Excelsior developed the COGD process in cooperation with Hot-Tec Energy Inc., a private company affiliated with members of the In-situ Combustion Research Group from the Department of Chemical and Petroleum Engineering at the Schulich School of Engineering, University of Calgary.

Excelsior is in the final stages of preparing an application to the Alberta Energy Resources Conservation Board (ERCB) and Alberta Environment (AENV) for an experimental pilot project. The experimental project will seek approval to operate three COGD well arrays with a production target of up to 1,000 barrels of bitumen per day. Anticipated regulatory approval is in approximately one year for a subsequent implementation and commissioning of the pilot in Q1 2011.

Excelsior will also seek Confidential Status from the ERCB for the experimental pilot operating results.

Upon a successful pilot project, an application would then be made for a commercial-scale 10,000 barrel per day development project. As a result of deciding to pursue COGD, Excelsior has suspended its Hangingstone 10,000 bopd SAGD demonstration project application given the more attractive economic potential of a successful COGD bitumen recovery pilot.

Excelsior has also applied for IETP (Innovative Energy Technology Program) funding for its proprietary COGD technology. If successful the funding will be in the form of a royalty credit to be used against future production. Opportunities to attract Federal funding targeting energy research and sustainable development are also under review. Excelsior is currently funded to complete the pilot project application and sustain project development efforts through 2010.

COGD. COGD employs an array of vertical air injector ignition wells above a horizontal production well located at the base of the bitumen pay zone. A short initial period of steaming prepares the cold bitumen for ignition and develops enhanced bitumen mobility in the reservoir. Upon ignition a combustion chamber develops above and along the length of the horizontal well with combustion gases segregated in the upper part of the reservoir and hot bitumen flowing by gravity into the horizontal production well.

The COGD process has been designed to address high capital and operating costs, and the use of large quantities of water, fuel gas and diluent in oil sands processing. Features of the process include:

• A significant reduction in water usage for steam generation by up to 80% compared to a similar sized SAGD process.

• A significant reduction in fuel gas consumption for steam generation by up to 80% compared to a similar sized SAGD process, as COGD uses the in situ energy of the bitumen which would otherwise be unrecoverable.

• A significant reduction in diluent demand as a result of potential in situ bitumen upgrading.

• A reduced environmental impact through decreased water draw and water recycling, decreased fuel gas and diluent demand.

• Significantly improved project economics as COGD recoveries are estimated to be as much as 50% greater than SAGD recoveries, and capital and operating costs are estimated to be considerably lower than comparable SAGD projects.