Quesnel explores community CHP potential

July 9, 2010, Quesnel, BC – The City of Quesnel and Terasen Gas have signed a letter
of intent to conduct final feasibility work on a renewable energy system in
Quesnel, British Columbia, in cooperation with West Fraser Timber Co. Ltd. and BC Hydro. The
letter of intent represents an agreement in principle to implement a combined
heat and power system that will serve as both an energy source and economic
benefit for its partners and the communities they serve.

The Quesnel
Community Energy System (QCES) is a biomass system that will use waste heat and
leftover residues from milling at West Fraser's Quesnel sawmill to generate
both heat and electricity. The approach and technologies used make the project
a first in North America. Although the technologies proposed in the QCES are
currently in operation today, including many similar heating systems in Europe,
these installations either provide district heating only, power only, or are
purpose-built. In contrast, QCES takes advantage of existing systems and
infrastructure to generate both heat and power. No trees or other forest
biomass would be harvested solely to power the QCES.

The
system is expected to provide 5.5 MW of heat to numerous industrial, municipal,
commercial, and multi-family residential buildings in Quesnel. It will also
produce up to 1.7 MW of electricity, which is proposed for purchase by BC Hydro
through an electricity purchase agreement for re-sale on the power grid. The
QCES will be designed to achieve more than 90% energy efficiency. About 40% of
all energy used through the project would be from recovery of waste heat. An
estimated 9,000 tonnes of wood waste from milling operations would be burned
for power and heat production. Each year, it would reduce greenhouse gas
emissions by 6,000 tonnes/year and produce 81,000 GJ of heat and 14.2 GWh of
electricity.

Under the proposed agreement, the City of Quesnel, Terasen Gas, and West Fraser will each
participate in the project. It is proposed that QCES purchase excess heat from
West Fraser, and BC Hydro purchase the electricity generated under an
Electricity Purchase Agreement. The partnership will now begin detailed engineering work to finalize analysis of
the economic viability of the QCES.

The
initial capital cost of the QCES is estimated at $14 million. The City of
Quesnel, through its Economic Development Corporation, secured grant funding of
$4.13 million through B.C.'s Innovative Clean Energy Fund, with Terasen Gas
funding the balance. Western Economic Diversification Canada, the Green
Municipal Fund, BC Hydro, and the BC Bioenergy Network have also been
instrumental in moving the project forward. The BC Bioenergy Network is
contributing and co-investing $200,000 in conjunction with Terasen Gas to facilitate
the timely completion of the required business, financial, and legal
frameworks, as well as the detailed engineering work.

Terasen Gas and the City will also work to negotiate and conclude detailed agreements
with BC Hydro and West Fraser Timber. With the successful conclusion of these
agreements and the engineering work, approval from the BC Utilities Commission
will be required to proceed with the project. If approved, the QCES is
anticipated to be operational in 2012.