrow a lot of the money would expect to have to earn.

Now the way you use that number, of course, is to add then what you think a wellhead value might be, let's say for the sake of assumption here $1 and you add that to the 2.90, that gives you $3.90. And that starts to be the number you compare against what is taking place in the market. In the market today the price is probably close to $5 or more so that would be a very comfortable margin. In the longer term most people expect gas prices to be at least dipping down in the 3 to 3.50 range and so any reasonable project has to meet those kind of tests. So clearly 2.90 wouldn't work in that kind of a world probably.

On the other hand if we look at the Authority's ability because of it's unique tax status, it's unique financing status, if we look at that ability for instance as the example of how we build a highway here in Alaska, we go out and we issue bonds, we retire the bonds and that's it. We believe that the economic activity we create pays for it.

Now the important part of that is that number now, that cost of service drops by over $1. And if you look at that number now that is a very competitive number on a world scale and it is a very economic project. That's what we're struggling to understand is how we structure our organization to take advantage of that and help any and all of the projects. Next slide, please.

I think that's what I just said is, we can get a dollar, we think we can compete. Next slide, please.

We have to be able to compete because there's lots of folks with gas on the Pacific Rim and we need to be able to compete against them. We've looked at some of those projects, certainly some of them have advantages. We certainly see ourselves at least as capable as a project like Sakhalin, there are people talking about LNG out of South America with pipeline requirements and other things far in excess of ours. Next slide, please.

And then finally here's sort of the rough schedule. The advantage of the LNG project and the reason we think it should -- has to be seriously, seriously considered is that it can be done very quickly. The basic route involved is the same route as the Trans Alaska Pipeline, this project has been on the table for over two decades and it is well understood. Next slide, please.

Right now our biggest challenge, of course, is getting funding from the legislature to do the work, we work through that process and that is taking some of my time.

And with that we'll just leave it there and leave time for questions.

JEFF STASER: Thank you, Harold. Ken, you're next up.

KEN THOMPSON: Thank you very much for having me. I'm representing the Alaska Gas Transmission Company, executives with MidAmerican Energy were not able to be here today, however they will be meeting separately with the board of Commonwealth North as requested.

In looking at the presentation that will be on the screen, let's go to the slide. And more or less I want to just briefly review the project description, the Lower 48 gas market as we see it, critical process -- or progress milestones, our development schedule, some conclusions but then also a question many have asked, why the MidAmerican Energy Group. Next slide.

In the project description, the project sponsor group, Alaska Gas Transmission Company is the name of our company. It's 80 percent plus owned by MidAmerican Energy Holdings, that's an affiliate of Berkshire Hathaway. Berkshire Hathaway has $222 billion in assets, very little debt and $26 billion in cash. So this is a project that greatly interests them in investment. They have given the right for CIRI to own 9.95 percent of this project as well as Pacific Star Energy, a consortium of Alaska native corporations as well as a private Alaska company that can have 9.95 percent.

Essentially this Alaska Gas Transmission Company is organized to design, construct, own and operate this line from the North Slope to the Alaska Yukon border. This project will interconnect with Trans Canada at the Alaska Yukon border. Trans Canada will build a new line from that border to Boundary Lake, Alberta and that will deliver gas into a massive existing trading hub near Alberta -- or in Alberta. Next slide.

This shows you a map of the overall direction. Gas will be delivered to Canada and the Lower 48 markets utilizing existing pipeline systems. In fact, currently there's about 2 billion cubic feet of pipeline capacity south of Alberta in existing pipelines and by the time this is on in late 2010 they'll be additional capacity as West Canadian gas basins decline. So this project we can deliver into various markets within the United States and Canada such as the mid continent, west coast, as well as the Pacific Northwest markets. Multiple markets will be very important for optimal price for Alaska's gas. Next slide.

745 mile pipeline route, 48 inch diameter, 2,500 pounds high pressure, able to carry the liquids and the gas as well. Initial design capacity is 4.5 billion. Our estimated direct cost is $6.3 billion, and then Trans Canada and partners will build a line in the Canadian segment for -- they have estimated around $5 billion and we look to the producers to build a gas treatment plant on the North Slope at roughly 2.5, or MidAmerican Energy would construct that if the producers decided not to. We have in our design an expansion capacity of 6 billion cubic feet a day in future years.

Of course, this is dependent on regulatory approvals and successful commercialization. We're targeting December 31st, noon, 2010, for gas sales.

