Energy and resource development

Energy development offers exceptional growth opportunities because world, domestic and Alaska per capita energy demand and prices are increasing. At the same time, Alaska's known fossil fuel reserves and new discoveries are declining.

Technician with Stone Horn Ridge's UCG project reviews samples to determine the composition of the coal resource.

Also, our nation's economic and security interests support increased domestic energy and infrastructure development over continued reliance on imported oil and gas. And Alaska economic and social interests support sustainable development of Alaska resources that will provide reliable, stable-priced energy for local consumption and possible export.

CIRI is well-positioned to benefit from these market trends because it is Southcentral Alaska's largest private landowner, with 1.3 million acres of subsurface estate available for responsible gas, oil and mineral leasing. It also has the potential to develop substantial renewable energy resources on its land in the region. The Company has about 100,000 acres leased for oil and gas exploration and development and anticipates that at least one gas exploration well will be drilled on those lands in 2011.

CIRI is aggressively working to develop alternative energy projects in the region. In 2010, CIRI teamed with Houston-based Laurus Energy Inc. to form Stone Horn Ridge LLC to develop an underground coal gasification (UCG) project on CIRI lands on the west side of Cook Inlet. The project will convert coal into synthesis gas (syngas) without mining. Syngas from the first phase of the project will likely be used to fuel a new 100-megawatt combined-cycle power plant to generate electricity for Southcentral Alaska.

Future phases of the project could upgrade syngas into synthetic natural gas for use in Southcentral Alaska or export. Syngas could also be used as feedstock for production of clean liquid fuels or other chemical products for in-state use or export.

Core sample drilling on Fire Island to analyze foundations for wind turbines.

CIRI has committed to using carbon capture and management technologies to minimize the project's carbon footprint. The Company performed two phases of test drilling in 2010 to assess the coal resource and project site with generally positive results. CIRI anticipates a third phase of test drilling in 2011 to support project design and permitting work. Commercial operations could start in 2015.

Fire Island Wind LLC, a wholly owned CIRI subsidiary, continues to develop Alaska's largest wind energy project on CIRI land on Fire Island, just three miles from Anchorage. The first phase of this project will install 11 turbines that can produce up to 17.6 megawatts of power and supply more than 51,000 megawatt hours of electricity annually to meet the needs of more than 6,000 Southcentral Alaska households. CIRI and Chugach Electric Association finalized a power purchase agreement for Fire Island wind energy that was approved by the Regulatory Commission of Alaska on Oct. 10, 2011. Fire Island Wind is now moving forward with construction of key project infrastructure in time to go online and deliver power in late 2012.

CIRI continues to look for ways to develop gold and other mineral resources on its Farewell and Johnson River properties. CIRI-related ventures are extracting commercial volumes of sand and gravel from sites in Eklutna and Birchwood, Alaska. And the Company is investigating additional sand, gravel and resource development opportunities in the Cook Inlet region.