Exhibit 10.1

                                                           No.____________
EQUIPMENT LEASE

Lessor:                 Malahat Energy Corporation

Lessee:                 __________________________

Billing Address:________________          Delivery Address:_______________
Street/Suite:___________________          Street/Suite:___________________
City:___________________________          City:___________________________
Province/State:_________________          Province/State:_________________
Postal/Zip Code:________________          Postal/Zip Code:________________
Attention:______________________          Attention:______________________
Telephone #:____________________          Telephone #:____________________
Facsimile #:____________________          Facsimile #:____________________


Equipment:
__________________________________________________________________________
Item            |         Equipment         |         Serial Number
 #              |                           |
________________|___________________________|_____________________________
 1              |                           |
________________|___________________________|_____________________________
 2              |                           |
________________|___________________________|_____________________________
 3              |                           |
________________|___________________________|_____________________________
 4              |                           |
________________|___________________________|_____________________________



Term:     The term of this lease will be __________ months commencing on the
Commencement Date and expiring on the Expiry Date, unless terminated earlier
pursuant to this lease.

Commencement Date:__________________    Expiry Date:_________________

Delivery and Installation Date:         __________________
Installation and Commissioning Cost:    $_________________

Supplements:                  Accepted
-----------                   --------
Genset Supplement             ________     Rent:            $__________/month
Maintenance Supplement        ________     Taxes on Rent:   $__________
Feedstock Supply Supplement   ________     Security Deposit:$__________

Lessee:                                    Lessor:
By:     Signature  ___________________     By:     Signature  _______________
        Print      ___________________             Print Name _______________

Title: ___________________                 Title: ___________________
Date:  ___________________                 Date:  ___________________

Lease Terms and Conditions

In consideration of their respective covenants set out below, Lessor and
Lessee agree as follows:

ARTICLE 1 - DEFINITIONS AND INTERPRETATION

1.1 Definitions.  Unless otherwise expressly provided, or unless the context
otherwise requires, all capitalized words and phrases used in this lease shall
have the following meanings and such meanings shall be equally applicable to
both the singular and the plural forms of the terms defined:

(a) "Alteration" has the meaning specified in section 7.1.

(b) "Business Day" means a day which is not a Saturday or Sunday or a
statutory holiday in the Province or State of the Delivery Address;

(c) "Commencement Date" has the meaning specified on the cover page;

(d) "Delivery Address" has the meaning specified on the cover page;

(e) "Delivery and Installation Date" has the meaning specified on the cover
page;

(f)  "Equipment" has the meaning specified on the cover page, including all
parts, components, attachments and accessories thereto and all other property
and assets from time to time subject to this lease, together with all
attachments, replacements, alterations, repair parts and components and all
intellectual property rights with respect to any of the foregoing;

(g) "Event of Default" has the meaning specified in Section 12.1;

(h) "Expiry Date" has the meaning specified on the cover page;

(i) "Force Majeure" means any event or occurrence not within the control of
the party claiming force majeure and which by the exercise of due diligence
such party is unable to prevent or overcome, including, without limitation the
generality of the foregoing, any act of God, strikes, lockouts or other
industrial disturbances, acts of the Queen's enemies, sabotage, wars,
blockades, insurrections, riots, epidemics, landslides, lightning,
earthquakes, floods, storms, fires, washouts, arrests, restraints of rulers
and peoples, civil disturbances, explosions, and orders of any court, board or
governmental authority having jurisdiction.  A lack of funds or other
financial cause specific to a party hereto shall not, in any circumstance be
force majeure;

(j) "Installation and Commissioning Cost" means the amount specified on the
cover page;

(k) "Lien" has the meaning specified in section 10.1;

(l) "Operating and Maintenance Manual" means Lessor's operating and
maintenance manual for the Equipment;

(m) "person" includes an individual, corporation, trust, partnership,
governmental authority and any other entity;

(n) "Prime Rate" means the rate of interest, expressed as a percentage per
annum, declared from time to time by the main branch in Vancouver of the Royal
Bank of Canada as its "prime rate", the intention being that the rate of
interest hereunder shall fluctuate as and when such declared prime rate
fluctuates;

(o) "Rent" means the amount specified on the cover page;

(p) "Security Deposit" has the meaning specified in section 3.8;

(q) "Stipulated Loss Value" for all or any part of the Equipment shall
represent the replacement cost of all or any part of the Equipment;

(r) "Supplements" means those of the Supplemental Agreements specified on the
cover page accepted by Lessee from time to time during the Term, which
Supplemental Agreements are each evidenced by a further agreement in writing
between the parties;

(s) "Taxes" means any and all taxes, rates, duties, assessments, levies,
license and registration fees and other public charges (excluding only federal
and provincial or state taxes on net income or capital of Lessor and
provincial, state or municipal place of business taxes and other similar taxes
in respect of Lessor or its property other than the Equipment) which may at
any time be charged or assessed directly or indirectly with respect to this
lease or the Equipment, or Lessor's or Lessee's interest therein, or with
respect to the use, leasing or operation of the Equipment, and all interest
and applicable penalties with respect thereto, whether assessed, levied or
charged by any municipal, provincial, state or federal government, and school
board or any other public body;

(t) "Term" has the meaning specified on the cover page;

(u) "this lease", "herein", "hereunder", hereof" and similar terms refer to
this lease as a whole and all Supplements accepted by the Lessee as indicated
on the cover page, and not to any particular article, section, schedule or
other subdivision of this lease.

