BPI Energy Signs Letter of Intent with Blue Source to Fund Greenhouse Gas Emission Reduction Project Development.

CLEVELAND -- BPI Energy Holdings, Inc. (AMEX: BPG), an independent energy company engaged in the exploration, production and commercial sale of coalbed methane (CBM) in the Illinois Basin, today announced it has signed a non-binding letter of intent for a relationship with Blue Source, LLC, an aggregator and marketer of carbon credits. The letter of intent contemplates that Blue Source would enter into an agreement by which it would commit to exclusively funding any and all qualifying projects generated from and/or constructed and operated by BPI, and that Blue Source would become a 50/50 partner with BPI in those projects. The relationship would commence with BPI's Western Fuels Project announced on June 18, 2008.

As part of the proposed five-year agreement, Blue Source would become the exclusive marketer of all carbon offsets and other quantifiable environmental benefits produced by BPI.

"According to the National Energy Technology Laboratory statistics, releases associated with the mining of coal account for about 10 percent of the country's total methane emissions," commented James G. Azlein, BPI president and CEO. "Methane is a potent greenhouse gas having 21 times the global warming potential of carbon dioxide. Recovery of coalbed and coalmine methane as practiced by BPI not only captures a large source of emissions, but also harnesses this energy resource."

Azlein added, "With the growing demand for natural gas and heightened environmental concerns associated with methane releases to the atmosphere, this complementary relationship between BPI and Blue Source is a win-win."

Co-founder and CEO of Blue Source, Bill Townsend, said the partnership signifies the possibilities in pre-regulatory efforts to reduce negative environmental impacts associated with greenhouse gas emissions.

"BPI is exemplifying environmental stewardship by voluntarily reducing the amount of methane gases vented into the atmosphere," Townsend said. "The company continues to demonstrate market leadership in this arrangement with Blue Source. The foresight to take a methane stream of this nature and to monetize the carbon emission reductions is clear foresight into the solutions we all need to provide to mitigate global climate change."

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About BPI Energy

BPI Energy (BPI) is an independent energy company engaged in the exploration, production and commercial sale of coalbed methane (CBM) in the Illinois Basin, which covers approximately 60,000 square miles in Illinois, southwestern Indiana and northwestern Kentucky. The company controls a large CBM acreage position in the Illinois Basin at approximately 534,280 acres. News releases and other information on the company are available on the Internet at: http://www.bpi-energy.com.

About Blue Source LLC

Blue Source is the climate change answer for forward-thinking businesses, offering both physical and financial solutions to risks and opportunities in the carbon market. The company is organized into a portfolio group, responsible for marketing and managing the carbon offset portfolio and sourcing new offset projects and a separate project development group, responsible for identifying, designing, developing and managing projects. The company is leading development of a "carbon highway," through investment in infrastructure to capture and transport carbon dioxide for long-term geologic storage. Blue Source Canada, formerly Baseline Emissions Management, is a leader in Canada's domestic offset opportunities with a supplier portfolio of more than ten million tonnes of emission offsets. Blue Source Canada's technical division leads in technical expertise for protocol development and offset identification. Blue Source has offices in Salt Lake City, Calgary, Houston, Denver, Raleigh, San Francisco and New York. More information on the company is available at: http://www.ghgworks.com.

Some of the statements contained in this report that are not historical facts, including statements containing the words "believes," "anticipates," "expects," "intends," "plans," "should," "may," "might," "continue" and "estimate" and similar words, constitute forward-looking statements under the federal securities laws. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or the conditions in our industry, on our properties or in the Basin, to be materially different from any future results, performance, achievements or conditions expressed or implied by such forward-looking statements. Some of the factors that could cause actual results or conditions to differ materially from our expectations, include, but are not limited to: (a) our inability to raise the funds necessary to satisfy our existing accounts payable and accrued liabilities; (b) a refusal by GasRock Capital LLC ("GasRock") to make any additional advances under the GasRock Credit Agreement, which are at GasRock's discretion; (c) our inability to repay or refinance the amounts advanced to us by GasRock when such amounts become due on January 30, 2009; (d) a breach by us of a covenant under the GasRock Credit Agreement or other event of default that allows GasRock to accelerate our outstanding obligations; (e) our inability to obtain sufficient financing, close an offering of debt or equity securities, or complete a merger/combination, joint venture, asset sale, selling of rights relating to our litigation against Drummond or other transaction that would enable us to fund our future operations; (f) our failure to accurately forecast CBM production; (g) a decline in the prices that we receive for our CBM production; (h) our failure to accurately forecast operating and capital expenditures and capital needs due to rising costs or different drilling or production conditions in the field; (i) our inability to attract or retain qualified personnel with the requisite CBM or other experience; (j) unexpected economic and market conditions, in the general economy or the market for natural gas; (k) limitations imposed on us by the GasRock Credit Agreement; and (l) potential exposure to losses caused by our derivative contract. We caution readers not to place undue reliance on these forward-looking statements.