O2Diesel™: A Clean FuelOption to Improve Urban Air Quality

Philadelphia Diesel Difference WorkshopJames Peeples, Executive V.P.; O2Diesel, Inc.

September 19, 2005

“Our most basic common link is that we all inhabit

this small planet, we all breathe the same air, we all cherish our children’s future and we are all

mortals.” John F. Kennedy

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A Few Basic Fuel Facts:A Few Basic Fuel Facts:

• Biofuels only represent about 3% of total U.S. transportation fuel consumption (2005).

• Texas consumes more diesel fuel than any other state, followed by Calif., Penn., & the Northeast States, all of which face serious air quality problems.

• U.S. transportation fuel demand is increasing at a rate of 1.5 - 2.3% annually (mostly diesel).

• U.S. refineries are operating at capacity & combined with huge world fuel demand, prices are skyrocketing.

• Despite the 2005 Energy Bill, no end in sight for U.S. dependence on imported fossil fuels.

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U.S. Fuel Ethanol: A ProfileU.S. Fuel Ethanol: A Profile

• Industry developed in U.S. over 25 years and will soon overtake Brazil as the world’s leading producer.

• Fuel Ethanol Capacity: >4 billion gallons (2005).

• Fuel Ethanol Potential Capacity: 25 - 30 billion gallons (~2025), roughly 15% of U.S. fuel demand.

• Corn is the predominant ethanol feedstock (~90%).

• New capacity to include grain sorghum, straw, “waste” materials, cellulose, MSW, etc. is quickly emerging.

• Fuel ethanol & biodiesel are the ONLY commercially available liquid fuels capable of reducing GHG emissions & reducing petroleum imports.

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Uses for Fuel EthanolUses for Fuel Ethanol• Gasoline component (up to 10vol%)

• E85 - An alternative fuel (85vol% ethanol)

• E diesel® - an ethanol-diesel blended fuel (up to 15vol% ethanol in additized diesel fuel)

• Fuel cell energy source (under development)

• Other (e.g., higher blend levels in gasoline, etc.)?

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WhyWhy Use Ethanol in Diesel? Use Ethanol in Diesel?

U.S. ag-based replacement for imported petroleum (500 mgy new ethanol demand potential)

Outstanding exhaust emissions benefits – verified reduction of both NOx & PM in new and older diesel engines

Plentiful supply & excellent infrastructure already exists in key U.S. and global fleet market areas

No significant environmental side-effects (CARB)

Greenhouse gas reduction impacts (Argonne Labs)

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E dieselE diesel®® Consortium Consortium

• Not-for-Profit membership organization formed to address technical, commercial, & regulatory issues facing E diesel®.

• Organized under the Renewable Fuels Foundation.

• Consortium began work in early 2002.

• Broad industry and government participation.

• See www.e-diesel.org for more information.

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E dieselE diesel®® Consortium: Members Consortium: Members• Illinois “Core Group” (original E diesel® Task Force)

• U.S. ethanol producers (Abengoa, ADM, Aventine)

• Additive Mfrs. & Suppliers (incl. O2Diesel, Inc.)

• U.S. Dept. of Energy (incl. NREL, Argonne Nat’l. Lab)

• Renewable Fuels Association (U.S. and Canada)

• National Corn Growers Ass’n. (and state chapters)

• State & local, public & private groups

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WhoWho is O2Diesel, Inc.? is O2Diesel, Inc.?

Six years in business: >$20 million spent on R&D

Recognized international “E diesel®” market leader

Five years of commercial logistics experience

Commercial sales started Q2 2004

Substantial independent 3rd party verification data

Strong industry partnerships (NCGA, fleets, etc.)

>$8 million in U.S. & state gov’t. support (DOE, DoD)

Publicly traded company since 2003 (AMEX: “OTD”)

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• Premium Fuel Properties of O2Diesel™:

• Enhanced Lubricity

• Corrosion Inhibition

• Static Electricity Control

• Excellent Operational Characteristics

WhatWhat iis Os O22DieselDiesel™™??• An Oxygenated Diesel Fuel Containing:

• 7.7vol% Biomass-Derived Fuel Grade Ethanol (ASTM D

4806);

• 0.6vol% of Proprietary, Ag-Based Additive Package

(O2D05); and

• 91.7vol% No.1 & 2 Diesel, CARB, ULSD, TxLED (ASTM D

975).

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• Environmental – Cuts visible smoke & other emissions.

• Premium Fuel Benefits – Stability, lubricity and anti-corrosion.

• Simple – No complex blending systems required.

• No Major Fuel Infrastructure Changes – Uses existing storage tanks and refueling equipment.

• No Costly Engine Modifications – Used in unmodified engines with no power or fuel economy losses.

• Scientifically-Proven – EPA Tier 1 Health Effects testing.

• Recognized Benefits – CARB-verified emission reductions, Nevada alternative diesel fuel status, TxLED status (pending).

• Equipment Compatibility – Works effectively with exhaust catalyst (DOCs) and new particulate filter (DPF) technologies.