Lower 48 gas market environment as we see it, the supply/demand is increasingly tight. Alaska gas is needed now. Next slide.

There are declining imports from Western Canada as those basins are declining, new wells are not having sufficient production. Also the traditional U.S. domestic production areas are in decline except for the Rocky Mountains. We expect the Lower 48 demand to grow to about 10 to 15 billion cubic feet additionally, currently it's around 60 billion. It's going to grow substantially, able to fit in the 4 1/2 to 6 bcf a day from Alaska.

Gas prices have increased 57 percent, over 5 to $6 in the last three years and then literally are creating gas demand construction, people are using other fuels now. This is not good for Alaska, we need to be in the market, we need to get our gas to market as soon as we can. We also believe that this will help stabilize the Lower 48 gas markets. Next slide.

We're already seeing evidence of this because global LNG developers are bringing gas to the Lower 48. Forty LNG terminals have been proposed and most of that gas will come from foreign nations. We believe very strongly that America and Alaska should first develop our domestic gas resources.

We see that the current long term price forecast actually make development of Alaska's stranded gas economic. Next slide.

Part of the critical progress milestones, enactment of the national energy bill, and in that we'd like to see U.S. loan guarantees, expedited permits, limits on judicial review as well as accelerated depreciation that can all help lower the tariff. And we pass that lower tariff around to the customers as well as to improve net back prices for producers in the state.

Also obviously a stranded gas act contract with the state of Alaska's very important, we're hoping to achieve that by mid March with the state of Alaska for public review and then approval by the legislature.

We also must reach -- while we've reached technical agreements and the sharing of our knowledge with Trans Canada, commercial discussions continue and so an agreement on commercial terms with Trans Canada is an important piece of the overall project.

And we also must develop an economic commercialization plan, discussions are already taking places as Mr. Sokol, CEO of MidAmerican testified, with over 50 customers in the Lower 48 to pull this gas into the Lower 48 with customers that would be known up front.

And now let me shift to the project development schedule that we're on. The sponsor organization was formed on January 20th, less than 30 days after Mr. Sokol called CIRI and Pacific Star Energy. They move very fast. January 22nd, stranded gas development application was filed. First quarter we're hoping for national energy bill to pass, second quarter, the stranded gas act with the state and then also in second quarter that we make significant progress with Trans Canada through those discussions underway. And then begin the FERC application process later this year. Next slide.

You see the evolution of working with the Federal Energy Regulatory Commission, Trans Canada will work with the Energy Board in Canada. 2007 we'll begin construction and then we would have production December, 2010.

So let me conclude with a few major points. Canadian exports and most U.S. domestic supply basins are in decline and are unable to satisfy forecasted demand growth in the Lower 48. The Alaska natural gas pipeline is economic and will compete with LNG imports to satisfy that supply/demand imbalance. Using existing infrastructure within Canada, south of Alberta, will help lower the tariff, create better net backs for producers in the state of Alaska as well as provide multiple markets across the entire geography of North America. Another -- next slide.

Use of those interconnects can help us on our overall cost, the capital cost risk and the tariff. It is going to be very important though to have an early in service day, our vision for the gas line is that we can moderate U.S. gas prices for all consumers, as well as provide some energy security benefits for the U.S.

It will also maximize value for the State of Alaska and we do believe firmly that now's the time for Alaska gas.

And then a final slide, a question we often get, why the MidAmerican Energy Group. Financial strength, $26 billion in cash with Berkshire Hathaway, a AAA bond rating and $222 billion in assets. CIRI and Pacific Star Energy are ready to go in terms of our funding and additional work that we can do in the next two years in raising additional funds from Alaskans.

Gas pipeline construction and operating experience, this company is the second largest natural gas transmission company in the United States, MidAmerican Energy Holdings. They operate the largest diameter and have constructed the largest diameter most recent pipeline expansions in the United States. Their ability, our structure is dependent on low cost. If we don't deliver a low cost tariff producers will not sell to us and the state will not approve our project. We know that, we have to deliver the lowest cost tariff.

We will also have open access not only for producers, but also open access for customers throughout the United States. Those discussions have already begun with major customers and they're very excited about gas from Alaska because of the constant rate it can be provided at.

And then a last point, do not overlook Alaskan companies have been brought in, Alaskans will own a piece of the pipe this time, just under 20 percent. That changes the fundamental business model from service and support to equity ownership for Alaskans. Equity ownership brings the real wealth in any natural resource industry and we're excited to be part of it.

