Press Room

Press Release

December 2006

Sage Island Energy, LLC is Formed

Salt Lake City, Utah - Terra Systems, Inc. (Pink Sheets: TSYI - News) - Mountain Island Energy, LLC ("MIE") of Soda Springs, Idaho, a subsidiary of Terra Systems Inc. ("TSYI"); and United Fund Advisors, LLC ("UFA") of Portland, Oregon are pleased to announce the formation of Sage Island Energy, LLC ("SIE"), a Delaware limited liability company.

SIE was formed to respond to the Wyoming Infrastructure Authority ("WYIA" - www.wyia.org) Request for Proposal ("RFP"), which seeks to establish a public-private partnership to develop a "clean coal" demonstration project (or projects). This project will demonstrate the production of energy from coal mined and converted to electrical power in the State of Wyoming using integrated gasification combined cycle technology. The WYIA hopes to qualify the project for federal financial support under the Energy Policy Act of 2005 (the "Act"). The Act calls for a Coal Gasification Project located in the Western United States to demonstrate the commercial feasibility of producing electricity with gasification technology, including the capture and sequestration of carbon dioxide emissions. Under Section 413 of the Act, a Project is to be designed to demonstrate the ability to use western coal and to operate at western elevation with coal gasification technology. RFP responses are due October 17th, 2006.

Under SIE's operating agreement, SIE will be owned 49.995% by Mountain Island Energy, LLC, of Soda Springs, Idaho; 49.995% by United Fund Advisors, LLC of Portland, OR and 0.01% by Mountain Island Energy Holdings, LLC, a previously announced joint venture of MIE and UFA. Under the management agreement, Reynold Roeder, Chief Operating Officer of UFA will serve as a Managing Director of SIE with Mitchell J. Hart, P.E., Vice President of TSYI and General Manager of MIE serving as a Managing Director.

Mr. Roeder stated, "A public private partnership with the Wyoming Infrastructure Authority would unite the resources of the State of Wyoming and the project development skills of the combined UFA and MIE team".

Mr. Hart commented, "Responding to Wyoming Infrastructure Authority request is a natural extension of our existing efforts in southeast Idaho. We see this as an opportunity to fill a regional need for electricity post-2011".

UFA is an affiliate of Portland Family of Funds Holdings, Inc. ("PFF" -- www.portlandfunds.com ). PFF is currently providing advisory and compliance services for over $400 million in New Market Tax Credit transactions. PFF contracts for its management from UFA. UFA and its management are experienced at raising capital and have closed over $200 million in New Market Tax Credit transactions.

Mountain Island Energy, LLC is a wholly owned subsidiary of Terra Systems, Inc. and focused on energy, carbon and mineral related projects and based in Soda Springs, Idaho.

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About Terra Systems, Inc.
Terra Systems, Inc. is a clean energy technology company incorporated in 1996 focused on advanced clean coal power generation, enhancement and utilization of waste coal and upgrading of specialty carbon products.

Contact
George Ford
Terra Systems, Inc.
gford3648@msn.com

Note: Certain statements contained herein may be forward-looking statements within the meaning of federal securities laws and Terra Systems, Inc. intends that such forward-looking statements be subject to the safe-harbor created thereby. Forward-looking statements include Terra Systems, Inc. expectations as to the managing and marketing of its businesses within the meaning of the Private Securities Litigation Reform Act of 1995 regarding future events and our future results that are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Actual results may vary materially from such expectations. Words such as "expects," "anticipates," "targets," "goals," "projects," believes," "seeks," "estimates," variations of such words, and similar expressions are intended to identify such forward-looking statements. Any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses, and other characterizations of future events or circumstances, are forward-looking. Although Terra Systems, Inc. believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, there can be no assurance that our results of operations will not be adversely affected by such factors. Unless legally required, we undertake no obligation to revise or update any forward-looking statements for any reason. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this statement.

Company Profile

Terra Systems, Inc. is a development stage company focused on advanced, clean and renewable energy technology applications and projects. TSYI is engaged in the development and commercialization of it's patented pneumatic accelerator system technology and the upgrading of specialty and waste carbon products. Terra Systems was founded in 1996 and is headquartered in Salt Lake City, Utah with a satellite office in Price, Utah.