OO22Diesel™ Operational Benefits:Diesel™ Operational Benefits:

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Nevada Ready Mix Fleet Demonstration

RFA National Ethanol Conference:

February, 2000

MGM Grand Hotel

Las Vegas, Nevada

OO22Diesel™ Visibility Benefits:Diesel™ Visibility Benefits:

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Pepsi Cola Delivery Fleet Operations –

December, 2002

Mount Vernon, New York

OO22Diesel™ Benefits:Diesel™ Benefits:

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Data from over 180 laboratory engine, road, and field smoke testsEngine Test Data: Colorado School of Mines, Env. Canada, CE-CERT & SwRI (Nov. ’99 – Sept. ‘03)

. . . Compared to EPA or CARB Certified No.2 Diesel. . . Compared to EPA or CARB Certified No.2 Diesel

PMPM(Particulate Matter)(Particulate Matter)

ReductionReduction

NOxNOx(Oxides of Nitrogen)(Oxides of Nitrogen)

ReductionReduction

COCO(Carbon Monoxide)(Carbon Monoxide)

ReductionReduction

Smoke Smoke ReducedReduced

20 to 46% 1.8 to 6% 12 to 23% Up to 70%

OO22Diesel™ Emissions Benefits:Diesel™ Emissions Benefits:

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John Deere E DieselJohn Deere E Diesel® Evaluation: August, 2004 Evaluation: August, 2004(Three New Tier II Cert. Engines + 7.7, 10, and 15vol% Ethanol-Diesel Blends)(Three New Tier II Cert. Engines + 7.7, 10, and 15vol% Ethanol-Diesel Blends)

OO22Diesel™ Emissions Benefits:Diesel™ Emissions Benefits:

J.D. Engine Type

(# cyl. + disp.)6068H

(6 cyl., 6.8L)

6081H

(6 cyl., 8.1L)

6125H

(6 cyl., 12.5L)

Visible

Smoke

-11% to -58% -39% to -61% -23% to -58%

Particulate Matter (PM)

-4% to -22% -16% to -30% -13% to -19%

Carbon Monoxide (CO)

+3% to +24% -6% to -14% -15%

Hydrocarbons (HC) + NOx

-7% to -9% +1% to +2% -4%

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John Deere E DieselJohn Deere E Diesel® Evaluation: August, 2004 Evaluation: August, 2004(John Deere 6125H 12.5 Liter Heavy-Duty Engine)(John Deere 6125H 12.5 Liter Heavy-Duty Engine)

OO22Diesel™ Engine Applications:Diesel™ Engine Applications:

Examples of Engine Applications:Examples of Engine Applications:

• 9000 Series Ag Tractors/Forage 9000 Series Ag Tractors/Forage HarvestersHarvesters

• ExcavatorsExcavators

• MiningMining

• Gen Sets & Marine EquipmentGen Sets & Marine Equipment

• Other On- and Off-Road FleetsOther On- and Off-Road Fleets

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Brazil - Urban bus & agricultural fleets.

Republic of Ireland - Transport truck fleet.

Las Vegas, NV - Construction, truck & bus fleets.

Lincoln, NE – StarTran urban bus fleet.

Winnipeg, Canada - Urban bus fleet.

Houston, TX - Package delivery company.

San Antonio, TX - Construction equipment.

Fresno, CA - Urban buses, delivery & utility fleets.

New York, NY - Delivery fleets, refrig. trailers.

Nellis AFB, NV - Non-tactical military equipment.

Ventura Co., CA - Refuse truck fleet.

More fleets coming on-line in 2005.

OO22Diesel™ Real WorldDiesel™ Real World Usage:Usage:

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How Cities Can Use How Cities Can Use OO22Diesel™Diesel™

Unique Urban Marketing Concept: CityHome™

•A self-funding model for cities, public transportation and corporate partnerships.

•A contemporary way to maximize an environmental program from which citizens, government and corporate sponsors all benefit.

•Allows for qualitative and quantitative monitoring of the economic results and health benefits.

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Bus Advertising Bus Advertising ExamplesExamples

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Other Advertising Other Advertising ExamplesExamples

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Benefits of Benefits of CityHome™CityHome™

• ZERO COST for the municipality.

• Responds to immediate need for air quality improvement.

• Contributes to a positive clean air message and sense of accomplishment for the community.

• Supports petroleum displacement policies with renewable fuels.

• Provides immediate emissions reductions from urban bus fleets.

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ConclusionsConclusionsO2Diesel™ enables urban fleets to reduce NOx, PM, and visible smoke emissions from diesel engines, old and new

O2Diesel™ is a cost-effective, easy-to-use “drop-in” fuel

O2Diesel™ is meeting all technical & regulatory challenges

Full CARB, TCEQ, and EPA verifications nearly complete

Product acceptance, OEM skepticism must be addressed

E diesel® Consortium addressing industry-wide issues

E diesel® is a fuel “ready for prime time” NOW!

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Contact Us:Contact Us:

World HeadquartersWorld HeadquartersO2Diesel, Inc.O2Diesel, Inc.

100 Commerce Drive; Suite 301100 Commerce Drive; Suite 301Newark, Delaware 19713Newark, Delaware 19713

(302) 266-6000 (office)(302) 266-6000 (office)(302) 266-7076 (fax)(302) 266-7076 (fax)

James Peeples, Exec. Vice President James Peeples, Exec. Vice President (703) 256-4497 (D.C. office)(703) 256-4497 (D.C. office)

www.o2diesel.comwww.o2diesel.com