(v) "Waste" means any exhaust, mineral salts, residual ash or other solids,
liquids or gases arising out of or in connection with, or resulting from the
Equipment excluding materials obtained from the scrubbers to be recycled
through the Equipment.

1.2 Interpretation

(a) In this lease, the singular includes the plural, the plural includes the
singular, and any gender includes the other genders.

(b) References in this lease to an article, section, schedule or other
subdivision are to the corresponding article, section, schedule or other
subdivision of this lease, unless otherwise indicated.

(c) The use of headings and the subdivision of this lease into articles,
sections, schedules and other subdivisions are for convenience of reference
only and shall not affect the interpretation of this lease.

(d) This lease shall be governed by and construed and interpreted in
accordance with the laws of the Province of British Columbia and the laws of
Canada applicable therein and each party hereby irrevocably agrees to the
exclusive jurisdiction of the courts of the Province of British Columbia in
respect of all matters which may arise in respect of this lease.

(e) Should any provisions of this lease be void or unenforceable it shall be
severed from this lease and the remainder of this lease shall remain in full
force and effect and shall be interpreted and construed as if the stricken
provision had never formed part of this lease.

(f) All dollar amounts referred to in this lease refer to  ______________
dollars.

(g) Except as contained in any Supplement accepted by the Lessee as indicated
on the cover page, this lease constitutes the entire agreement between the
parties with respect to the Equipment and its rental to and use by Lessee.
Any discrepancy between the terms of this lease and a Supplement shall be
resolved in favour of the Supplement.  There are no other terms, conditions,
obligations, representations or warranties on the part of either party,
whether oral, written, express, implied, statutory or otherwise, governing or
affecting the transaction contemplated in this lease or which may give rights
to Lessee or restrict the remedies and rights of Lessor.  Amendments to this
lease must be in writing and executed by the parties hereto.

(h) The representations, warranties and covenants survive the expiration or
sooner termination of the Term.

(i) The parties agree that the provisions of this lease have been negotiated
by the parties and therefore the contra proferentum rule will not apply as a
rule of construction of this lease.



ARTICLE 2  - LEASE

2.1 Lease and Term.  Lessor leases to Lessee, and Lessee leases from Lessor
the Equipment for the Term.  This lease cannot be cancelled except as
expressly provided herein.

2.2 Title.  Title to the Equipment is and shall at all times remain vested in
Lessor.  This agreement is one of lease only.  Lessee shall have no right,
title or interest in the Equipment except the right to use and possess the
same upon and subject to the terms and conditions contained in this lease.
Lessor may, and Lessee shall if and as directed by Lessor, affix plates, tags
or markings to the Equipment clearly indicating Lessor's ownership, and Lessee
shall not remove, alter or conceal any such plates, tags or markings.  Lessee
shall defend Lessor's title against any contrary claim asserted during the
Term or at any other time by any person claiming through or against Lessee or
arising out of or related in any way to this lease or Lessee's possession or
use of the Equipment.

2.3 Delivery.  The Lessor shall, at the Lessee's expense, deliver the
Equipment to the Delivery Address on the Delivery and Installation Date and
pick-up from the Delivery Address and deliver the Equipment to a location of
the Lessor's choice on the Expiry Date or sooner termination of the Term.
Without limiting the generality of the foregoing, the Lessee shall pay all
costs associated with the transportation of the Equipment to and from the
Delivery Address.

ARTICLE 3  - LESSEE'S PAYMENT OBLIGATIONS

3.1 Installation and Commissioning Cost.  The Lessee shall pay to the Lessor
the Installation and Commissioning Cost upon successful installation and
commissioning of the Equipment at the Delivery Address.

3.2 Rent.  Lessee shall pay to Lessor Rent during the Term and the Rent
together with applicable Taxes on Rent will be payable in advance on the first
day of each month.

3.3 Taxes.  Lessee shall promptly pay all Taxes, when due, to Lessor or to the
proper governmental authority.

3.4 Interest.  All Rent and other amounts from time to time owing under this
lease not paid when due shall bear interest, from the due date to the date of
payment at the Prime Rate plus 4% per annum, compounded monthly, both before
and after demand, default and judgment, which amounts shall be payable on
demand.

3.5 Net Lease.  This lease is a net lease and every cost and expense existing
or arising with respect to the Equipment, the delivery thereof or Lessee's
lease, possession or use thereof and all Taxes shall be borne by Lessee.  All
Rent and other amounts from time to time owing hereunder are payable without
abatement, withholding, set-off or reduction for any of the foregoing or for
any claim or claims whatsoever which Lessee may assert against Lessor or
against any other person for any reason, and whether arising under this lease
or otherwise.

3.6 Manner and Place of Payment.  All amounts to be paid by Lessee to Lessor
hereunder shall be direct-deposited to such bank as Lessor shall designate in
writing.  If any such amount is due to be paid on a day other than a Business
Day, such amount shall be payable on the next succeeding Business Day.  Lessee
acknowledges that any invoices for payments due under this lease sent to
Lessee by Lessor shall be for Lessee's convenience only. Lessee's non-receipt
of an invoice shall not relieve Lessee of its obligations to make any payment
hereunder on the due date thereof.

