Irvine, CA - August 29, 2006 - BlueFire Ethanol, Inc. (PINKSHEETS: BFRE) signed an LOI with Petro-Diamond, Inc. (PDI) to purchase the ethanol produced from BlueFire's first North American Biomass-to-Ethanol conversion facility located at a Southern California landfill as announced last week.

Petro-Diamond, Inc. is a significant blender of denatured ethanol into motor fuel in Southern California. Ethanol is currently blended year-round at PDI's terminal facility located in Long Beach, California. On average, they purchase over 50,000 gallons of ethanol per day.

"In striving to eliminate the commodity risks that have always plagued the traditional ethanol producers we have focused on two key elements of our development plan. BlueFire, by using waste as a feedstock, has eliminated the risk that traditional producers encounter while supplying their process with a commodity such as corn or sugarcane as a feedstock. The other key element to our plan is to decrease the volatility of our end product sales by striving to "lock-up" the price variances an ethanol producer would typically encounter. The agreement with PDI enables us to do what we do best, profitably convert green waste and other cellulosic waste into ethanol".

"We're excited about working with BlueFire Ethanol in the future," stated Michael Dougherty, General Manager of Petro-Diamond. "BlueFire's waste to ethanol manufacturing process provides us with a cost advantage that will help keep PDI competitive in this dynamic industry."

U.S. oil consumption has climbed to a record high of 7.6 billion barrels per year, with 38% of all imported oil originating from the Middle East. "Maximizing energy efficiency and renewable energy is the domestic epicenter in the war on terror, and it is imperative that we maximize the partnerships between the public and private sectors in new and creative ways with a sense of seriousness, national purpose, and the urgency the situation merits," commented U.S. Department of Energy Assistant Secretary Alexander Karsner at the recent Power-Gen Renewable Energy and Fuels Conference.

The renewable multi-year agreement between BlueFire and PDI provides for floor and ceiling pricing for the ethanol based on a reasonable discount from the previous months Los Angeles average rack price and subject to escalation.

About Petro-Diamond:

Petro-Diamond Inc. is a wholly owned subsidiary of Mitsubishi Corporation. Established in 1983, PDI's principal function is to expand Mitsubishi's role in petroleum product trading in the western hemisphere, primarily in the United States. The administrative location, headquartered in Irvine California, is also responsible for all product trading from the U.S. West Coast and Western Canada and operates a modern waterborne terminal facility in Long Beach, California.