Developing a Canadian Forest Industry Biomass Strategy- Potential in Biofuels Task 38- Rotorua, New Zealand- Mar 24, 2004 Australia Bioenergy Association- Sydney, Australia- Mar 26, 2004 Doug Bradley 69 Fulton Avenue ∙ Ottawa, Ontario ∙ Canada K1S 4Y7 phone ∙ ∙ web site ∙ www. climatechangesolutions.net

Forest Industry Biomass Strategy Bioenergy- Forest residue, agriculture, municipal waste Forest Industry- Policy, Competitiveness, Energy….

Strategy Timing 2004 Biomass inventory Biomass costs Technology readiness Development options Financing models Gov’t incentives Environmental repositioning Environmental repositioning AprMayJunJulAugSeptOctNov

Energy Use – 2001 Pulp & Paper Source: Forest Products Association of Canada Biomass: includes wood, bark, sawdust, and pulping liquor

Volume Biomass Utilization in Pulp & Paper Industry

Forest Biomass Supply Potential MBDT pa Mill Residues5.9 Mill Residues5.9 Stock piles0.3 Stock piles0.3 Pulp Sludge1.0 Pulp Sludge1.0 Forest Floor0.2*- 43.1** Forest Floor0.2*- 43.1** Total7.4 – 50.3 Total7.4 – 50.3 * BW McCloy and Associates- Assumes 15% recoverable (12%-chips, 3% energy) ** BIOCAP Canada

BC Interior- Mountain Pine Beetle 9 million ha infested- 108 million M 3

Potential from Forest Floor

Location of Harvest Slash

Biomass Long Term Supply l

Technology Readiness Direct Combustion Direct Combustion Bio-oil from Fast Pyrolysis- 100 TPD in 2004 Bio-oil from Fast Pyrolysis- 100 TPD in 2004 Gasification Gasification Bioproducts, biochemicals Bioproducts, biochemicals

Biomass Long Term Plan Development Options- hypothetical Combustion Fast Pyrolysis Oil Gasification

Financing Models Needed Much capital needed Much capital needed Forest Industry has no money! Forest Industry has no money! Focus $capital on core business Focus $capital on core business Need to explore options to funnel $investment into bioenergy Need to explore options to funnel $investment into bioenergy Developer ownership Developer ownership Joint Ventures Joint Ventures Flow through shares Flow through shares Oil&gas exploration examples Oil&gas exploration examples

Government Policy Existing Existing REDI (Renewable Energy Deployment Initiative) max $80,000 REDI (Renewable Energy Deployment Initiative) max $80,000 Cdn Renewable & Conservation Expenses (Tax) Cdn Renewable & Conservation Expenses (Tax) Tax Depreciation 43.1 for generation equipment Tax Depreciation 43.1 for generation equipment MIP (Market Incentive Program) 40% refund of marketing costs only MIP (Market Incentive Program) 40% refund of marketing costs only 10¢ per litre excise tax exemption on ethanol fuel 10¢ per litre excise tax exemption on ethanol fuel 20% gov’t power purchases from renewable 20% gov’t power purchases from renewable Wind Power 1¢/KWh production incentive $250 million Wind Power 1¢/KWh production incentive $250 million Need meaningful incentives Need meaningful incentives Feed-in-tariffs (price premiums) Feed-in-tariffs (price premiums) RPS (Renewable Portfolio Standard) RPS (Renewable Portfolio Standard) Grants (capital support) Grants (capital support)

Environmental Repositioning Loss in Nutrients Loss in Nutrients Most soil nutrients from roots Most soil nutrients from roots Most agb nutrients in needles/leaves Most agb nutrients in needles/leaves Have to eliminate “misinformation” Have to eliminate “misinformation” Particulates- eg. Williams Lake Particulates- eg. Williams Lake NGO workshop planned in September NGO workshop planned in September

Strategy Timing 2004 Biomass inventory Biomass costs Technology readiness Development options Financing models Gov’t incentives Environmental repositioning Environmental repositioning AprMayJunJulAugSeptOctNov

 Company founded in 1990  BioTherm™ - a patented fast pyrolysis process that converts forest and agricultural biomass residue into a liquid fuel called Bio Oil, char and non-condensable gases.  Independently proven as reliable, replicable and commercially scaleable  2 plants built (Vancouver Pilots)  2 commercial demo plants under construction (2004)  Aim- low cost producer of bio oil / commoditize technology and output. Dynamotive Overview

What Is Fast Pyrolysis? Rapid heating of biomass in the absence of oxygen. BioOil (yield 55 – 73%)Char (yield 15 – 25%) Non-condensable gases are recycled in the process. Feedstocks - agricultural and forest residue including: bark and whitewood, sugar cane residue, wheat straw, rice hulls (over 120 feed stocks tested). BioTherm Process

 Clean burning CO 2 neutral fuel  Alternative to fossil fuel in gas turbines and boilers  Characteristics  No SO 2 Emissions  Trace NO x Emissions  Transportable and storable  Produced from non-depleting agricultural and forest biomass  19.5 MJ/litre ( vs 36.9 for light oil) What is Bio Oil?

