Home

IGRS Project

Petro Source Project

Iowa Farm Project

Norseman

Canadian Consortium of Energy Companies Agrees to Buy Emission Reduction Credits from CO2 Pipeline Operator

Den Hague – November 20, 2000 – The Greenhouse Emissions Management Consortium (GEMCo), a consortium of Canadian energy companies focusing on market-based ways of reducing greenhouse gas emissions, today announced an agreement with Petro Source Carbon Company (Petro Source), to option 600,000 metric tonnes of 2002 to 2012 vintage carbon dioxide-equivalent emission reduction credits. Six of the GEMCo consortium members will participate in the option call agreement.

The announcement was made during the 6th Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change in den Hague, Netherlands. The transaction was facilitated by virtual marketplace for greenhouse gas emissions (GHG) trading, CO2e.com, LLC, which celebrated its official opening this evening in den Hague.

The agreement is a first of its kind. Petro Source is managed by PSCO2, L.P. which is 57.5% owned by a Petro Source Corporation affiliate and 42.8% by MCNIC Pipeline and Processing, a subsidiary of MCN Energy Group Inc. (NYSE: MCN). Petro Source’s first CO2 pipeline project was the development and construction of the Val Verde Pipeline in Pecos and Terrell Counties, Texas. Val Verde Pipeline is 78% owned by PSCO2, L.P. and 22% owned BP Amoco’s ARCO Permian. The 82-mile pipeline started operating in August 1998, gathers and transports carbon dioxide (CO2) (which had historically been vented to the atmosphere) to mature oil fields, where the CO2 is injected into the bedrock and sequestered. When oil producers inject CO2 into partially depleted reserves, the crude oil flows more easily. As a result, oil producer demand for electricity declines indirectly reducing sulfur and smog-causing emissions.

Typically, the injected CO2 for enhanced oil recovery is drawn from underground reserves. However, the Val Verde pipeline gathers CO2 that would otherwise be vented to the atmosphere from flue stacks at a number of natural gas treating facilities located along the pipeline. Substantial greenhouse gas emission reductions and operating benefits are derived from the substitution of the treatment facilities' flue gas.

The Emission Reduction Credit ("ERC") trade with GEMCo will enable Petro Source to expand and develop new CO2 vent gas collection and transportation activities. While Petro Source could fulfill its obligations to GEMCo entirely from its Texas operations, the agreement does not restrict Petro Source to the delivery of Texas-originated ERCs. For example, PSCO2 recently announced a new long-term supply agreement for significant volumes of CO2 vent-gas sourced in Wyoming. In the summer of 2001, PSCO2 plans to begin construction of the new CO2 vent-gas pipeline to mature oil fields in the Powder River Basin of Wyoming. PSCO2 estimates that this Wyoming project will generate approximately 31 million ERCs in addition to roughly 20 million ERCs available in Texas.

An ERC is defined as the equivalent of one metric tonne of atmospheric carbon dioxide (CO2) or other greenhouse gas measured in CO2-equivalents (CO2e), reduced or avoided from an agreed baseline. ERCs are generated by documenting activities that cause measurable incremental reductions in greenhouse gas emissions. ERCs may eventually be surrendered by titleholders to environmental regulators, in partial compliance with possible future legislated obligations to reduce greenhouse gas emissions. Alternatively, ERCs could be packaged with a wide range of energy products to achieve an emissions-neutral market offering.

"We are very pleased to participate in a major carbon emission reduction credit trade that takes place in the middle of the U.S. oilpatch," says Aldyen Donnelly, President of GEMCo. "We are especially pleased to be working with Petro Source, a supplier with the capacity to deliver ERCs well beyond the demand for GHG emission offsets we have addressed off in this one agreement."

Bill Townsend, President, Petro Source, emphasizes that “This sophisticated option transaction with GEMCo points out the existing commercial strengths in ERC trading available in the marketplace today. As a result of this agreement, Petro Source will have additional funds in which to invest in growing and expanding its CO2 sequestration businesses. ”

Carlton Bartels, CEO of CO2e.com said, “CO2e.com is thrilled to have facilitated this innovative transaction, as the first trade of the new company. This trade demonstrates the power of emissions trading to bring the imagination of industry to create innovative GHG reductions. The Canadian/US aspect illustrates how forward thinking businesses, such as GEMCo and Petro Source, are willing to reach across borders to effect real environmental solutions, without waiting for the resolution of international negotiations.”

International concern for the escalating level of greenhouse gases, and perceived linkages between the level of GHGs in the atmosphere and extreme weather events have led to several international accords. Negotiated in December 1997, the Kyoto Protocol committed its signatories, in principal, to a goal of reducing projected GHG emissions. The Canadian government committed to a reduction leading to emissions 6% below those of 1990 in the period 2008-2012. The Clinton Administration committed the United States to a reduction of 7%. Negotiators from 160 nations are currently meeting in den Hague to try to forge a practical path forward from the conceptual commitments that are already in place.

"We are very concerned about the prospect of this process evolving into a legally binding international treaty that is largely based on trade theory”, says Donnelly. "GEMCo encourages all interested parties to develop experience through transactions like the one we are announcing today. It is very important that more real market experience inform these very important negotiations."

Seven Canadian energy companies that had been loosely collaborating since early 1995 established GEMCo in 1996. The founding partners decided that the best way to develop their individual positions on greenhouse gas policy and emission trading system design was to get market experience. GEMCo currently has 11 corporate members that directly employ over 60,000 Canadians, own and operate over $60 billion in energy assets that generate roughly 25% of Canada's greenhouse gas emissions, and provide a diverse range of energy services to over 15 million Canadian customers. These firms also control smaller but high growth enterprises with operations in other countries such as Argentina, Australia, Brazil, Chile, China, Columbia, Great Britain, Hungary, India, and the United States.

GEMCo hit the news last year with its announced commitment to buy up to 2.8 million metric tonnes of CO2-equivalent emission reduction credits from U.S. farmers. "Greenhouse gases know no international boundary," says Donnelly. "Greenhouse gas ERCs can be originated anywhere in the world to offset emissions anywhere in the world."

“This is just good business. Capturing CO2 which would normally be vented as a waste stream, directing it to an economic and beneficial use and improving our environment. A great bottom line for all,” said Howard McCollum, CEO, Petro Source Corporation.

For More Information, contact: