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Denbury studying proposed pipelines

DALLAS — Denbury Resources Inc. has initiated a comprehensive feasibility study of a possible long-term CO2 pipeline project, which would connect proposed gasification plants in the Midwest to the Company’s existing CO2 pipeline infrastructure in Mississippi or Louisiana.

The Illinois Department of Commerce and Economic Opportunity has provided financial assistance for the feasibility study for the Illinois portion of the pipeline. The feasibility study is expected to determine the most likely pipeline route, the estimated costs of constructing such a pipeline and review regulatory, legal and permitting requirements. It is estimated that the study will be completed in the fourth quarter of 2009, following which Denbury will evaluate external market conditions, the state of financing and construction of the proposed gasification projects, and make a decision as to whether or not they will take initial steps to build such a pipeline.

In related developments, two proposed Midwestern gasification plants with which Denbury has CO2 purchase contracts, one in Illinois and one in Indiana, have been selected to proceed to the term sheet negotiation phase under the U.S. Department of Energy Loan Guarantee Program.

The company’s preliminary internal estimates suggest this would be a 500- to 700-mile pipeline system with a preliminary cost estimate of approximately $1 billion, based on the cost of other pipelines recently built or under construction by the company. The potential pipeline project would likely take from four to five years to complete.

A third proposed gasification plant with which Denbury has a CO2 purchase contract was also selected by the loan guarantee program. The company plans to commence a pipeline study for this plant proposed to be built along the Gulf Coast of Mississippi, which would likely be a 110-mile pipeline that connects to the existing Free State Pipeline.

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