Electricity and Process Heat Electricity Export to Grid Lumber dry kilns, pulp mill lime kilns, diesels Bio Oil Bio Oil Refinery Derivative Products of Bio Oil Resins / Chemicals / Bio Methanol ++ Europe Japan United States Green Power Generation Shipping / Export of Bio Oil Char HeatBriquettes Activated Carbon

15 Tonne Per Day Pilot Plant

1996 to 2003 Capital Cost Progression and Projections $29

1996 to 2003 Production Cost Progression and Projections. * Includes all CAPEX and OPEX with a 15% ROE *

STAGE 1: Industrial Fuels - Boilers, Kilns, Furnaces Sugar Industry, District Heating, etc. STAGE 3: Transportation Fuels Blends, Syngas, Bio-Methanol STAGE 2: Power Generation - Turbines, Diesels Small Scale Industrial, Remote Higher Lower Value Added STAGE 4: Chemical Refining Derivative Products Staged Development Time 1996 / >>>>>>

R&D Partners: Technology:  Tecna Engineering (Scale up, integration, design)  UMA Engineering (Scale up, design, modularization)  Harper International (Reactor Modeling, scale up, design, construction)  Ramsay Group (Modular fabrication, design)  Resource Transform International (RTI): Technology base Applications (amongst other):  CanFor: Lumber Kiln applications (Industrial test completed)  Magellan Aerospace Corp, Orenda: Turbine (CHP)  Leading Briquette Manufacturer: Briquette production from char  University of Iowa + Alliant Energy: CHP applications  University of Saskatchewan: Activated Carbon  University of New Hampshire – Bio Oil applications and market opportunity  Bio Mass Refinery: Dr. Desmond Radlein Success through strategic partnerships

Keys to success Solid patented process Solid patented process Resolved technical issues- stability Resolved technical issues- stability Multiple feedstocks- sawdust. Bark, sugar cane etc. Multiple feedstocks- sawdust. Bark, sugar cane etc. No steam host needed No steam host needed Modular plants- 100 TPD plant on 7 skids Modular plants- 100 TPD plant on 7 skids Moveable plant- reduced risk Moveable plant- reduced risk Self-sustaining plants (2-3 years) Self-sustaining plants (2-3 years) Partnerships- eg Orenda 2.5 MW package Partnerships- eg Orenda 2.5 MW package

First Modular 100 TPD Plant

Total Production Mills 100 Production 9.3 M tpy Surplus 3.0 M tpy BC / Alberta Surplus Wood Residue 200 tpd 300 tpd 500 tpd 800 tpd Plants

 Establish DynaMotive’s technology as benchmark.  Complete initial wood based commercial projects, launch bagasse project  Establish order book for plant construction- Canada / US / Europe / Asia / Latin America.  Launch construction in US, Europe & Latin America. Contract Asia construction  Migrate technology to dirty waste streams (Construction wood waste, Sewage sludge and animal waste).  Scale reactor for fixed and mobile plant market opportunities.  Launch research into mobile fuel applications. Complete activated carbon and lime kiln program.  Establish model for biomass reserves, like oil exploration and production model.  Develop bio oil export model / first shipment to Europe from Canada contracted. Corporate Objectives 2004

 Establish network of agents / representatives. Support by European desk in Vancouver  Business / Financial Modelling / Technical support.  European Desk: Reports to CEO. Natalia Stepanova (Business Development), Ivette Vera (Technical support), Nathan Neumer (Communications). Support Services (Technical Group, Financial Services Group).  Year 1 Establish fabrication capabilities based on Canadian Model. Establish Flagship project  Export plant from Canada. Feed conditioning Bruks Klockner, Generation equipment Orenda (70% European content), integration European Engineering (Three candidates – Spain / Germany).  Agency’s France, Switzerland, Italy, Austria and CIS Countries. Representation Germany, Sweden, Bulgaria, UK, Poland, Spain, Belgium. Others to be advised. Overview European Strategy

Dynamotive Development Plan

STAGE 1: Industrial Fuels - Boilers, Kilns, Furnaces Sugar Industry, District Heating, etc. STAGE 3: Transportation Fuels Blends, Syngas, Bio-Methanol STAGE 2: Power Generation - Turbines, Diesels Small Scale Industrial, Remote Higher Lower Value Added STAGE 4: Chemical Refining Derivative Products Staged Development Time 1996 / >>>>>>

Biomass Refinery Critical Precursor: Reliable High Quality BioOil Supply

Conclusion Canbio-FPAC promoting bioenergy LT biomass development strategy Canbio-FPAC promoting bioenergy LT biomass development strategy Bio-Oil can be major part of strategy Bio-Oil can be major part of strategy Dynamotive a world leader in fast pyrolysis Dynamotive a world leader in fast pyrolysis Excellent process, modular plant design Excellent process, modular plant design Global development schedule Global development schedule New business opportunity for forest industry New business opportunity for forest industry