3.7 Security Deposit.  Lessee shall deposit with the Lessor the sum of two
months Rent as a security deposit upon signing this lease (the "Security
Deposit"), as security for the faithful performance by Lessee of all of its
covenants and obligations hereunder, provided that

(a) the Lessor shall not be liable to the Lessee for interest on the Security
Deposit;

(b) if any portion of the Rent is at any time overdue and unpaid, or if Lessee
fails to keep and perform any terms, covenants or conditions pursuant to this
lease, then Lessor may but shall not be obliged to, apply any portion of the
Security Deposit for loss or damage sustained or suffered by Lessor for
Lessee's breach.  If the entire Security Deposit, or any portion if it, is
appropriated and applied by Lessor, then Lessee will, upon demand, immediately
remit to Lessor a sufficient amount in cash to restore the Security Deposit to
the original sum deposited; and

(c) if Lessee complies with all of the terms, covenants and conditions and
promptly pays all of the Rent and other amounts owing, the security deposit
will be returned in full to Lessee within 60 days after the end of the Term.
Lessor shall not be obliged to account to Lessee for any interest earned on
the Security Deposit.

ARTICLE 4 - REPRESENTATIONS AND WARRANTIES

4.1 Lessor's Representations and Warranties.  Lessor represents and warrants
to Lessee that:

(a) Lessor is a corporation duly incorporated, organized, and validly existing
under the laws of Canada and is duly qualified to own the Equipment and to
lease it to Lessee as provided in this lease;

(b) Lessor has full power, authority and the legal right to enter into this
lease and perform its obligations hereunder, and the execution and delivery by
it of this lease and performance of its obligations hereunder have been duly
authorized by all necessary corporate action on the part of Lessor and will
not violate any provision of law or of the constating documents or by-laws of
Lessor or result in a breach of or constitute a default under any agreement,
indenture or other instrument to which Lessor is a party or by which Lessor or
any of its property may be bound or affected;

(c) This lease constitutes a legal, valid and binding obligation of Lessor;
and

(d) The Equipment shall have the capacity to convert approximately 6.0 tons
(metric) per day of biodegradable materials of the type as selected by the
Lessor into syngas to generate energy, yielding an average equivalent range of
250 kilowatt hours per hour of energy.

4.2     Exclusions.  Except as set forth in subsection 4.1, Lessor makes no
representations or warranties in favour of Lessee, whether oral or written,
express or implied, statutory or otherwise, with respect to Lessor, the
Equipment, this lease or any other matter relating to this lease transaction.
In that regard, and for greater certainty, Lessee acknowledges that (i) it has
selected the Equipment without placing any reliance on Lessor or on Lessor's
skill or judgment (ii) the Equipment is leased under this lease on an "as is"
basis, (iii) there are no warranties, conditions, terms, representations or
inducements, oral or written, express or implied, statutory or otherwise, made
by or on behalf of Lessor or operating in favour of Lessee as to any aspect of
the Equipment including, without limitation, as to its condition, operation,
fitness for any particular purpose, durability or merchantability, or as to
Lessor, this lease or any other matter related to this lease transaction, all
of which are waived and excluded from this lease to the fullest extent
permitted by applicable law, and Lessee agrees not to seek or claim the
benefit thereof; and (iv) the sole fundamental obligation of Lessor under this
lease is not to disturb the Lessee's quiet possession of the Equipment as long
as Lessee is not in default under this lease.

4.3     Lessee's Representations and Warranties.  Lessee represents and
warrants to Lessor that:

(a)     Lessee is a corporation duly incorporated, organized and validly
existing under the laws of its jurisdiction of incorporation and is duly
qualified and holds all necessary licences, approvals, certificates and
permits to enable it to lease the Equipment from Lessor and to operate the
same as contemplated in this lease;

(b)     Lessee has full power, authority and the legal right to enter into
this lease and perform its obligations hereunder, and the execution and
delivery by it of this lease and performance of its obligations hereunder have
been duly authorized by all necessary corporate action on the part of Lessee
and will not violate any provision of law or of the constating documents or
by-laws of Lessee or result in a breach of or constitute a default under any
agreement, indenture or other instrument to which Lessee is a party or by
which it or any of its property may be bound or affected, or permit any lender
to accelerate or demand repayment of any material amount of indebtedness of
Lessee;

(c)        this lease constitutes a legal, valid and binding obligation of
Lessee; and

(d)     all consents, authorizations and approvals of third persons, if any,
necessary with respect to this lease and to performance by Lessee of its
obligations hereunder have been obtained.

ARTICLE 5 - USE

5.1 Location.  Lessee shall keep the Equipment at the Delivery Address and
shall not remove the Equipment from such location during the Term without
Lessor's prior consent, which consent shall not be unreasonably or arbitrarily
withheld or delayed.

