PROJECT SUMMARY

53,000 BPD COAL-TO-LIQUIDS FACILITY WELLSVILLE, OHIO September 2007

 Baard Energy, L.L.C.  ●   9013 NE Highway 99   ●   Suite S   ● Vancouver, WA  98665

A. The Company

Baard Energy, L.L.C. (“Baard”), through its affiliate Ohio River Clean Fuels, L.L.C. (“ORCF” or “the Company”), has commenced development of a 53,000 barrel per day) coal-to-liquids "CTL" facility at Wellsville, Ohio (the “Project”).  Baard and its affiliated companies has over 20 years of experience in the design, development, and construction of a variety of energy projects, including natural gas powered electric generating facilities, ethanol production plants, biodiesel production plants, and coal to liquids projects.  Baard is a private project development company based in Vancouver, Washington.

B. The Project

Recent sustained high energy prices coupled with increased concern about energy security has led to a focus on the development of domestically sourced fuel supplies, especially those that have desirable emissions profiles.  With the largest coal reserves in the world, the U.S. is particularly well-positioned for the development of coal-to-liquids projects for the production of Fischer-Tropsch (“FT”) fuel.  Many parties, including the Department of Defense, have proclaimed their preference for the widespread adoption of FT fuel.  States with significant coal reserves have also been active proponents for various CTL projects. Below is a simple block flow diagram depicting the CTL process. 

The Company intends to develop and construct the Project in three phases – a first phase that consists of a 17,500 bpd CTL plant, followed by a second and third phases to expand the aggregate capacity to 53,000 bpd.  Each phase will involve a production train that consists of two gasifiers feeding into one FT reactor. One refining process will be constructed during the first phase and will have sufficient capacity to handle the output from all three trains.  In addition, the Project will utilize the RectisolTM process developed by Linde and Lurgi to clean, isolate and capture carbon dioxide for use in enhanced oil recovery (“EOR”) in neighboring oil fields in Eastern Ohio.

The Project has partnered with the Columbiana County Port Authority (“CCPA”) to secure a 1200 acre site adjacent to the Ohio River.  The site has easy barge access, rail access through the Norfolk Southern main lines and proximity to abundant eastern bituminous coal reserves.  The site is located within 20 miles of oil fields which are well-suited for the injection of carbon dioxide captured from the CTL production process for EOR.  The Project expects to use a combination of eastern bituminous coal and biomass to produce fuels including ultra low sulfur FT diesel, jet fuel and naphtha, all with a lower emissions profile than traditional petroleum based products. 

The Company has already commenced permitting the facility with the State of Ohio.  The Company and Ohio EPA have collaborated in an iterative review process which allowed submittal of the permit applications in process “modules”.  This will significantly reduce the anticipated review process time.  The Company expects that all the process modules for the Air and Water permits will be fully submitted by September, 2007 and be subject to a rapid review by the regulating authorities. 

Below is a basic overview of the inputs and outputs of the Project both for Phase I and fully developed. 

Feedstock Supply

The Project will utilize both coal and biomass as feedstock. The Company is currently in discussion with existing area coal companies to supply the entire plant’s feedstock need pursuant to 10 year agreements that will match the volumes needed to fulfill the Project’s contractual offtake commitments. When fully developed, the project will use approximately 28,000 tons of coal each day. Biomass can be substituted for the coal up to approximately 30% by weight.

The Project is located in Wellsville, OH, near the border of West Virginia, Pennsylvania, and Ohio. This location is the heart of the coal corridor in the Midwest United States. These three states have combined recoverable reserves of over 1,285 million tons, which is sufficient to satisfy the Project’s coal needs for the life of the plant. The Project’s rail and river access facilitates coal procurement from various sources. The State of Ohio contains over 300 million tons of extractable reserves of eastern bituminous coals as well as existing mines/mining technology and other resources necessary to support a large CTL plant. The State’s mining industry is currently producing approximately 20 million tons per year, over 80% of which is delivered to the utility industry. However, the coal industry’s ability to increase coal usage is presently limited by the higher sulfur levels and inability for the existing coal fleet to use these coals without significant investment in air pollution controls. This high sulfur coal can be utilized by the Project because it is able to economically remove the sulfur, as well as other harmful constituents, such as mercury, in the gas-cleanup section of the plant. Therefore, the Project will not only have access to significant coal reserves that are currently idled, but it also expects to be able to procure this coal at a discount to coal with lower sulfur content. Due to its advantageous location, the Project can also access cost-competitive coal supplies from neighboring coal producing states such as Pennsylvania, West Virginia, Kentucky, Illinois and Indiana. Petroleum coke reserves are also available to the Project from numerous refinery producers located along the Ohio River Basin.

