Smart Energy Initiative

Presented by:John R. Hanger

717-237-6036jhanger@eckertseamans.com

April 19, 2012

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U.S. In Energy Boom: Key Facts Gas Production in 2011 Set Record

U.S. World’s Number 1 Gas Producer

U.S. Oil Production Increasing For First Time in 35 Years

U.S. Oil Imports Decline From 60% in 2005 to 47% in 2010

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Total Energy Provided By Fuels Oil 34%

Natural Gas 26%

Coal 19%

Renewables 11%

Nuclear 10%

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Power Generation Trends

Renewable Energy of all Types (Ethanol, Hydro, Biomass) Provided About 11% of All U.S. Energy in 2011

Coal Gas Nuclear Wind Solar2000 52% 16% 20% 0 02011 42% 26% 20% 3% 0.2%2012 38% 29% 20% 4% 0.4%

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U.S. In Energy Boom Wind Has Doubled Since 2008:

25,000 MW to 50,000 MW Iowa - 20% of Electricity From Wind Texas – 7% of Electricity From Wind Wind Power Costs Cut 65% Since

2003 Wind Generation Now Costs 5 Cents

Per Kwh

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U.S. In Energy Boom U.S. Solar Has Increased 700% Since 2008

500 MW to 4,000 MW

Solar Costs Cut From $10 Per Watt to About $2.75 Per Watt for Large Projects

Rooftop Solar in $3 to $4 Per Watt Range

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Energy Efficiency Also Booming Oil Use Back to 1999 Levels

Gasoline Use Back to 2001 Levels

Total Energy Use at 2000 Levels

New Cars Sold in February 2012 18% More Fuel Efficient Than in October 2007

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Gas Production In Pennsylvania First Oil Well Drilled in Pennsylvania

in 1857 Approximately 400,000 Oil & Gas

Wells Drilled in Pennsylvania First Exploratory Shale Gas Wells

Drilled in 2005 200 Shale Gas Wells Drilled by 2008

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Strategic Objective Should Be:

Produce the Gas and Protect the Environment

Shale Gas Development

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Gas Production In Pennsylvania Prior to Shale Gas Wells,

Pennsylvania Produced Typically Less than 200 Billion Cubic Feet of Gas/Year or Less than 1% of U.S. Gas Production

Pennsylvania has Issued More than 9,000 Shale Gas Well Permits

More than 5,000 Shale Gas Wells Now Drilled

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Gas Production In Pennsylvania Pennsylvania Production in 2011

Greater than 1 Trillion Cubic Feet or About 6% of U.S. Production

Gas Production in Pennsylvania Likely to Reach 2 Trillion Cubic Feet Per Year

Pennsylvania Will Provide About 10% of U.S. Natural Gas Production

USA is the Number 1 Gas Producer in the World

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Protecting the Environment – Issues for the Public1. Impact on Water from Drilling /Wastewater

- Streams- Private water wells- Withdrawals

2. Operational Problems/Accidents- Spills- Leaks- Fires – Response time- Blow outs – Response time- 50 plus emergencies responses

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Protecting the Environment – Issues for the Public3. Truck Traffic Impact & Safety

- Congestion- Road damage- Unsafe trucks

4. Gas Migration

5. Public Lands: State Forests & Parks

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Protecting the Environment – Issues for the Public6. Staffing of Oil and Gas Program

- Number of employees- Location

7. Air Impacts- Nox- HAPs

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Protecting the Environment – Issues for the Public

8. Seismic Impacts from Deep Well Injections

- Arkansas- Ohio

9. Disclosure of Chemicals

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Regulatory Response: Pennsylvania Case Study Review & Strengthen All Rules

4 Regulatory Packages Enacted1. Water Withdrawal Plan: August 20082. Waste Water Disposal/TDS Rule: August 20103. New, Strong Drilling Standards: January 20114. 150 Feet Mandatory Buffer from All Development for

22,000 Miles of High Quality Steams: November 2010

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Regulatory Response Staffing

88 Positions in Oil Gas Program as of September 2008

Raised Fee When Applying For a Permit from $100 to as much as $10,000 for Deep Wells

Doubled Staff to 202 by January 2011

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Regulatory Response Enforcement of Rules

1,200 Violations Issued During 2010

1,100 Violations Issued During 2011

Companies Pay for Clean Up of Spills, Leaks, Gas Migration

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Water Impacts From Gas Drilling Exist & Include Methane Migration to About 50 to 100 Private Water Wells

But Water Impacts of Gas Drilling Are Less Than: Oil Production Coal Production Biofuels Large Hydro

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Gas Drilling Is not in Top 5 Impacts of Water in Pennsylvania Acid Mine Drainage Raw Sewage Discharges Nitrogen & Phosphorus from Agriculture

& Other lands Sediment From Construction Areas Spills, Leaks, Accidents From

Underground Takes, Transportation of Materials

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Protecting the EnvironmentFour Remaining Main Environmental Issues

Air Emissions Smog

Methane Leakage

Gas Migration

Seismicity Associate With Injection of Wastewater in Deep Caverns

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Coal v. Gas Carbon Lifecycle Studies There are 6

Prof. Howarth, Cornell University, Most Publicized & Controversial

Finding: “Coal is as Dirty as Gas on Carbon Emissions”

No Claim that Coal is as Dirty as Gas on Mercury, Soot, Other Pollutants

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5 Studies Contradicting Howarth Paper1. NETL – April 2011

2. Carnegie Mellon University – August 2011

3. Worldwatch Institute – August 2011

4. University of Maryland – October 2011

5. Cornell University – November 2011

All Papers are at www.johnhanger.blogsport.com

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Natural Gas Good For Economy

Shale Gas Production Boom Shale Gas Less than 1% of U.S. Gas

Supply in 2000 Shale Gas Production at 2 Bcf/day in

2007 Shale Gas Production at 16 Bcf/day

in February 2011 Today Shale Gas is 30% of U.S.

Natural Gas Production

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Natural Gas Good For Economy1. Shale Gas Production Has Lowered

Natural Gas Prices Significantly$13 for Thousand Cubic Feet July 2008$4.50 for Thousand Cubic Feet July 2011

2. Shale Gas Has Saved Residential Gas Heating Customers About $500/year51% of Homes Use Natural Gas as a Heating

Fuel

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Natural Gas Good For Economy3. Shale Gas Has Saved Residential

Electricity Customers About $500/year

25% of U.S. Electricity Supply Comes from Natural Gas Plants

Natural Gas Plants Often Set Wholesale Price of Electricity

4. Shale Gas Has Prevented a Broad Energy Shock in 2011 & 2012 to U.S. Economy

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Getting Off Foreign Oil5. U.S. Exports About $400 Billion/year for

Foreign Oil

60% Oil Imports in 2005 45% Oil Imports in 2011

Natural Gas is Cheaper and Cleaner Than oil But Major Market Failure Blocks Transition from Oil to Gas in Transportation

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Getting Off Foreign Oil Keys to Getting Off Foreign Oil By No

Later Than 2025 Natural Gas Vehicles Electric Vehicles U.S. Oil Production Biofuels Efficiency

Goal Should be to Decrease Oil Imports 3 Percentage Points Per Year for Next 15 Years

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THERE ARE NO PERFECT ENERGY CHOICES

SAYING NO TO GAS MEANS SAYING YES TO OIL & COAL

GAS AND RENEWABLES WILL GROW RAPIDLY IN THE NEXT 20 YEARS