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"The State Oil and Gas Board of Alabama Grants Falcon's MoBay Storage Hub Petition"

Wall Street Journal
October 16, 2008

HOUSTON, Oct 16, 2008 (BUSINESS WIRE) -- MoBay Storage Hub LLC, an affiliate of Falcon Gas Storage Company, Inc., today announced that the State Oil and Gas Board of Alabama has entered an order granting MoBay's petition to establish the North Dauphin Island Gas Storage Facility.

At the special hearing on October 14, 2008, the Board also approved the horizontal and vertical boundaries of the gas storage facility and appointed MoBay facility operator.

MoBay will convert the depleted North Dauphin Island unit into a high-deliverability, multi-cycle (HDMC) underground storage facility as part of Phase I of the MoBay Storage Hub project. Phase I will provide 50 Bcf of working gas storage capacity with direct interconnects to the Gulfstream pipeline, Southeast Supply Header (SESH), Transco Pipeline and Gulf South Pipeline systems.

MoBay received a certificate of public convenience and necessity from the Federal Energy Regulatory Commission (FERC) in December 2006 authorizing MoBay to construct and operate the MoBay Storage Hub.

"The State Oil and Gas Board's approval is another important milestone in the MoBay Storage Hub's development," said Edmund Knolle, MoBay's chief operating officer. "We look forward to working closely with the Board, the Alabama Department of Conservation and Natural Resources, and other federal, state and local agencies as we move forward with developing the nation's easternmost natural gas trading hub. The MoBay project will provide important and long-lasting benefits to the State of Alabama, the greater Southeast and Gulf Coast gas markets, as well as communities in South Mobile County, Alabama."

In addition to the FERC and State Oil and Gas Board approvals, MoBay has received permits and approvals under sections 10 and 404 of the Clean Water Act, section 7 of the Endangered Species Act, section 401 Water Quality Certification, Coastal Zone Consistency, Air Permits from the Alabama Department of Environmental Management, and other federal, state, and local permits and approvals. MoBay also has been granted tax abatement by the Industrial Development Authorities of Bayou La Batre and Dauphin Island, Alabama.

MoBay executed a long-term storage lease with the State of Alabama in February 2008 covering 25,000 acres over the North Dauphin Island, Northwest Dauphin Island and Northeast Petit Bois reservoirs. All three depleted naturally occurring reservoirs lie under the shallow waters of the Mississippi Sound in South Mobile County, Alabama.

MoBay began Phase I development in July 2008 with the plugging and abandonment of 10 production wells and the removal of the Northwest Dauphin Island platform. MoBay plans to complete facility engineering and refurbishment of the existing North Dauphin Island platform later this year. Project financing for the remainder of Phase I development is expected to close in early 2009. The anticipated in-service date for Phase I is the second quarter of 2010.

To date, MoBay has contracted with 14 customers to provide more than 40 Bcf of HDMC storage service under multi-year contracts.

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.
SOURCE: Falcon Gas Storage Company, Inc.
Falcon Gas Storage Company, Inc.
Edmund A. Knolle, 713-623-5947
or, Encore Communications
Carole Minor, 713-880-9550
Copyright Business Wire 2008