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The production of chemicals by fermenting various sugars is a well-accepted science. Its use ranges from producing beverage alcohol and fuel-ethanol to making citric acid and xantham gum for food uses. However, the high price of sugar and the relatively low cost of competing petroleum based fuel has kept the production of chemicals mainly confined to producing ethanol from corn sugar - until now.

The Company has developed significant proprietary improvements to a well known conversion technology known as concentrated acid hydrolysis such that the process is ready for commercial implementation. The Technology is unique in that, for the first time, it enables widely available cellulosic materials, or more commonly, biomass, to be converted into sugar in an economically viable manner, thereby providing an inexpensive raw material for fermentation or chemical conversion into any of a hundred different specialty and/or commodity chemicals. We call this our BioEthanol concept.

Biomass feedstocks include:

* agricultural residues (straws, corn stalks and cobs, bagasse, cotton gin trash, palm oil wastes, etc.),
* crops grown specifically for their biomass (grasses, sweet sorghum, fast growing trees, etc.),
* paper (recycled newspaper, paper mill sludge's, sorted municipal solid waste, etc.),
* wood wastes (prunings, wood chips, sawdust, etc.), and
* green wastes (leaves, grass clippings, vegetable and fruit wastes, etc.).

The ability to utilize low cost feedstocks, and/or those that command tipping fees, to produce products that sell into highly efficient markets provides a viable business that can be sited in almost any geographic area, urban or rural. Due to its moderate use of thermal energy, the production of no waste streams, its significant environmental benefits, and minimal permitting requirements, the Technology also makes an ideal "thermal host" for cogeneration facilities.

The Technology

Development History - It has been known for over 100 years that acids act as catalyst to convert ("hydrolyze") cellulose and hemicellulose into simple sugars (hexose and pentose, or "C6 and C5" sugars). The Germans and Russians used this simple procedure in the early part of this century to produce alcohol fuels and chemicals from wood in order to supply their war efforts. During this same period, a similar plant was operated in the United States in Oregon. However they all shared a similar characteristic - they were not economically competitive with low cost petroleum products because of poor yields, high wastage, and the large volume of unmarketable by-products. Except for a few plants in Russia, the technology fell out of use after World War II.

However, interest in the conversion of biomass-to-sugars picked up in the mid 1970's due to the oil embargo and the United States' desire to lessen its dependence on foreign chemical and fuel feedstocks. Further interest was stirred in 1983 when DuPont published an article in Science magazine detailing the variety of chemical products that could be produced via fermentation of sugar. Since that time many universities and government laboratories have been studying the hydrolysis of cellulose, either through the application of various acids or enzymes. Most notable in regard to acid hydrolysis, had been the work undertaken at the Tennessee Valley Authority and Mississippi State University.

In 1989 The Company, as a related company to ARK Energy, began researching several technologies in order to develop thermal hosts for siting in conjunction with ARK Energy power plant projects that were being bid into local utilities. The Company determined that the concentrated acid hydrolysis process could be made economically viable through the use of new technology, modern control methods, and newer materials of construction. The Company engineers and their consultants were able to solve the problems with the following proprietary improvements that now make the process economically viable:

* efficient acid recovery and reconcentration;
* high sugar concentration at high purity;
* the ability to ferment C6 and C5 sugars efficiently with conventional microbes;
* the ability to handle silica in biomass feedstocks; and,
* all by-products are usable and marketable.

Project Developments - BlueFire Ethanol has completed the arrangement of the major commitments necessary to proceed with final development of its first commercial facility which will be sited in California.

The Process - To demonstrate the efficacy of the Technology, The Company has constructed and operated a pilot plant near its Southern California offices for roughly five years. Since 2003, the Technology has been successfully used by an unrelated, independent, and internationally recognized corporation to produce ethanol for the Japanese transportation fuel market. Over the last 10 years, the initial testing on a vast array of potential feedstock has been completed both in the U.S. and at various locations throughout the world. The core technology and other related processes are protected under patents issued and pending by the U.S. Patent and Trademark Office.

An integrated, full-scale commercial process plant consists of five basic unit operations:

1. Feedstock preparation;
2. Decrystallization/Hydrolysis Reaction Vessel;
3. Solids/Liquid Filtration;
4. Separation of the acid and sugars;
5. Fermentation of the sugars; and,
6. Product purification.

