Exhibit 10.9

TAX SHARING AGREEMENT

This Agreement is made effective this 9th day of November, 2006 (the
“Agreement”) between MICROGY HOLDINGS, LLC, a Delaware limited liability company
(“Microgy Holdings”), and ENVIRONMENTAL POWER CORPORATION, a Delaware
corporation (“EPC”).

RECITALS

A. Microgy Holdings is primarily engaged in the business of holding the equity
interests in (i) MST Production Ltd., a Texas limited partnership (“MST”),
(ii) Rio Leche Estates, L.L.C., a Texas limited liability company (“Rio Leche
Estates”), (iii) Mission Biogas, L.L.C., a Texas limited liability company
(“Mission Biogas”) and (iv) Hereford Biogas, L.L.C., a Texas limited liability
company (“Hereford Biogas” and, together with MST, Rio Leche Estates and
Mission, the “Subsidiaries”).

B. Microgy Holdings is a wholly owned subsidiary of EPC.

C. Microgy Holdings, EPC and the Subsidiaries file consolidated federal income
tax returns and would find it advantageous to file consolidated income tax
returns with state and other taxing authorities.

D. Certain states or other taxing authorities do not permit Microgy Holdings and
EPC to file consolidated tax returns.

E. Microgy Holdings is engaging in a financing transaction under (i) that
certain Loan Agreement, dated October 1, 2006, between the Gulf Coast Industrial
Development Authority (the “Issuer”) and Microgy Holdings (the “Loan
Agreement”), (ii) a Trust Indenture Agreement, dated October 1, 2006, between
the Issuer and Wells Fargo, N.A., as Trustee (the “Indenture”), which financing
transaction will have direct material benefits to EPC, and one of the conditions
of such transaction is that Microgy Holdings and EPC enter into this Tax Sharing
Agreement.

AGREEMENT

1. Definitions. Capitalized terms not otherwise defined herein shall have the
meaning assigned to such terms in the Loan Agreement.

2. Preparation of Tax Returns. EPC shall prepare, pursuant to the terms of that
certain Management Services Agreement executed contemporaneously herewith, or if
such agreement has been terminated, pursuant to the terms of this Section 1, any
and all tax returns required to be filed by Microgy Holdings and/or the
Subsidiaries with any taxing authority (federal, state, local or otherwise)
regardless of whether such tax returns can be prepared on a consolidated basis.
EPC shall undertake such preparation (as well as the preparation of its own tax
returns) in such manner that is necessary and advisable and shall timely file
such tax returns

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(including its own tax returns) as may be required by applicable law to avoid
any penalty or other negative consequence. EPC shall only be compensated for the
provision of such service as part of the Management Services Agreement, or if
such agreement is no longer outstanding, the cost of such service shall be
considered a capital contribution from EPC to Microgy Holdings. In no event
shall EPC be entitled to such compensation in contravention of the Loan
Agreement.

3. Payment of Tax Liability. Upon submission of any tax return, EPC shall pay to
the applicable taxing authority any tax (and any interest or penalties related
thereto) due from EPC, Microgy Holdings or the Subsidiaries whether such amount
arises from (i) an allocable share in a consolidated return, (ii) from a wholly
separate tax return being filed by Microgy Holdings or any Subsidiary or
(iii) from any tax assessed or imposed by any taxing authority. Notwithstanding
the foregoing, EPC in its sole discretion shall have the right to withhold any
payment of taxes, interest or penalties to any taxing authority until a final
determination of liability has been rendered by the appropriate taxing authority
or a court of competent jurisdiction if EPC is in good faith contesting the
validity or amount of such taxes, interest or penalties claimed to be due from
Microgy Holdings or any Subsidiary. EPC shall be entitled to reimbursement from
Microgy Holdings for the amount of any such tax liability of Microgy Holdings or
any Subsidiary, before giving effect to any tax benefits that may be available
to EPC independent of Microgy Holdings, any Subsidiary or their respective
assets or operations.

4. Term. The term of this Agreement shall commence on the date hereof and shall
continue through December 31, 2036; provided, however, that EPC may terminate
this Agreement if an Event of Default occurs under the Loan Agreement or the
Indenture and the Trustee exercises any remedies available to it under the
Indenture. Notwithstanding the foregoing, the Issuer or the Trustee shall have
the right to cause Microgy Holdings and EPC to terminate this Agreement at any
time for cause or if an Event of Default has occurred and is continuing.

5. Miscellaneous.

(a) Third Party Rights. The Issuer and its successors and assigns shall enjoy
the rights and not the obligations of a third-party beneficiary hereunder. No
other third party beneficiary rights are created hereunder.

(b) Survival of Claims. Any claims that either party may have against the other
party arising from the performance of such other party’s obligations hereunder
shall survive the termination of this Agreement.

(c) Headings. Section and article headings used in this Agreement have no legal
significance and are used solely for convenience of reference.

(d) Governing Law. This Agreement shall be construed and enforced in accordance
with the internal laws of the State of New Hampshire, without regard to its
principles of conflicts of laws, and each party hereby submits to the
non-exclusive jurisdiction of the state courts of New Hampshire and the federal
courts of the Untied States of America sitting in New Hampshire.

 

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IN WITNESS WHEREOF the parties have executed this Agreement the date first above
written, and agree to be bound by the terms hereof and the documents issued
pursuant hereto.

 

ENVIRONMENTAL POWER CORPORATION By:  

/s/ John F. O’Neill

  John F. O’Neill   Chief Financial Officer MICROGY HOLDINGS, LLC By:  

/s/ Richard E. Kessel

  Richard E. Kessel   President

[Signature Page to Tax Sharing Agreement]

 

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