The following table illustrates that there is ample coal supply in the surrounding region to meet the requirements of the Project without putting excess pressure on regional coal prices.  In fact, coal production in the Appalachian Region decreased in 2006 by 6.8 million tons as a result of decreased demand from coal-based electricity generation, decreased exports to other regions, and increased imports of compliant (low sulfur) coal from other regions.1

Offtake Agreements

The Company has been in negotiations with the Department of Defense (“DOD”) for the sale of up to half of the Project’s FT fuel output.  The Company has provided the Defense Energy Supply Center with a significant amount of information as the DOD continues its internal development to utilize synthetic fuels.  The FT fuels produced from the Project would fit the profile of DOD’s fuel needs.  The DOD has been leading efforts to secure suitable, domestically produced alternative fuels for military use.  In an official letter to Airmen in September of 2006, Secretary of the Air Force Michael W. Wynne stated that energy independence is a key element to ensuring the United States’ economic and national security, and an assured domestic supply of fuel and an aggressive energy conservation plan will benefit the entire Air Force2. As such, the Air Force and the Department of Defense are aggressively pursuing FT fuels as a key component to their energy independence strategy.

The Company has also discussed offtake contracts with several petroleum-based businesses that have expressed interest in acquiring significant volumes of synthetic fuel, including FT wax, FT diesel and FT naphtha.  Furthermore, the Company has received contingent commitments from several large commodity trading firms which have indicated willingness to enter into an offtake agreement for the synthetic fuels produced by the Project.

In addition to the energy offtake, the Company has been in conversations with Marathon about using the carbon stream isolated from the Project for the purpose of enhanced oil recovery at oil fields located approximately 20 miles from the Project site.  This will serve to enhance the economics of the Project through the sale of the carbon byproduct and greatly reduce the overall carbon footprint.

1 U.S. Coal Supply and Demand:  2006 Review, p. 3. Published by U.S. Energy Information Administration 2

 Source : http://www.defenselink.mil/transformation/articles/2006-11/ta111006b.html

C. Project Highlights

f Favorable Industry Dynamics.  Sustained high energy prices and concerns about energy security have spurred the growth prospects of domestic sources of alternative energy, including CTL projects.  The abundance of low cost coal coupled with high oil prices makes CTL projects economically attractive.

f Government Support for FT Fuel.  The Department of Defense (“DOD”) has proclaimed its preference for FT fuels and has a test program on its usage in its aircrafts under way.  FT fuels produced by the Project would fulfill the DOD’s desire for domestically-sourced, high quality fuel.

f Superior Product and Process.  FT fuels have superior emission profiles to traditional petroleum products and the production process can be adjusted to maximize the production of a particular type of fuel – diesel, jet fuel, naphtha - depending on relative market prices and contractual commitments.  The FT process has been deployed for decades in South Africa, Germany and other places and is technologically proven.

f Strategic Location.  The site is adjacent to significant reserves of Ohio, West Virginia and Pennsylvania coal and biomass feedstock.  Ready access to the largest river port in Ohio as well as the Norfolk Southern main lines will facilitate transportation of feedstock and products.  

f Carbon Sequestration Capability.  The Project is strategically located so that the carbon dioxide produced can be readily piped to nearby oil fields for injection for enhanced oil recovery.  As a result, the Project has a desirable greenhouse gas emissions profile relative to other CTL projects without such capability.  In addition, carbon sequestration, when combined with biomass use, makes the process less carbon-intensive than traditional diesel production.

f Robust Commercial Framework.  The Project expects to enter into long-term coal and biomass feedstock supply as well as product offtake agreements.  The Project also expects to enter into an EPC contract with a consortium of leading engineering and construction companies with terms that could facilitate project financing.

f Strong Local Support.  The State of Ohio has provided financial and infrastructure support for the Project in the form of access to tax exempt project debt and assistance with the acquisition of the Wellsville Ohio site.

f Experienced Developer. Baard has developed and constructed seven alternative energy projects over the past 20 years. Baard developed an 88 million gallon per year Ethanol plant in Ravenna, Nebraska and a 55 million gallon per year Ethanol plant in Coshocton, Ohio.  A third 110 million gallon per year ethanol development in Iowa is fully permitted and financing is currently being completed.  Baard successfully developed over 1,200 MW of electrical generation at four separate facilities in the last twenty years and built a retail electric marketing business in Michigan, Illinois, and Texas.



Contact Baard Energy

9013 NE HWY 99, Ste S

Vancouver, WA  98665

Tel:  360-546-2342

Fax:  360-574-2795

Email:  info@baardenergy.com





 

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