Thank you very much and we'll answer questions in a moment.

MR. STASER: Thank you, Ken. Next we're going to go with Ken Konrad.

KEN KONRAD: Hello, folks. Thank you, Jeff. I'm Ken Konrad with BP. BP's part of the sponsor group that's currently in negotiations with the state to develop a commercial gas project along with ConocoPhillips and ExxonMobil. I'm going to spend a few minutes today talking, giving a little project overview then Joe's going to step up and provide a little more context and details.

I guess, in the simple sense our project is really all about a large diameter, high volume, high pressure gas pipeline to service North American markets. North American markets, the biggest, deepest, most vibrant gas market in the world, it's clearly the place we want to sell our gas and we think by using a leading edge technology gas pipeline is clearly the lowest way to get that gas to that market.

Our project includes four elements. The first, starting on the North Slope, a gas treatment plant to remove carbon dioxide, H2S, compress the gas and chill the gas. And then what we call the A to B segment, or the Alaska to Alberta segment, which would take gas from the North Slope through Alaska and through Western Canada into Alberta. From there we would -- we engineered a pipeline from Alberta into the upper U.S. mid west, to evacuate gas out of Alberta, but that's really only one possible outcome. There's a possibility that there will be excess capacity on existing infrastructure at that point in time, existing infrastructure could be expanded. Some combination of those three new builds to excess capacity expansion will take the gas out of Alberta and the market will decide what the lowest cost way out of that basin is, the lowest cost solution is obviously best for Alaska and best for the project.

Finally, there's a natural gas liquids treating plant located somewhere along the line, probably in Alberta. That is to reduce the btu level of the gas down to a level that is saleable into the market, the btu spec of the gas coming off the Slope is -- will be too high to sell into LDCs or utilities, we'll have to bring it down to a lower level and then sell those liquids. And there's actually infrastructure in Canada to be able to store and transport and access markets from there.

So those are the four big elements of our project. So we look at the project from -- basically from wellhead to burner tip. The cost of that project, we spent about $125 million a couple of years ago engineering that project in some level of detail. It looks like all four of those elements would cost about $19 billion.

With respect to Alaska that would include 2.3 billion for the gas treatment plant on the North Slope and 4.4 billion for the pipeline segment itself in Alaska. So something approaching $7 billion of investment in Alaska.

The pipeline, of course, would be open access, it would be available to any party, be that a producer, a gas marketer, an LDC, utilities, LNG projects, virtually any party would have access to the pipeline and they could secure space on that pipeline.

It's an exciting project, it's a great gas market, but it is a project of unprecedented scale and hence it has quite a few risks. So while there's -- the rewards are there, currently the risks outweigh the rewards. And as we wound up our work in 2002 on the first phase of this study, we said there's four things we've really got to do and one was reduce the costs. And we've been working pretty hard over the past couple years and we think we see line of sight to actually reducing the cost somewhat from our initial estimate.

Two, we need U.S. legislation. We've gotten close to it a couple time, two votes short, but I think ultimately we will get that, but we're not there today.

We need a contract with Alaska to give us the certainty this project needs and I'm pleased to say that the stranded gas act passed in 2002, we're at the table with the state in trying to work those terms out.

And finally we need a clear regulatory process in Canada, just like in the U.S. where you need clarity and predictability, we need the same thing in Canada. And that's -- we're making progress on all four of those elements, but unfortunately the shoe hasn't dropped on those key government frameworks yet.

I would point out in our discussions with the state, there's really three priorities we have. One is clarity and predictability around the take, we don't want to argue, we want simple, clear rules that everyone will be happy with over the length of the project.

We're going to need enhancements. Clearly we need to modify the level of the state take, that can actually help a project get over the hurdle.

And finally we need a contract that's going to be durable, it's really going to stand the test of time so that after the $19 billion is spent the rules don't change. So that is really key.

And we're in discussion with the state and I might add that what we're working with the state on includes all elements of the tax take, clearly severance tax and royalty are very important to the upstream producers. But, indeed, the taxes paid by whoever owns the pipeline are also quite important because ultimately whatever taxes are paid by the pipeline entity are passed directly through to us as shippers on the line. So that's also pretty important.

With that kind of high level of overview I was going to turn it over to Joe to provide a little more context.