Catalyst announces bioenergy upgrades

Mar. 1, 2011, Richmond & Port Alberni, BC – Two mills operated by Catalyst Paper in British Columbia are receiving a
total of $18 million for two bioenergy projects from the federal Pulp and Paper
Green Transformation Program (PPGTP). The projects are funded entirely by PPGTP
credits, earned through production of black liquor at the Crofton pulp operation in 2009.

Powell River
The Powell River mill, which produces
newsprint and specialty papers, will receive $13.3 million to double the volume
of renewable electricity the mill generates from wood waste. The electricity
will be certified under the federal EcoLogo program. The project will involve new waste-wood
handling equipment, a sand recycling system, and other upgrades to an existing
power boiler, as well as installation of a steam condenser on the generator.
Work is underway and expected to be completed within approximately 12 months.

"One of the great strengths at the
Powell River operation is our clean-burning power boiler. Emissions and
air-quality monitoring demonstrate that," says Bob Lindstrom,
vice-president, supply chain, energy, and information technology. "Factor
in our marine access to waste-wood supplies, and our Powell River mill becomes
one of the most logical and low-impact places in Canada to generate green
energy from biomass."

The project is supported by the Sliammon
First Nation, which has signed a memorandum of understanding (MOU) with
Catalyst in connection with it.  The MOU includes provision for a
Sliammon-Catalyst Development Fund, commits Catalyst to informing the Sliammon
regarding fibre supply opportunities, and envisions longer-term collaboration
relating to skills development.

Waste wood, mostly tree bark, is burned in
the power boiler to create steam for both paper making and electricity
generation. Manufacturing-related steam requirements were reduced when kraft
pulp production ended at Powell River in 2001. The new steam condenser will
allow the power boiler to once again be operated at capacity and electricity
generation to double from 14–18 MW to a range of 32–36 MW.

The project's impact on the mill's
environmental performance has been modelled and assessed, as required by the
Canadian Environmental Assessment Act. The electricity from the project will
displace natural gas generated electricity for a net annual reduction of 96,500
tonnes of carbon emissions. Mill air emissions are expected to remain within
applicable permit levels, and the mill's carbon footprint will remain at an
industry-leading level of approximately 88 kg of CO₂ equivaltent/air dry ton of production.

Installation of a recycling system will
improve the use of sand that is fed into the boiler bed to ensure combustion
efficiency. Rather than being trucked away for screening, as is now done, sand
will be screened and recycled on-site, reducing the total volume of sand required.

Port Alberni
The Port Alberni mill, which focuses
primarily on specialty papers, will receive $4.7 million to improve the
performance of its power boiler. This will improve the efficiency and
reliability of biomass-based energy generation. The project was endorsed in
letters of support from the Hupacasath First Nation and the Tseshaht First Nation. The work involves three upgrades to the
main power boiler: a new secondary air system, a larger economizer or
heat-exchange system, and a new gas monitoring system.  Due to time
requirements for component manufacture, work will not begin until late in 2011,
but is expected to be completed during an extended annual boiler maintenance
shutdown planned for October.

Installation of larger and better-designed
air nozzles will result in more efficient boiler combustion and reduce fuel
requirements, improving the operational reliability of the existing equipment.
Fewer economizer outages will reduce the need to use a back-up natural gas boiler,
with associated greenhouse gas emissions. The combination of more efficient
combustion and lower-temperature gas exiting the boiler will reduce emissions
of dioxins and other substances associated with incomplete combustion. The new
gas monitoring system will provide ongoing feedback that operators will use to
continually optimize the performance of the upgraded boiler.

The project requires no new environmental
permitting. The biomass that fuels the main power boiler is made up mostly of
waste wood and is classified as a carbon-neutral fuel under international
carbon accounting protocols and widely accepted standards. Port Alberni's
energy generation is also certified under the federal EcoLogo program.