5.2 Compliance With Laws.  Lessee shall at all times and at its own expense
comply with all applicable statutes, laws, regulations, orders and rules,
including without limitation, regarding environmental matters, present or
future, and the requirements of any insurance policies and underwriters
relating to the ownership, lease, possession, use, operation, maintenance,
alteration, storage, repair, delivery, return or other disposition of all and
any part of the Equipment and Waste.

5.3 Maintenance, Use and Inspection.

(a) Lessee shall at all times and at its own expense, maintain the Equipment
in good mechanical and working order, repair, condition and appearance
(reasonable wear and tear from proper use only excepted).  Lessee shall
promptly make any and all necessary repairs and replacements, including
repairs and replacements, to the Equipment, and shall furnish or obtain and
install any and all parts, components, accessories and servicing required to
keep the Equipment in the state required by this lease.  Before undertaking
any maintenance, repairs or replacements to the Equipment, Lessee shall first
consult with Lessor, and to the extent authorized by Lessor, Lessee may
undertake such maintenance, repairs or replacements by competent and duly
qualified persons approved by Lessor.  If the Lessor so chooses, the Lessor
may at the Lessee's expense elect to undertake or engage others to undertake
the necessary maintenance, repairs or replacements, in each case provided the
Lessor ensures such maintenance, repairs or replacements are done promptly and
with the minimum amount of disruption to the Lessee's business.

(b) Lessee shall ensure that the Equipment is not exposed to hazardous
materials which may impair the efficiency or destroy the functionality of the
Equipment.  Lessee shall cause the Equipment to be operated by competent and
duly qualified personnel only, and for proper business purposes, and in
compliance with all of Lessor's recommendations and instructions in the
Operating and Maintenance Manual and with all terms and provisions of this
lease.

(a) (c) Lessor, its employees and agents shall have and be permitted to have
access to the Equipment and the right to enter upon any lands or premises
where any part of the Equipment may be located at any time and from time to
time for the purpose of inspecting, maintaining, repairing or replacing the
Equipment.

(a) Lessor shall notify the lessee promptly of updates to the operating and
maintenance manual, if any, and lessee shall at all times maintain the
contents of the operating and maintenance manual in good order.(d)

5.4 Removal of Waste.  The Lessee shall own and be responsible for the removal
and disposal of all Waste in compliance with Section 5.2.

5.5 Excess Energy.  Lessee shall be responsible for obtaining all approvals
and permits and shall bear all risk with respect to any sale of excess energy
(including without limitation electricity, steam and synthesized gas) arising
out of or in connection with or resulting from the Equipment.

ARTICLE 6 - GREENHOUSE GASES

6.1 Definitions. Unless otherwise expressly provided, or unless the context
otherwise requires, all capitalized words and phrases used in this Article
shall have the following meanings and such meanings shall be equally
applicable to both the singular and the plural forms of the terms defined:

(a) "Convention" means the United Nations Framework Convention on Climate
Change.

(b) "ER" or "Emission Reduction" means a reduction, avoidance, sequestration
or mitigation of GHG emissions;

(c) "ERB" or "Emission Reduction Benefits" means all rights, benefits, title
and interest in and to, arising out of or in connection with, or resulting
from, an ER, whether such right, benefit, title or interest is in existence as
of the date of this lease or arises thereafter, including the period after the
Term;

(d) "GHG" means carbon dioxide, methane, nitrous oxide, hydrofluorocarbons,
perfluorocarbons, and any other gas substance that is the subject of the
Convention and related protocols, treaties, agreements and instruments;

6.2 Ownership of Greenhouse Gas Emission Reductions.  By signing this
Agreement, Lessee transfers, surrenders and quit claims to Lessor all of
Lessee's right, title and interest in any and all ERs and any and all ERBs
arising therefrom, if any, arising out of or in any way related to the
Equipment including without limitation, any and all ERs and ERBs arising from
sale of excess energy by Lessee.  Lessee agrees to take no action and to
receive no benefit, credit or interest contrary to this Agreement or that in
any way prejudices or impairs Lessor's ability to use or enjoy its right,
title ,interest and benefits in any and all such ERs and ERBs.

6.3 Measurement and Verification ERs.  Lessee shall, at Lessor's Cost, provide
Lessor with access to such of the Lessee's books, records and other
information both during and after the Term, as the Lessor may reasonably
require to document,evidence or measure any and all ERs which may arise out of
or are in any way related to the Equipment.

6.4 Further Assurances.

(a) At the request and cost of Lessor, Lessee shall from time to time, either
before, during or after the Term of the lease, do all such acts and things as
may be necessary to qualify all of the ERs which may arise out of or are in
any way related to the Equipment for any available ERBs and, subject to
subsection (b), to obtain and secure such ERBs forLessor.

(b) At the request and cost of Lessor, Lessee shall from time to time, both
during and after the Term, execute and deliver or cause to be executed and
delivered to Lessor all such further documents and instruments and do all such
further acts and things as may be necessary for more perfectly and absolutely
assigning, transferring and assuring to and vesting in Lessor good and
marketable title to any and all ERs which may arise out of are in any way
related to the Equipment and any and all ERBs arising therefrom.

ARTICLE 7  -ALTERATIONS, ADDITIONS AND IMPROVEMENTS

7.1 Alterations, Additions and Improvements.

(a) Lessor shall be entitled, at its expense, to make alterations, additions
or improvements (each individually referred to as an "Alteration") to the
Equipment provided the Lessor ensures such Alterations are done with the
minimum amount of disruption to the Lessee's business..

