AEP to support largest agricultural carbon offset program in U.S.; program will capture and destroy methane from 200 farms

Program part of AEP’s comprehensive strategy to capture, reduce, avoid or offset greenhouse gas emissions

COLUMBUS, Ohio,– American Electric Power (NYSE: AEP) today announced an agreement with an affiliate of Environmental Credit Corp. (ECC) to purchase approximately 4.6 million carbon credits between 2010 and 2017 generated from capturing methane on livestock farms. (One carbon credit is equal to one ton of carbon dioxide reduction.) The agreement is part of the first large-scale livestock methane offset program established in the United States that will capture and destroy methane from approximately 400,000 head of livestock on as many as 200 U.S. farms. Cost of the credits is not being disclosed due to confidentiality agreements.

“The methane offset program is one piece of a comprehensive strategy to address our greenhouse gas emissions,” said Michael G. Morris, AEP chairman, president and chief executive officer. “While we remain fully committed to making on-system reductions in emissions from our fleet -- including building the next generation of clean, coal-gasification plants, validating technology to capture and store carbon from existing coal plants, and investing in new renewable generation -- offset programs are an important part of a complete carbon strategy.

“Methane capture programs from livestock farms offer significant benefits. Not only do they reduce the impact of a highly potent greenhouse gas, but they also reduce odor and pest issues and provide a new source of income for farmers who often struggle with razor-thin margins. A farm with 2,000 head of livestock could receive $105,000 or more during the 10-year agreement. Because we see the issues that farmers face in our 11-state service area, we’ve also required that more than half of the credits that we purchase through this agreement come from projects on farms located within those 11 states.”

"By sponsoring the reduction of emissions on farms throughout the country, AEP can make a significant, measurable difference in overall greenhouse gas emissions quickly and efficiently, while continuing its work on internal reduction projects" said Ed Heslop, chief executive officer of ECC. "This approach has implications that reach far beyond the 11 states served by AEP. This partnership between ECC and AEP reflects ECC´s ongoing pledge to foster projects that mitigate greenhouse gases, and because of AEP´s commitment to this project, ECC is investing more than $25 million in services and materials to bring the 200 farms online with emission reduction. This has the added benefit of bringing revenue to the farms very early in the project"

Methane from livestock manure accounts for 6.6 percent of total greenhouse gas emissions in the United States. Methane is 21 times more potent than carbon dioxide (CO2) in trapping heat in the atmosphere and is released into the air through common manure-handling practices. Through the methane-capture program, ECC will install covers on manure storage lagoons to capture and flare (burn off) methane, converting it to CO2, a much less-potent greenhouse gas. Capturing and flaring the methane from manure lagoons significantly reduces the greenhouse gases, as well as odors, emitted from livestock farms. It also helps prevent issues with pests, rainfall and dust.

According to the terms of the agreement, AEP will purchase up to 600,000 carbon credits per year between 2010 and 2017 at a fixed price from ECC. ECC will work with farmers to design and provide lagoon cover systems, including gas meters and flares, at no cost to participating farmers. ECC also will provide data monitoring, reporting, independent verification, certification and registration of the carbon credits with the Chicago Climate Exchange (CCX), the world’s first and North America’s only voluntary, legally binding greenhouse gas emissions reduction and trading program. AEP is a founding member of CCX.

AEP has led the U.S. electric utility industry in taking action to reduce its greenhouse gas emissions. AEP was the first and largest U.S. utility to join CCX and, as a member, committed to gradually reduce, avoid or offset its greenhouse gas emissions to 6 percent below the average of its 1998 to 2001 emission levels by 2010. Through this commitment, AEP will reduce or offset approximately 46 million metric tons of greenhouse gas emissions by the end of the decade.

AEP is achieving its CCX commitment through a broad portfolio of actions, including power plant efficiency improvements, renewable generation such as wind and biomass co-firing, off-system greenhouse gas reduction projects, reforestation projects and the potential purchase of emission credits through CCX.

Earlier this year, AEP announced an expanded strategy to capture, reduce, avoid or offset 5 million tons of greenhouse gas emissions per year post 2010, including plans to add 1,000 megawatts of nameplate-rated wind capacity and to install carbon capture on two existing coal-fired power plants, the first commercial use of technologies to significantly reduce CO2 emissions from existing plants. Technologies being advanced by AEP’s plan include both post-combustion and pre-combustion solutions to carbon dioxide emissions from coal-fired generation. The company also is continuing existing – and exploring new – initiatives for both demand-side and supply-side efficiency.