Energy Park

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Energy Park
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Background

• No indigenous natural gas since early 20th
  century (Moncton from Albert County)
• Recent natural gas discovery in Penobsquis area
  (Kings County) by Corridor Resources
• PCS utilizing this gas for all non-electrical
  energy requirements above ground
• Over 50 million invested to date, more
  exploratory drilling scheduled for this year

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Economic Development Opportunity

• Stated in the 2002 ACOA Study Natural Gas and
  Its Impacts on Greenfield Areas re economic
  development
• It is possible that long-term access to
  RELATIVELY INEXPENSIVE gas could trigger such
  benefits, for example, if gas were available at
  preferential rates near the source of supply

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Current Situation

• Natural Gas-Based Economic Development Study
  completed and distributed six months ago
• A MAJOR OPPORTUNITY for New Brunswick was
  verified and economic development models in other
  jurisdictions identified
• The need to move quickly to capture the
  opportunity was highlighted

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The KEY Numbers

• Proven/probable reserves 120 Bcf
• Expert (3rd Pty) est. deposits 1.0 Tcf
• Initial Sable Island deposit 1.3 Tcf

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Critical Issues for Corridor

• Extraction challenges
• Identifying threshold ( proven and
  extractable) volume for lateral construction
• Raising investment capital / partnering with
  larger player

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Why the urgency?

• Corridor Resources
  
• Investors looking for ROI
• i.e. selling gas ASAP
• Business plan is based on identifying enough gas
  to justify investment in lateral
• i.e. export everything to the U.S. through MNE,
  the ONLY current market.
• Estimated cost of lateral 30M

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Current Gas Field
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Urgency To Do What?

• Create a competitive, alternative market
• Use the gas locally rather than exporting to
  benefit another country
• Offer the same or better NET revenue to
  Corridor
• Offer investor companies/customers PREFERENTIAL
  PRICING
• Put in place BEFORE investment in the lateral!

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Using Gas to Attract Investment

• Location must offer a strong Value Proposition
• Cheaper gas alone will not attract investment
• Success depends on creating the needed business
  environment, investing in the park
  infrastructure, and a strong marketing effort

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Timetable for Action

• Assume successful drilling program
• this summer
• Allowing for regulatory processes
• and raising capital (est. 6-8 months)
• Major investment in Lateral by Spring, 06
• Alternative market (s) identified 15 month
  window!

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The ENERGY PARK Concept

• An industrial park located at or near the
  natural gas wells
• A greenfield site that is outside of all current
  and anticipated natural gas service areas within
  New Brunswick
• Minimal infrastructure costs to bring local gas
  to and distribute within the industrial park
• Anchor tenant electrical generating station
• Proven concept

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Models for New Brunswick

• BAGLAN ENERGY PARK (Wales)
• www.baglan-energy-park.com
• EMPIRE ZONES (New York State)
  www.gorr.state.ny.us/gorr/EmpireZones.htm

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B. E. P. Website Quote

• At Baglan Energy Park, customers can benefit
  from unique cost savings which will translate
  into improved profitsThe net effect is that
  energy savings of up to 30 will be achieved,
  providing real commercial benefits for all
  customers, with high energy consumers deriving
  the biggest advantages...

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B.E.P. Key Attractions / Value Proposition for
attracting tenants

• Availability of highly skilled, flexible labour
• Highly accessible location on the M4, excellent
  rail and sea links
• Very good infrastructure
• Availability of government assistance
• Energy savings
• Low density, high quality sites

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Empire Zone Manufacturing . . NYS
Electric and Gas Discounts of up to 4 cents per
KwH on electricity and up to 6 cents per Therm on
gas are available to Zone businesses.
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From NYS Press Release

• TITLE Governor Pataki Low-Cost Power Helps
  Frankfort Firm Expand
• QUOTE In total the power allocations will
  save.about 27
• QUOTE Governor Patakis POWER FOR JOBS program
  and the ECONOMIC DEVELOPMENT POWER program have
  both helped Grannys Kitchens lower its energy
  costs and increase its employment opportunities.
  (40 more jobs)

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Support for Energy Park

• Kings East Development Partnership
• STRONG
• Corridor Resources
• NEUTRAL
• Province of New Brunswick
• UNCLEAR

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Required from the Province

• Strong clear public statements of support
  from the Premier and Cabinet Ministers
• Priority action from key departments around the
  issues of
• Legislative and business environment
• Financial and resource commitments for putting
  the Energy Park infrastructure in place quickly
• Ongoing financial and resource commitments for
  marketing the Energy Park (as one of New
  Brunswicks key competitive advantages in
  attracting investment) l

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Local Distribution Issue

• When a local gas producer has submitted an
  application for a local gas producer franchise to
  the Board to distribute gas and offer a customer
  service within a gas distributor's general
  franchise, the Board may authorize the producer
  to do so, where it is satisfied that the
  customers of the gas distributor would not be
  materially prejudiced by authorizing the local
  gas producer to serve the part of the gas
  distributor's general franchise to which the
  application relates.
• Excerpt from Gas Distribution Act, 1999.

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ENBRIDGE

• No current or planned gas distribution anywhere
  near the proposed location of the Energy Park
• Energy Park tenants are new businesses
  attracted there, not existing businesses
  (potential customers)

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Regulatory Environment

• Natural Gas Allow for the flow of gas from
  local wells to the energy park, without being
  subjected to gas distributor control (Enbridge)
• Electricity Ensure that NB Power pays
  competitive market prices for electricity sold
  to the grid and market fees for wheeling
  power to other markets

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NB Power

• Current regulatory environment discourages the
  attraction of an electrical generating investor
  company
• 1) Currently pay approx. 40 (?) of sale price of
  electricity to non-NB Power producers strong
  disincentive to investment
• 2) Control wheeling rights and fees charged to
  access foreign markets

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Regulatory Solution

• Real market pricing for purchased electricity
  and for wheeling power to outside customers.
• Benchmark these prices against those in other
  competitive jurisdictions (Maine and other US
  states offer very good models)

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Anchor Tenant (Electrical Power Generator)

• Attracted by very competitive costs with cheap
  natural gas as the major component
• In return for this fuel benefit , must offer
  tenants of Energy Park a substantial discount on
  electricity (10-30 less than the NB Power
  negotiated rate for its largest customers)

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Target Industries (high energy users)

• Food Processing Sector
• Chemical/Petrochemical Sector
• Wood Sector
• Possible Local Opportunities
• - Canada Cement (Havelock)?
• - Michelin Tire (NS)?
• - kiln-dried lumber, furniture
  manufacturing

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Conclusion

• NATURAL GAS A Made in New Brunswick
  Competitive Advantage!!
• stable supplies very competitive pricing
  
• THE major competitive advantage in economic
  development as fossil fuels are depleted around
  the world!!
• Attracting jobs here for our children and
  much needed immigrants!!
• Higher standard of living for all!!

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IMMEDIATE REQUEST

• Formation of an Energy Park Committee composed
  of the Deputy Ministers of
• - Energy
• - Natural Resources
• - Business New Brunswick
• - Environment and Local Government
• Mandate to co-ordinate and fast-track the
  Energy Park project