(b) Lessor shall give Lessee prior written notice of any Alterations to the
Equipment proposed to be made by it (repairs, replacements and maintenance of
the nature contemplated by section 5.3 excepted).  All Alterations shall upon
the earlier of installation or completion become the property of, and the same
are conveyed to, Lessor without requirement of any further act or formality,
and thereafter all such Alterations shall for all purposes be and be deemed to
be part of the Equipment.  Lessee shall not be entitled to modify or remove
any Alterations which become the property of Lessor.  Lessor, its employees
and agents shall have and be permitted to have access to the Equipment and the
right to enter upon any lands or premises where any part of the Equipment may
be located at any time and from time to time for the purpose of making
Alterations to the Equipment

7.2 Lessee shall, if so requested by Lessor, execute and deliver to Lessor
such bills of sale, assignments, deeds and other documents and instruments as
may be requested by Lessor to evidence the ownership of  Lessor of title in
and to any Alterations which become the property of Lessor as contemplated in
Section 7.1.

ARTICLE 8 - LOSS, DAMAGE AND INSURANCE

8.1 Loss or Damage, Restoration and Rebuilding, Expropriation.

(a) Lessee assumes the entire risk of loss (including loss or interruption of
use) of or damage to the Equipment from any cause whatsoever.  No loss or
damage (with the exception of loss or damage caused by the gross negligence or
wilful misconduct of Lessor), shall affect or impair the obligations of Lessee
under this lease including but not limited to the obligation to pay Rent
unabated and without interruption, all of which shall continue in full force
and effect subject to subsection 8.1(c).

(b) If the Equipment is destroyed, expropriated or confiscated, or is damaged
so that it cannot reasonably be repaired (as determined by Lessor), Lessee
shall promptly notify Lessor and Lessee shall pay to Lessor all amounts
required by Lessor to replace the Equipment or the part so destroyed, or, at
the Lessor's option, on the next Rent payment date pay to Lessor, including
the Rent payment due on such date, the applicable Stipulated Loss Value for
the Equipment or such part.

(c) Upon payment of the Stipulated Loss Value pursuant to subsection 8.1(b) in
respect of the Equipment, and provided Lessee is not then in default
hereunder, this Lease shall terminate.  In the event that Lessee is required
to pay Stipulated Loss Value in respect only of part of the Equipment, then
following payment thereof Rent shall be adjusted to a lower amount as
determined by Lessor.

8.2 Insurance.  Lessee shall obtain and maintain, at its expense and for the
duration of the Term, insurance against loss, damage or destruction of the
Equipment and against such other risks as Lessor may reasonably require on
such terms and against such risks in accordance with prudent business
practices prevailing in the energy industry and having regard to the
locations, age and character of the Equipment and with insurers acceptable to
Lessor.  Such insurance shall be in an amount not less than the Stipulated
Loss Value from time to time of the Equipment as determined by the Lessor in
its absolute discretion.  Lessor shall have no obligation to insure against
any loss, damage or liability whatsoever.  All policies and all renewals
thereof shall name Lessor and Lessee jointly as loss payees.  Insurance
proceeds for damage to or destruction of the Equipment shall be paid to Lessor
to reimburse it for the costs of repair or replacement under Section 8.1, as
the case may be, or applied towards satisfaction of Lessee's obligation to pay
the Stipulated Loss Value of the Equipment.

8.3 Third Party Liability.  Lessee shall insure at its expense both Lessor and
Lessee against liability for all loss, damage, injury or death to persons or
property arising directly or indirectly out of the possession, operation,
delivery, return, storage or use of the Equipment during the Term or
thereafter and prior to its return to Lessor, by whomsoever caused and whether
or not caused by negligence under comprehensive general liability policies in
such amounts and with such insurers as are acceptable to Lessor.  Each
liability policy maintained in accordance with this section 8.3 shall provide
that all provisions thereof (except limits of liability) shall operate as if
they were a separate policy covering each insured.

8.4 Proof of Insurance; Notice of Change.  Certificates confirming existence
of the insurance coverage required to be maintained by Lessee under sections
8.2 and 8.3 and all insurance policies shall be deposited with Lessor at all
times and shall be provided to Lessor on before the Delivery and Installation
Date, but Lessor shall not be deemed to have reviewed the same or the
sufficiency thereof except where it has so confirmed in writing.  Lessee shall
give Lessor immediate notice of any reduction in the limits of liability or
property insurance maintained by Lessee and of any notice of cancellation or
termination, or of intent to cancel or terminate, in respect of any such
policy.  Each policy shall also require the insurer to give Lessor not less
than 30 prior days notice of cancellation or termination.  In the event of
issuance of notice of cancellation or termination, Lessee shall immediately
provide Lessor with satisfactory evidence of replacement insurance complying
with this lease.

