Creating a Market for New Investment in Biomass Renewable Energy Generation Capacity Presented by Steven Jay Mueller President – DG Energy llc Forum on Climate Change, Forests, and Bioenergy Washington, DC - January 26, 2007

State of the Nation – Biomass Renewable Generation in America today 2,500 MW of installed capacity In 18 states 130 facilities 16 MW average generation output Annually 20,000,000 MWh supplied to utilities Average age of plants > 20 years Page 1

Economic Impacts $150,000,000+ national payroll 45 full-time direct/indirect jobs per site (5,200 total) Supplying remote generation to utilities with critical power support Converts 20,000,000 BDT/year of woody biomass to electricity (50/50 mill waste & forest slash/residue) Page 2

Environmental Benefits 2x the renewable power delivery of wind 2x the benefit on GHG reduction – first by replacing fossil-fuel production and second by eliminating emissions from fires and decomposition of such waste materials Provides an assured disposal of mill waste that would otherwise be burned or landfilled Page 3

Weak Current Federal Program for Biomass Generation Inadequate Incentives (Wind receives a $20/MWh PTC – biomass receives $10/MWh) No Encouragement from Congress for new investment (the PTC section 45 credits for biomass are presently set to expire 12/31/08 and do not encourage repowering of older plants) Healthy Forest Initiative legislation - helpful but unfunded (calls for up to $20/gT subsidy to remove fire hazard materials with $500k cap per project – excellent concept but needs assured multi-year appropriation Page 4

How to Encourage New Biomass Investment – An Example Lakeview, Oregon 13 MW project Proactively supported by community and state agencies Local sawmill owner (Collins Pine) provided land, steam purchase and a portion of the raw material supply USFS and BLM provided additional surety of fuel supply through a stewardship access to meet generation fuel needs The critical CROP analysis provided surety of long-term supply for the next 20 years Page 5

Defining a Success, continued The State of Oregon provided Designation as an Oregon Solutions Project which ensured highest level agency attention Access to 15 year long-term debt at highly favorable interest rates for up to 70% of the project cost Reduction of capital project cost through a unique Business Energy Tax Credit Through the PUC, establishment of a standard PPA structure obligating the local utilities to buy biomass power under pre-negotiated, defined terms Page 5

The Result Created a viable private equity investment ‘environment’ (which is highly like to foster several more such investments) On January 4th of this year, DG announced it would build the first new large biomass plant in the US since 1992 (a second, smaller plant was announced simultaneously by the Gov of Oregon as well) Added 20 plant jobs & materials collectoin and transport-related jobs (injecting more than $1.8mm of new wage base for the next 20 years+ in Lakeview) Page 6

Biomass Generation is Small & Local 15 MW - typical new biomass plant size Produce 100,000MWh/year of power Consume 90,000 BDT/year of fire hazard and thinning materials From a 75 mile radius on a 20 year sustainable basis Power serves the rural community Generation locally improves power reliability Page 7

Huge Potential Economic Impact 2,700 MW of new wind capacity was installed during 2006 Equivalent to 900 MW of biomass (wind operates at less than 40% availability) 900 MW of biomass = 2,000 new long-term jobs in 60 communities Page 8

Recommended Federal Support for Biomass Generation Recraft the Section 45 Production Tax Credit Program for Biomass (parity with wind and allow application to existing older plants with more appropriate repower conditions) Appropriate Funds for Biowaste Removal (the Act provides for up to $20/gT but no funds have been yet appropriated nor have any regulations been promulgated since late 2005) Encourage Federal Agency and Military Base use of Biomass generation (there are numerous opportunities for private funding of on-base or near-base biomass potential – allowing for fire safety benefits and renewable power supply) Page 9

Distributed Generation – An Important Key to America’s Energy Future Biomass provides grid stability in rural areas At or below the cost of fossil fuel supply With high reliability (typically 95%+) Creates significant rural employment Page 10

A Long-Term Energy Supply With proper support biomass renewable generation can triple in the next decade 5,000 MW of new generation potential Drawing only on timber industry wastes and hazardous fuels removal Dramatic reduction of transmission and distribution losses as well as new power line infrastructure Page 10

Conclusions Biomass generation is a truly sustainable renewable source of energy Displaces fossil-fuel kwhrs (like wind & PV) But offers the benefit of simultaneously reducing GHC by removing materials that will either combust or decompose Page 10