Prepared answering testimony of Jonathan Lesser on behalf of the Indicated Shippers regarding Northern Natural Gas Co under RP03-398.

Inofficial FERC-Generated PDF of 20031211-0153 Received by FERC OSEC 12/09/2003 in Docket#: RP03-398-000 ORIGINAL r. ( r*1 ~.o-D " ~ I "l "'[~" ,, r~ (D Jnofflclal FERC-Generated PDF of 20031211-0153 Received by FERC OSEC 12/09/2003 in D o c k e t # : R P 0 3 - 3 9 8 - 0 0 0 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Northern Natund Gas Company ) Docket No. RP03-398-000 PREPARED ANSWERING TESTIMONY OF JONATHAN A. LESSER ON BEHALF OF THE INDICATED SHIPPERS CONFIDENTIAL MATERIAL REDACTED PUBLIC VERSION December 9, 2003 Jnofflclal FERC-Generated PDF of 20031211-0153 Received by FERC OSEC 12/09/2003 in D o c k e t # : R P 0 3 - 3 9 8 - 0 0 0 Docket No. RP03-398-000 Exh. IS-7 UNITED STATES OF AMERICA BEFORE THE FEDERAL ENERGY REGULATORY COMMISSION Northern Natural Gas Company Docket RP03-398-000 SUMMARY OF PREPARED ANSWERING TESTIMONY OF JONATHAN A. LESSER Dr. Lesser's testimony addresses the economic lifetime calculations of Northern Natural Gas ('2~NG," '~ortherrL," or '2he Company") witness Mr. Edward Feinstein, which form the basis for his depreciation calculations, and thus directly affect the Company's allowed V transmission rates. Mr. Feinatein's economic lifetime calculations should not be relied on whatsoever to establish depreciation rates for the Northern system for the following reasons: 1. The economic foundations of Mr. Feinstein's gas supply analysis are incorrect. He fails to incorporate basic economic postulates into his supply analysis in an adequate manner, and instead uses unsubstantiated and unrealistic assumptions. 2. Mr. Feinstein estimates flawed econometric models, then propagates those models to determine future reductions in natural gas supplies that are unrealistic and unsupportable. 3. Mr. Feinstein fails to address the underlying economics ofpipoline operations whatsoever, ignoring basic economic principles that operate in the natural gas industry and other extractive industries. The analysis and assumptions he uses to develop a Mid-Continent, Rocky Mountain, and Western Canada Sedimentary Basin ("WCSB') region supply models cannot be supported. v Jnofflclal FERC-Generated PDF of 20031211-0153 Received by FERC OSEC 12/09/2003 in D o c k e t # : R P 0 3 - 3 9 8 - 0 0 0 D o c k e t No. R I N ~ 3 9 8 - 0 0 0 Exh. IS-7 TABLE OF CONTENTS INTRODUCTION AND SUMMARY ............................................................................. 1 REGIONAL GAS SUPPLY MODELS ........................................................................... 6 Overall G a s Supply Model Structure ........................................................................... 7 The Effectiveness o f Exploration Model .................................................................... 13 Mid-Continent Gas Supply Analysis .......................................................................... 31 Rocky Mountain Gas Supply Analysis .....................................