8.5 Failure to Perform Covenants.  If Lessee fails to insure, to pay Taxes or
to keep the Equipment and the respective interests of Lessor and Lessee
therein free and clear of all claims, proceedings and Liens as required by
this lease, or to perform or observe any other covenant or condition of this
lease, then in addition to its other remedies, Lessor may, but shall not be
obligated to pay to insure, pay Taxes, pay to discharge, release or vacate any
adverse claim or Lien against all or any part of the Equipment or to release
the Equipment from proceedings, or pay any other sum or otherwise take such
steps and proceedings as may in its opinion be required to cure or partially
cure any default by Lessee hereunder.  The cost of such actions and all
amounts so paid and incurred by or on behalf of Lessor shall be payable to
Lessor on demand together with interest at the rate stated in section 3.4 from
the date the same is paid by Lessor to the date of payment by Lessee.

ARTICLE 9 -INDEMNIFICATION AND EXCLUSION OF LIABILITY

9.1 Lessee's Indemnification.  Lessee shall indemnify and hold harmless
Lessor, its directors, officers, employees, shareholders, representatives,
consultants and agents from any liability described in section 8.3 and any and
all losses, claims, actions, suits, proceedings, costs, expenses, damages and
liabilities, including legal fees on a solicitor and his own client basis,
arising out of, connected with, or resulting from the Equipment including
those relating to the possession, use, lease, operation, maintenance,
alteration, repair, delivery, storage, return or other disposition of all or
any part of the Equipment, arising out of, connected with or resulting from
harm or injury suffered by Lessee or its directors, officers, employees,
shareholders, representatives and consultants, or from property damage or
destruction and any breaches by Lessee of any of the representations,
warranties, terms, covenants or conditions under this lease.  This indemnity
shall not be affected or terminated by virtue of the expiry of the Term or
sooner termination of this Lease but shall remain in full force and effect
until all obligations of Lessee to Lessor have been satisfied.

9.2 Lessor's Indemnification.  Lessor shall indemnify and hold harmless
Lessee, its directors, officers, employees, shareholders, representatives,
consultants and agents from any and all losses, claims, actions, suits,
proceedings, costs, expenses, damages and liabilities, including legal fees on
a solicitor and his own client basis, arising out of, connected with, or
resulting from any breaches by Lessor of any of the representations,
warranties, terms, covenants or conditions under this lease.

9.3 Exclusion of Liability.  Neither party shall be liable to the other party
for indirect or consequential loss or for loss of profit, regardless of how
the liability arises, including without limitation via negligence, gross
negligence or breach of contract.

ARTICLE 10  - LIENS AND ENCUMBRANCES; RECORDATION AND FILING

10.1 Liens and Encumbrances.  Lessee shall not at any time during the Term
permit any builder's, laborer's, material supplier's or other similar lien or
charge to stand against the whole or any part of the Equipment.  In addition,
at all times during the Term and so long as any amount owing hereunder shall
remain unpaid, Lessee shall keep the Equipment free and clear of all other
liens, charges, encumbrances, security interests, seizures and rights or
claims of third parties of any kind or nature (any such lien, charge,
encumbrance, security interest, seizure and third party right and claim of any
kind or nature being referred to as a "Lien"), except for any Lien arising out
of claims against the Lessor unrelated to this transaction and to the
Equipment.  Notwithstanding the foregoing Lessee may, upon written notice to
Lessor, refrain from paying and discharging any Lien if:

(a) the amount, applicability or validity thereof is being contested by Lessee
in good faith; and

(b) Lessee shall have deposited with Lessor or with a court having
jurisdiction or with the appropriate governmental authority such amount by way
of cash, certificates of deposit or other security, if any, as may be required
by such court or governmental authority or by applicable law in order to
permit Lessee to contest the same, and shall have provided to Lessor, if and
whenever requested by Lessor, with evidence satisfactory to Lessor that the
effect of such proceedings is to postpone or avoid the enforcement of the Lien
and forfeiture of any part of the Equipment.

However, upon final determination of such proceedings Lessee shall immediately
pay and satisfy all costs, penalties, interest or charges payable by it in
connection with the Lien and such proceedings.

10.2 Recordation and Filing.  Lessee shall at its own expense, do, execute,
acknowledge or deliver all such further things, agreements, documents and
conveyances as may from time to time be requested by Lessor to give effect to
or better protect the rights of Lessor hereunder, including but not limited to
completion of such public registrations of or with respect to this lease and
Lessor's rights hereunder as Lessor may require.  Lessor shall be permitted to
file and re-file Personal Property Security financing statements or notices of
similar effect with respect to the Equipment in all applicable jurisdictions.

ARTICLE 11  - RETURN OF EQUIPMENT

11.1 Time and Place of Return.  At the end of the Term or sooner termination,
and at Lessee's expense, Lessor shall pick up and return the Equipment to the
Lessor's nearest manufacturing facility.

11.2 Equipment Return Condition.  The Equipment shall be returned to Lessor at
the end of the Term in the same condition it was in on the Commencement Date.
If at the termination of this lease the Equipment is not in the condition
required by this lease, Lessor may repair or replace the same or any part
thereof as may in Lessor's judgement be necessary to place the Equipment in
the required condition.  Lessee shall pay the costs of all such repairs and
replacements on demand with interest at the rate stated in section 3.4.

11.3 Quiet Enjoyment.  So long as Lessee is not in default, Lessor shall not
disturb Lessee's quiet enjoyment and possession of the Equipment during the
Term except as may be permitted by this lease.

