Forests and Energy: Growing Towards a

Carbon Neutral Alberta

October 20,2010

ANC STORY

Began Production in 1990

Premium newsprint supplied to the Edmonton Journal, Calgary Herald, USA Today, Wall Street Journal, and others.

210 Full time employees, 125 FTE in woodlands, plus others

On going capital reinvestment to ensure ANC’s long-term viability and competitiveness

Only paper mill in Alberta

Mechanical Pulping 92% Yield

TMP Refining

Refiner Motors generate High Fiber Yields

Minimal waste streams for co-generation opportunities

Consume Significant Electricity- 95 Mega Watts

Rolls Leaving Winder

Alberta Electricity Deregulation

Game Changer at ANC

Alberta Deregulated in 2001 – market prices doubled

ANC Hedged with Acquisition of PPA from Coal Fired Electricity Generators

Alberta Carbon Tax in 2007 for major emitters

GHG required

for PPA

(Tonnes)

GHG credit

generated at

ANC (tonne)

Bought from Market (Tonne)

$$ spent

2010

(estimated)190,000 40,000 150,000 $2.0 million

2009 166,000 22,000 144,000 $1.84 million

2008 135,000 21,000 114,000 $1.5million

Carbon Management at ANC

Actively increasing carbon capture and storage with highly successful and prompt silviculture program

Multifaceted approach beginning in 2004

Forest Carbon Management a strategic goal in 2008

Simple pragmatic target of securing a carbon credit from forest management activities in 2010.

Business Case for Carbon Offsets

Carbon is an emerging business threat and opportunity for ANC

ANC is purchasing Alberta carbon credits –annual expenditures of $2 million

Afforestation and Reforestation represent a made in Alberta opportunity to offset rising offset expenses.

Yearly Natural Gas Usage

Natural Gas

4.22

3.303.07

2.75 2.622.90

2.25

120,000

240,000

360,000

480,000

600,000

720,000

840,000

960,000

1,080,000

1,200,000

2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08

Yearl

y G

J

-

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

GJ/t

Yearly GJ GJ/tA

N

C

What Are the Results?

BEFORE – 2000Block 810-1012

AFTER – 2008Block 810-1012

IFM Example

Real Data on 1030 ha

2010/01/07 MMM 12

8 year old white spruce

ACTIVITIES

Use of sludge for remediating contaminated sites

Sludge spreading / forest productivity

Greenhouse Gas Credits

Sludge landspreading guidelines for pasture lands, hay lands, (non-incorporation)

SLUDGE UTILIZATION

0

20

40

60

80

100

120

140

160

Vo

lum

e (m

3/h

a)

Treated Control

June 98

August 98

August 99

August 00

August 01

August 02

August 03

August 04

August 05

August 06

August 07

0

100

200

300

400

500

600

700

800

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Tree Age (years)

t C

O2

/ha

T reated

Control

Treated Projection

Control Projection

1998

sludge

applied

2007

Additional

369 Mg

CO2/ha

in 2012

annual measurements2012

CO2 Stored in Control and

Sludge Amended Treatments*

* Based on ARC factors0

100

200

300

400

500

600

700

800

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Tree Age (years)

t C

O2

/ha

T reated

Control

Treated Projection

Control Projection

1998

sludge

applied

2007

Additional

369 Mg

CO2/ha

in 2012

annual measurements2012

0

100

200

300

400

500

600

700

800

7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Tree Age (years)

t C

O2

/ha

T reated

Control

Treated Projection

Control Projection

1998

sludge

applied

2007

Additional

369 Mg

CO2/ha

in 2012

annual measurements2012

Trees- Carbon Sink

Pine Trees with Increasing sludge

application

Current status –carbon credits not available to ANC

Sludge application classified as business as usual.

Forestry and Oil & Gas Integration

The forest industry has an abundance of forest residues (tops, limbs, slash, unmerchantable timber, Aspen, and potential for MPB killed wood).

Forestry and Oil & Gas Integration

Transportation costs prohibit forest biomass material from being shipped long distances for use at central mill sites.

Opportunities exist to replace traditional fossil fuels with renewable forest fuels. On the ANC FMA - the SemCAMS site offers a unique opportunity for a high efficiency cogeneration (CHP) plant utilizing both steam and electricity (supports the Provincial Energy Strategy).

Biofuel Recovery

Kaybob Oil and Gas Green Energy

Partnership

Prefeasibility Work Completed

Carbonization (Biochar) Platform

Carbonization process engineering (bioenergy and biochar production)

Carbon (biochar) sequestration + crop yield and quality enhancement: horticultural or agricultural uses; solid fuel and other industrial applications

Biochar technology scale-up and commercialization

Biochar: carbon-rich solid produced by low-temperature (400 - 600º C) pyrolysis of biomass under complete or partial exclusion of oxygen.

It is called Biocoal or Biocarbon when used as solid fuel.

Biochar

Horticultural Markets for Biochar

• Hydroponic Growth Media Market:Canada: equivalent to 17,360T/year of bone dry biochar (AB+BC=4,960T/yr, ON=12,400T/yr)

• USA: equivalent to 15,500T/yr of bone dry biochar

• Other Horticultural Markets (Peat Moss Replacements):Total peat moss mined in Canada: 1,200,000 -1,400,000T/year

• 120,000T/year consumed in Canada, the rest exported to USA

Horticultural Markets for Biochar

BiocharSawdust

Coir

Hydroponic Gardening

25

30

35

40

45

Rockwool Coir Biochar

Effect of Various Substrates on Yield of Tomatoes in 2009,

Number of Tomatoes/plant

Assumption: 5 t Biochar/ha

Arable land in Canada: 50x106 ha

Potential Biochar on arable land: 250x106 t

CO2 equivalent: 880x106 t

Canada’s total CO2 emissions: 640x106 t/year

Biochar is a potential storage of carbon to

reduce GHGs.

Biochar as Soil Amendment/Carbon

Sequestration – Huge Potential Area

Additional Projects

Biochar (pyrolysis of wood and biosolids)-horticultural products processed and bagged at ANC

Biochar sequestering for carbon credits

Waste wood streams to Enerchem Edmonton-gasification for fuel streams

Biofuels- Integrated to SemCAMS

Plug Screw Feeder Filtrate and air effluent stream characterization for hemicellulose and terpenesextraction for value added feedstock

Ongoing support and participation in AfforestationProtocols with C3 for application on public land.

Additional Projects

Mountain Pine Beetle Management and CO2 Dynamics in the Central Alberta Region

Conclusion

“On two previous occasions when the atmosphere contained very

high levels of carbon dioxide, the early Carboniferous and Cretaceous periods, beginning about 350m and 150m years ago respectively, they were reduced by the expansion of carbon-sequestering plants. Industrial burning of the fossil fuels laid down in the Carboniferous period, in the form of decaying plant-matter, is the main reason why there is now more carbon in the

atmosphere than there has been for 4m years.” The Economist –Sept 23,2010

Forests can play a role in the carbon neutral Alberta

Integrated practical carbon management strategies will be of strategic importance but are not for the faint of heart.