ENERGY, INNOVATION, AND ECONOMIC DEVELOPMENT

The Mesaba Energy Project

Excelsior Energy Inc.Mesaba Energy ProjectProject Update2008 GTC ConferenceOctober 7, 2008

Page 1

Project Energy Project Overview

Status of Efforts

Carbon Management Approach

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Project Overview

Subject to Confidentiality AgreementPage 3

Mesaba Energy Project Overview

IGCC plant with initial capacity of nominal 600 MW (net) with 2014 in-service dateCommercial, multi-train application of ConocoPhillips E-GasTM Technology for solid fuel gasification; fuel-flexible design accommodates 100% Powder River Basin (PRB) coal, 100% Illinois No. 6, or a blend of PRB and petroleum cokePreferred site on west Iron Range near Taconite, MN2003 Minnesota enabling legislation facilitated IGCC development

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Site Location

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Mesaba Project Key ParametersUtilizes enhanced design of an existing operating IGCC plantMISO transmission interconnection agreement in place to make output deliverable throughout MISO gridMinnesota enabling legislation

Exempt from certificate of need for generation and transmissionExempt from Minnesota law banning new coal generation

Federal incentives:Recipient of U.S. Department of Energy (DOE) $36 million Clean Coal Power Initiative Round II 50% cost-share fundingSpecific authorization for loan guarantee in federal Energy Policy Act of 2005; selected by DOE’s loan guarantee program to submit full application$133.5 million of Section 48A investment tax credits awarded to project by U.S. Treasury Department

Licensing rights to ConocoPhillips E-Gas technology, designed for subbituminous coalAbility to capture 30% of carbon emissions with proven technologies and developed plan for sequestration in North Dakota in conjunction with enhanced oil recovery (EOR)

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Plant Configuration: Well Understood Processes and Equipment

600 MW integrated gasification combined-cycle (IGCC) plant:

2 combustion turbines, 1 steam turbine generator, and 2 heat recovery steam generators

2 gasification trains with full spare gasifier, for high availability

Natural gas pipeline allows plant to provide back-up generation with natural gas when gasification island is unavailable

Licensee of ConocoPhillips E-Gas Technology (coal gasification)—agreement provides for long-term alliance benefits

Selected by the Electric Power Research Institute as the “reference plant” design for fuel-flexible IGCC

Designed to run on 100% subbituminous Powder River Basin coal, Illinois No. 6 coal, and blends of coal and petroleum coke

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Fuel Flexibility and Diversity

95% Pure O2

Bituminous

Sub Bituminous

Petcoke (50%)

Coal

PreparationGasifiers

SyngasCooling

Gas Cleanup

SyngasConditioning Natural Gas

Syngas

GasificationIsland

Combined Cycle Power Island

Combustion Turbines/Generators

Heat Recovery Steam Generators

Steam Turbine/Generator

Steam Condenser

AirSeparation

Unit

Fuel Flexibility Fuel Diversity

Power To The

Grid

The Project can use a wide variety of feedstocks, including high-sulfur Eastern coal, Midwest bituminous coal, Powder River Basin coal, and petroleum coke

Natural gas backup provides added fuel diversity to further increase plant availability

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Infrastructure and Transmission

Adequate rail, natural gas, and water infrastructure available at site to develop project

Site near Taconite, Minnesota situated strategically with access to two rail lines; options obtained for both preferred and alternative sites

Permit applications include a second 600-MW unit at the same site

Transmission interconnection agreements signed (LGIAs); modest transmission network upgrades required to achieve deliverability throughout MISO

9 miles of double-circuited 345-kV transmission line required for Generator Outlet facilities (serves both units at site)

Baseline studies indicate 80 miles of new 230-kV transmission line needed from Minnesota Power’s Boswell station to its Riverton substation; Excelsior has asked MISO to conduct sensitivity studies to verify baseline conclusions (rapid industrial expansions occurring since baseline conditions established could significantly lessen requirements)

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Site/Route Licensing Activities and Schedule

Remaining Activities and Approvals

DOE preparing final comment and response document for review by EIS cooperating agencies

Final EIS issuance targeted for early January 2009

Administrative Law Judge recommendation to Minnesota Public Utilities Commission (MPUC) regarding adequacy of EIS and preferred Project site anticipated early 2009

MPUC issues final decision anticipated in second quarter 2009

Draft permits issued for public comment shortly after MPUC sitingdecision

Carbon dioxide pipeline permitting slated to begin upon Project’s financial close

Subject to Confidentiality AgreementPage 10

Carbon Capture and Sequestration Plan

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CCS Plan: Approach

Excelsior has filed with regulators a plan for Carbon Capture and Sequestration (“CCS Plan”)

CCS Plan identifies enhanced oil recovery and other sequestration opportunities in the region; based, in part, on work conducted by the EERC as part of PCOR Partnership program

CO2 removal from syngas prior to firing in combustion turbine (no shift conversion required); for subbituminous coal provides approximately 30% overall CO2 captureUses commercially available technology

Amine scrubber, dehydration & compression“Bolt-on” process allows retrofit installation with minimal down time andplant can operate with or without captureEnhanced Oil Recovery (“EOR”)

Transport by pipeline to north-central North Dakota and southwestern Manitoba; pipeline ~400 to 450 miles in length

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Potential CO2 Pipeline Routes: EOR

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Potential CO2 Pipeline Routes: Saline Aquifer

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EERC’s Vision of CCS in a Carbon-Managed Economy

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CCS Plan: Why Excelsior’s Plan Makes Sense

IGCC is the best platform for future carbon capture

Pre-combustion clean-up provides economical advantages to post-combustion scrubbing in conventional coal-fired power plants

Incremental carbon capture approach

30% capture, dehydration and compression is a “bolt-on” system (it does not affect base case plant design)

Builds bridge to 90% capture

CO2 sequestration at EOR site eliminates major risks/liability/development delay associated with geologic saline aquifer

EOR offers revenue to offset costs

Pipeline construction creates opportunity for sequestration of carbon from multiple sites – EERC vision made real

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CCS Plan Synopsis

IGCC with 30% capture and EOR sequestration is the logical framework from which to start building the CCS bridge to future, economically viable, carbon-free power production

Starting at a higher capture level represents too high a cost and technological/integration risk for the first commercial IGCC projects

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An Essential Step to Decarbonized Coal

The Mesaba Energy Project will demonstrate the commercial technologies that are essential to the nation’s transition to low-emission power from coal

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