ARTICLE 12  - EVENTS OF DEFAULT AND REMEDIES

12.1 Events of Default.  Each of the following shall constitute an event of
default (an "Event of Default") under this lease:

(a) if any amount owing under this lease is past due;

(b) if Lessee assigns this lease or sublets, transfers, surrenders or loses
possession (except by theft) of any of the Equipment, whether by seizure,
expropriation, abandonment or otherwise;

(c) if Lessee makes an assignment for the benefit of creditors;

(d) if Lessee states in writing its inability to pay its debts as they fall
due or demonstrates an intention to cease carrying on business;

(e) if a receiver, receiver-manager, trustee or similar official is appointed
for Lessee or any of its property which appointment is not contested by Lessee
or which, if contested, is not vacated within 30 days of the appointment;

(f) if a petition in bankruptcy or other proceeding or application for
reorganization or liquidation of Lessee under any federal or provincial law is
filed or commenced by or against Lessee which is not contested by Lessee or
which, if contested, is not discharged within 30 days of filing;

(g) if Lessee suspends business, or transfers to one or more other entities
all or a substantial part of Lessee's property, or seeks any proposal,
arrangement or compromise with its creditors under the Bankruptcy Act
applicable within its federal, state or provincial jurisidiction or any other
statute or otherwise;

(h) if Lessee commits an act of bankruptcy;

(i) if Lessee fails to comply with or to perform any other term of this lease
provided:

(i) Lessee has been given notice of such failure by or on behalf of Lessor and
a period of 7 days has elapsed from the date of such notice without Lessee
having cured the same, or

(ii) where by its nature such failure is capable of being cured but is not
capable of cure within 7 days, Lessee has not proceeded diligently to cure
such failure or, in any event, if such failure has not been cured within 14
days of such notice.

12.2 Consequences of Default; Remedies.  Upon the occurrence of any Event of
Default, Lessor may, subject to any provision of applicable law which cannot
be waived:

(a) take any proceedings and pursue any remedies available to it under this
lease, at law, equity or by statute to compel performance by Lessee of its
obligations under this lease or to cure any default by Lessee and, or in the
alternative, to recover damages;

(b) with or without terminating this lease, enter personally, or by agents or
attorneys, upon any premises where the Equipment or any part thereof may be
located and repossess all or any part of the Equipment without any prior or
further demand, notice, court order or other process of law, and may use such
force as may be lawful and as circumstances may require, and Lessee releases
Lessor from all liability for damage occasioned by such repossession and
agrees to indemnify and save Lessor harmless against all claims for such
damage;

(c) as agent for Lessee, without terminating this lease and without in any way
releasing Lessee from any of its obligations hereunder, re-lease the Equipment
for such period and upon such terms as Lessor deems fit and apply the net
proceeds of such re-leasing against amounts payable hereunder (including
amounts payable under paragraph 12.2(f));

(d) elect to terminate this lease, in which event Lessor may dispose of the
Equipment in whole or in part, whether by public sale, private sale, lease or
otherwise, and at such time and place and upon such terms and conditions
(including sale for deferred payments) as are commercially reasonable in the
circumstances;

(e) recover from Lessee, and Lessee shall immediately pay to Lessor on demand,
the difference between the total of rentals to be received by Lessor from any
third party lessee of the Equipment for the balance of the Term, or the
purchase price at a sale, lease or other disposition, as the case may be
pursuant to paragraphs (c) or (d) above, and the total unpaid Rent which would
have otherwise been payable hereunder for the balance of the Term, discounted
at 5% to present value;

(f) recover from Lessee, and Lessee shall immediately pay to Lessor on demand,
all costs incurred by Lessor in connection with the enforcement of its rights
and remedies under this lease, including but not limited to costs incurred in
selling, re-leasing or otherwise disposing of repossessed Equipment; and

(g) recover from Lessee, and Lessee shall immediately pay to Lessor on demand,
interest on all sums referred to in paragraphs (a) through (f) at the rate
stated in section 3.4 from the date of the Event of Default (or in the case of
costs referred to in paragraph (f), from the date the same are incurred) until
payment in full by Lessee.

12.3 Exercise of Remedies.  The remedies specified in this lease are in
addition to any other rights Lessor may have at law, equity or under this
lease, and Lessor may exercise any one or more of such rights successively or
concurrently, provided that Lessor may not be compensated twice for the same
damages suffered by it.

ARTICLE 13 - FORCE MAJEURE

13.1 Force Majeure.

(a) If either party is prevented from or delayed in performing any of its
obligations under this lease, in whole or in part, by reason of Force Majeure,
such party shall be excused from performance for so long as and to the extent
that Force Majeure shall so prevent such performance, provided that such party
uses reasonable efforts to restore its ability to perform its obligations
hereunder.  Any party claiming Force Majeure will, with reasonable promptness,
give to the other party notice of the cause of the Force Majeure and its
expected duration.

(b) If the Lessee is wholly unable to operate the Equipment as a result of an
event of Force Majeure, then for so long as the Equipment is inoperable and
cannot be repaired or replaced as the Lessee may be obligated to do in
accordance with the provisions of this lease, and only during such period, the
Lessee's obligation to pay Rent and Taxes applicable to Rent shall be
suspended.

