Falcon’s MoBay Storage Hub Signs 24,000-Acre Gas Storage Lease With the State of Alabama

MoBay Storage Hub LLC, an affiliate of Falcon Gas Storage Company, Inc., has signed a gas storage lease with the State of Alabama that covers more than 24,000 acres of state-owned lands, clearing the way for construction of the MoBay Storage Hub to start this spring. The target in-service date for the MoBay project, located in Mobile County, Alabama, is October 2009.

MoBay will develop the project in phases. The first phase will convert the largest of three depleted gas reservoirs into a 50 Bcf high-deliverability, multi-cycle (HDMC) gas storage facility with 1.0 Bcfd of withdrawal and injection capacity. The second phase will develop the remaining two reservoirs. Both phases are covered by the storage lease with the state and MoBay’s Federal Energy Regulatory Commission (FERC) Certificate.

The MoBay Storage Hub received authorization from the FERC in December 2006 to build and operate the project under Section 7c of the Natural Gas Act. U.S. Army Corps of Engineers permits authorizing construction of the facility were issued in 2007, as were air and water quality permits from the Alabama Department of Environmental Management (ADEM). Long-lead procurement items, including over 38,000 horsepower of compression and 17 miles of 36-inch pipe, already have been acquired.

The interstate natural gas storage facility will interconnect with up to seven pipelines and natural gas processing facilities, including Gulfstream, Transco (Zone 4A), Gulf South (Zone 4) and Florida Gas Transmission (FGT) in Zone 3. Additional interconnects are planned with the proposed Southeast Supply Header (SESH), Williams Processing, Chandeluer, and other interstate pipelines and processing systems. All of these interconnects are within one mile of the main compressor station. MoBay is located less than 25 miles from the planned Gulf LNG Clean Energy Project and the proposed ChevronTexaco LNG facility in Pascagoula, Mississippi.

“MoBay will triple the underground storage capacity in Alabama and substantially increase energy reliability for the entire Southeast region,” said Edmund Knolle, MoBay’s chief operating officer. “We expect MoBay to create a major new market center for natural gas in the eastern Gulf Coast region, balancing supplies from unconventional production and LNG with growing weather-driven gas load in the Southeast.

“Since MoBay received its FERC Certificate,” he added, “over 5,500 MW of new coal-fired generation in the Southeast has been canceled. Natural gas will be required to fill the void. MoBay’s location, large working gas capacity and high injection rates will allow interstate shippers to quickly store large amounts of off-peak gas at a market center directly connected to over 6.0 Bcf of take-away capacity into peninsular Florida, the Southeast and Northeast U.S. markets.”

MoBay has executed binding precedent agreements with nine shippers for 29.4 Bcf of working gas capacity and plans to hold an open season in March 2008 for the remaining Phase I capacity.

About Falcon Gas Storage Company, Inc.

Through its wholly-owned subsidiaries and affiliated companies, Houston-based Falcon Gas Storage Company is one of the largest independently owned developers and operators of high-deliverability, multi-cycle (HDMC) natural gas storage capacity in the United States. Falcon’s NorTex Gas Storage Company subsidiary owns and operates 35 Bcf of gas storage capacity with nearly 1.0 Bcfd of aggregate deliverability from Hill-Lake and Worsham-Steed. Through its MoBay Storage Hub LLC affiliate, Falcon is developing a 50 Bcf HDMC gas storage project in southern Alabama with 1.0 Bcfd of injection and withdrawal capacity. In addition, Falcon is developing a 20 Bcf HDMC gas storage project in the Desert Southwest that will be located near the San Juan Blanco Hub. Falcon subsidiaries also are involved in crude oil production, including enhanced oil recovery; natural gas transportation, processing and NGLs production; and natural gas, crude oil and NGLs marketing and trading. Visit Falcon at www.falcongasstorage.com.