Press Room

Press Release

December 2006

MIEH Remains Undeterred in Pursuit of Federal Tax Credits

Salt Lake City, Utah - Terra Systems, Inc. (OTC Bulletin Board: TSYI - News) - Mountain Island Energy Holdings, LLC ("MIEH") of Soda Springs, Idaho, a joint venture between Mountain Island Energy, LLC (a wholly owned subsidiary of Terra Systems Inc. ("TSYI")); and United Fund Advisors, LLC ("UFA") of Portland, Oregon were disappointed in the recent announcement by the DOE and IRS that only nine (9) of the forty-nine (49) applicant projects received $1billion of the $1.65 billon federal tax credit awards authorized under Section 1307 of the 2005 Energy Policy Act. MIEH looks forward to being able to reapply for a portion of the remaining $650 million in federal tax credits anticipated to be allocated in late 2007.

It is important to note that essentially no project west of the Mississippi received federal tax credit awards.

MIEH was formed to respond to the 2006 DOE - IRS solicitation of federal tax credits for "advanced clean coal" power projects. MIEH's project proposed to be located near Soda Springs, Idaho is specifically designed to efficiently operate at elevation using western US based coal.

Under MIEH's operating agreement, MIEH is owned 50% by Mountain Island Energy, LLC, of Soda Springs, Idaho and 50% by United Fund Advisors, LLC of Portland, OR. Under the management agreement, Reynold Roeder, Chief Operating Officer of UFA serves as a Senior Managing Director of MIEH with Mitchell J. Hart, P.E., Vice President of TSYI and General Manager of MIE serving as a Managing Director.

Mr. Roeder stated, "We continue to work on the project and intend to pursue an award of tax credits in the next round of applications".

Mr. Hart commented, "The lack of awards has not slowed the project and we continue to make progress with our development efforts and are generating increasing industry interest".

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.