(c) With the exception of 13.1(a) and (b), this lease shall not terminate and
the obligations of Lessee shall not be affected by reason of any defect in or
damage to all or any part of the Equipment, loss of possession or use of the
Equipment in whole or in part from any cause whatsoever, the prohibition or
other restriction against use of all or any part of the Equipment by Lessee or
any other person, interference with such use by any person, the invalidity or
unenforceability or lack of due authorization of this lease by Lessee or
Lessor.  It is the intention of the parties that Rent and all other amounts
for which payment is provided or required in this lease shall continue to be
payable as herein provided unless the Lessee's obligation to pay the same is
terminated pursuant to an express provision of this lease.

ARTICLE 14 - MISCELLANEOUS

14.1 Notices.  Any direction, notice or invoice that any party may be required
or may desire to give to the other shall be in writing and shall be delivered
or sent by facsimile or courier to the other party addressed as follows:

If to Lessor, then to:

Malahat Energy Corporation

                6473 - 64th Street
                Delta, British Columbia
                Canada V4K 4E2

Fax No.:        1-604-946-3098

Attention:      Ben Dulley

If to the Lessee, then to the Billing Address specified on the cover page.

Either of the parties may by notice to the other change its address. Any
notice or invoice delivered or sent by facsimile or courier shall be deemed to
have been received by the addressee on the Business Day after it was so
delivered or sent by facsimile or courier.  Notwithstanding the foregoing,
invoices for Rent and other costs and expenses to be charged to Lessee may be
sent by mail in which event such will be deemed received on the fourth day of
such mailing.

14.2 Assignment.

(a) Lessee shall not assign any of its rights hereunder nor sublet, transfer,
attach as a fixture to real property, nor deliver possession of (except for
purposes of repair) the Equipment. No purported assignment, sub-letting,
transfer, attachment nor delivery by Lessee in contravention of this
subsection shall be of any effect as against Lessor.  Lessee agrees that any
change of control of Lessee shall be deemed to be an assignment by the Lessee,
requiring the prior written consent of the Lessor.  For the purposes of this
paragraph, "change of control" means a change, directly or indirectly, of the
control of the Lessee or of legal or beneficial ownership of more than 50% of
the aggregate voting securities of the Lessee and "control" includes the right
to exercise, directly or indirectly, a majority of the votes which may be cast
at a general meeting of the Lessee or the right to elect or appoint, directly
or indirectly, a majority of the directors of the Lessee.

(b) Lessor may assign its rights or transfer any of its obligations under this
lease, or both, in whole or in part without notice to Lessee, provided that
Lessee shall be bound by any such assignment according to its terms only upon
receipt of notice thereof.  Lessee shall in no event raise against any
assignee of Lessor any claims Lessee may have against Lessor.  Lessee accepts
any assignment made by Lessor in favour of a third party and agrees to execute
and deliver to any such assignee an acknowledgment or such other documentation
including any hypothecation, financing or leasing documentation with respect
to this lease as Lessor or its assignee may reasonable request.

14.3 Confidentiality.  Lessee shall keep all workings of the Equipment, the
Operating and Maintenance Manual, and all other documents and information
provided by Lessor relating to the Equipment confidential.

14.4 No Waiver Operates to Waive Future Defaults.  No covenant or condition of
this lease to be performed or observed by Lessee can be waived except by
written consent of Lessor.  Forbearance by Lessor in any regard shall not
constitute a waiver.  Until complete performance or observance by Lessee of
each covenant or condition, Lessor shall be entitled to invoke any remedy
available to Lessor under this lease and at law or equity, despite any prior
forbearance.  No waiver of a single default shall be deemed a waiver of any
other, nor shall any single or partial exercise of any remedy preclude any
further exercise thereof or of any other remedy of Lessor.

14.5 Lessee's Waiver.  Except as may be prohibited by law, and to the extent
the same extends to and relates to this lease as amended, modified or
supplemented or any security collateral hereto, Lessee waives the benefit of
all provisions of any applicable statutes and regulations which would in any
manner affect, restrict or limit the rights of Lessor hereunder including,
without limitation, as the same may be amended, supplemented, re-enacted,
substituted or replaced from time to time.  Lessee also waives the right of
any statutory exemption from execution or seizure, and the right to demand
security for costs in the event of litigation.

14.6 Further Assurances.  The parties shall execute and deliver such
additional documents in form and substance mutually satisfactory to both
parties, and shall cause such additional action to be taken as, in the
reasonable opinion of the other party, may be necessary or desirable to fully
effect, evidence or carry out the provisions of this lease and the
transactions contemplated.

14.7 Enurement.  This Agreement shall be binding upon and enure to the benefit
of the parties hereto and their respective successors and permitted assigns.

14.8 Counterparts and Facsimiles.  This Agreement may be executed in one or
more counterparts, in original form or by electronic facsimile, each of which
shall be deemed to be an original and all of which taken together shall be
deemed to constitute one and the same instrument, with the same effect as if
the signatures thereto were upon the same instrument.

14.9 Time of Essence.  Time is of the essence of this lease and of the terms
and conditions hereof.