Denbury Undertakes Midwest CO2 Pipeline Feasibility Study

14 July 2009

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 Denbury’s existing CO₂ pipeline infrastructure in Mississippi or Louisiana.

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 US Department of Energy Loan Guarantee Program.

This program, instituted in the Energy Policy Act of 2005, is designed to spur technological innovation in fossil fuel development. Governmental guarantees of debt financing for these plants is not assured, and building of these plants is subject to the normal financing due diligence, term sheet negotiations, loan documentation and various approvals, including state legislative approval.

The feasibility study will investigate multiple routes, scenarios and combinations of the various proposed gasification sites within the area. Thus, the final pipeline system, estimated cost, total miles and diameter of pipeline(s) could vary significantly. Denbury’s preliminary internal estimates suggest this would be a 500 to 700 mile pipeline system with a preliminary cost estimate of approximately $1.0 billion, based on the cost of other pipelines recently built or under construction.

As building such a pipeline is still in the preliminary stages, the Company has not yet evaluated its financing options, but they could include third party financing, project financing, bank financing, joint venture development and potential governmental support. 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. Denbury 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.

Denbury Resources Inc. is the largest oil and natural gas operator in Mississippi, owns the largest reserves of CO₂ used for tertiary oil recovery east of the Mississippi River, and holds operating acreage in the Barnett Shale play near Fort Worth, Texas, onshore Louisiana and Alabama, and properties in Southeast Texas.