2 July 2002 – Ontario Power Generation (OPG) has entered into two futures contracts totalling 9 million tonnes of carbon dioxide equivalent (tCO2eq) as part of its voluntary commitment to reduce greenhouse gas emissions.

The trades were announced today by CO2e.com, a Cantor Fitzgerald company which carried out the transactions between OPG and BlueSource. One of the transactions of 6 million tCO2eq is the largest publicly announced firm purchase of CO2eq in the history of the global greenhouse gas market.

The transactions consisted of two trades of CO2eq between BlueSource and Ontario Power Generation, two innovative companies in the field of emissions trading.

The two deals were facilitated by CO2e.com’s Canadian office; the first a forward firm purchase by OPG of 6 million tCO2eq and the second an option for 3 million tCO2eq.

The total amount of CO2eq purchased by OPG is equivalent to the direct CO2 emissions produced by 15 000 aeroplanes flying from Toronto, Canada to Sydney, Australia. Companies like OPG who aim at reducing greenhouse gas emissions act in accordance with the objectives of the Kyoto Protocol, an international treaty in which developed nations agreed to limit their greenhouse gas emissions.

Steve Drummond, CEO of CO2e.com said that, CO2e.com is delighted to have facilitated this transaction which dramatically demonstrates the power of emissions trading. A huge environmental benefit has been funded in a single, financially efficient transaction, rewarding innovation and enabling OPG to meet its environmental targets cost-effectively. It shows that cross border trading is a viable reality and supports the sort of innovation the world needs to make real reductions in our impact on global climate change.”

The purchased emission reductions stem from geological sequestration projects in Texas, Wyoming and Mississippi. In 2000 and 2001, Blue Source’s clients expanded the construction of a CO2 pipeline which gathers locally produced CO2 and transports it to crude oil producers for injection into mature oil fields to enhance oil recovery. The CO2 used for this process would otherwise be vented into the atmosphere by natural gas processing plants. Additionally, Blue Source’s clients expanded their enhanced oil recovery (EOR) operations allowing for additional injections of CO2. The CO2 is sequestered in underlying bedrock that formerly held the oil.

“Greenhouse gas emissions are a global concern. Emission reduction credits are an effective tool for reducing emissions and OPG has been a leader in this area,” said Ron Osborne, President and CEO of OPG. “We have successfully lowered OPG’s Greenhouse Gas (GHG) emissions using a range of approaches and we will continue initiating opportunities to improve emission reduction.”

Mr Bill Townsend, CEO, Blue Source said, “Geologic sequestration of CO2 during EOR operations is an attractive source of greenhouse gas emission reductions in the United States due to its underlying economics and environmental assurance”. Mr. Townsend further commented that, “combining
Blue Source’s considerable inventory of greenhouse gas emission reductions
with OPG’s greenhouse gas offset needs allowed for a transaction of this
magnitude to be completed.”

Blue Source LLC, is a US-based firm that identifies, secures and markets greenhouse gas emission reductions in US-based logistic, transportation,
manufacturing and enhanced oil recovery industries.

Ontario Power Generation is an Ontario-based company whose principal business is the generation and sale of electricity to customers in Ontario and in interconnected markets. The company’s goal is to be a premier North American energy company, focused on low-cost power generation and wholesale energy sales, while operating in a safe, open and environmentally responsible manner. Its focus is on producing reliable electricity from competitive generation assets, power trading, and commercial energy sales.

In the projects associated with the transaction, CO2 is an industrial by-product that is normally vented into the atmosphere during the process of gas and oil extraction and processing. This waste CO2 is instead captured and is then compressed and transported by pipeline to a producing oil field. The captured CO2 is injected under pressure into oil wells to enhance oil recovery and is ultimately stored in the bedrock, where it displaces oil.

Since the waste CO2 would normally be vented, the initial greenhouse gas reduction can be quantified on a 1-for-1-basis i.e. 1 metric tonne of CO2 captured and injected results in 1 metric tonne of CO2 emission reduction. However, approximately 1-3% of the injected CO2 may be re-released into the atmosphere, depending upon the design of the field operations. The total CO2 emission reductions are based on CO2 injected minus the amount of the re-released CO2.