Simply put, the process separates the biomass into two main constituents: cellulose and hemicellulose (the main building blocks of plant life) and lignin (the "glue" that holds the building blocks together), converts the cellulose and hemicellulose to sugars, ferments them and purifies the fermentation liquids into products. These unit operations require a series of material and energy inputs to produce the primary products of fermentation and the resultant by-products.

If there is no power plant present from which to obtain steam, the production facility would use natural gas or lignin as fuel for its own boilers.

Incoming biomass feedstocks are cleaned and ground to reduce the particle size for the process equipment. The pretreated material is then dried to a moisture content consistent with the acid concentration requirements for decrystallization (separation of the cellulose and hemicellulose from the lignin), then hydrolyzed (degrading the chemical bonds of the cellulose) to produce hexose and pentose sugars at the high concentrations necessary for commercial fermentation. Insoluble materials, principally the lignin portion of the biomass input, are separated from the hydrolyzate by filtering and pressing and further processed into fuel or other beneficial uses.

The remaining acid-sugar solution is separated into its acid and sugar components by means of chromatographic separation. The Company-developed technology that uses commercially available ion exchange resins to separate the components without diluting the sugar. The separated sulfuric acid is recirculated and reconcentrated to the level required by the decrystallization and hydrolysis steps. The small quantity of acid left in the sugar solution is neutralized with lime to make hydrated gypsum, CaSO4 · 2H2O, an insoluble precipitate which is readily separated from the sugar solution and which also has beneficial use as an agricultural soil conditioner. At this point the process has produced a clean stream of mixed sugars (both C6 and C5) for fermentation.

In an ethanol production plant, naturally-occurring yeast, which The Company has been specifically cultured by a proprietary method to ferment the mixed sugar stream, is mixed with nutrients and added to the sugar solution where it efficiently converts both the C6 and C5 sugars to fermentation beer (an ethanol, yeast and water mixture) and carbon dioxide. The yeast culture is separated from the fermentation beer by a centrifuge and returned to the fermentation tanks for reuse. Ethanol is separated from the now clear fermentation beer by conventional distillation technology, dehydrated to 200 proof with conventional molecular sieve technology, and denatured with unleaded gasoline to produce the final fuel-grade ethanol product. The still bottoms, containing principally water and unfermented pentose sugar, is returned to the process for economic water use and for further conversion of the pentose sugars.

Hypothetical Ethanol-only Plant

To give some idea of what a commercial stand-alone fuel-ethanol plant configuration would be, one can assume an available feedstock supply on a 330 days per year, twenty-four hours per day basis which has an average cellulosic content of 75%, having the following inputs and outputs:

Inputs
Feedstock	454 dry tonnes per day	500 dry tons per day
Sulfuric Acid	18 tonnes per day	20 tons per day
Lime	3.6 tonnes per day	4 tons per day
Electricity	4,000 kw	4,000 kw
Steam	55,000 kg. per hour	120,000 lbs. per hour
Outputs
Ethanol, 200 proof	159,000 liters per day	42,000 gallons per day
Carbon Dioxide	121 tonnes per day	133 tons per day
Lignin (50% moisture)	365 tonnes per day	402 tons per day
Gypsum (40% moisture)	30 tonnes per day	33 tons per day
Yeast (80% moisture)	55 tonnes per day	60 tons per day

Typically, yeast would be grown at the site. Water usage would be minimal because of complete recycling of the water contained in the incoming materials.

Such a plant would utilize approximately five hectares (twelve acres) for the process itself; feedstock intake, preparation and short-term storage (five days); product loadout facilities; CO2 processing; administration and laboratory buildings. The plant is designed on a zero-discharge basis and normally uses public sewers only for sanitary purposes.

A standalone plant would use lignin or natural gas to fire its boilers and therefore will require air permits for the boiler exhaust. Note that a plant sited next to a cogeneration facility and using steam from the power plant would have no combustion emissions whatsoever. Volatile organic chemical ("VOC") emissions of ethanol are readily contained by closed fermentation tanks, closed top storage tanks, and vapor recovery transfer systems. In the United States, the only other permits in addition to those for construction and general operations, would be those required by the US Treasury Department for the production and storage of alcohol.