Introduction

Power Energy Fuels, Inc. (PEFI) has the opportunity to assist the US Forest Service in converting forest residual (wood waste) into a useful commercial product. Recent devastating and costly wild fires are forcing the Forest Service to take preventative action by clearing volatile wood residue and thinning out trees in the 190 million acres of the forest considered at high risk of costly fires nationwide.

Under the National Fire Plan, which was developed in response to the fires of 2000, the Forest Service has been instructed by the President and Congress to do what is necessary to protect forested communities from wildfire (Hazardous Fuel Reduction program) and it has been instructed to work with communities to help provide economic opportunities, jobs, and industries to these forest dependant communities (Community Assistance program).

Also in force is the National Energy Plan. Under the plan, the President has directed all agencies to do what they can to expedite and develop energy options from Federal lands. The Forest Service is particularly interested in the renewable energy opportunities from utilization of trees from the National Forests because the vast amount of material available will go a long way to helping provide renewable energy for the country and helping to reduce the dependence on foreign oil.

The nexus between the two initiatives adds weight and emphasis to the biomass to energy concept. The PEFI technology comes as an excellent "fit" because of its unique ability to convert waste wood into clean commercial fuels.

Project Summary

The Forest Service will organize essentially all the necessary services and agreements to launch the project which will commence by cleaning and clearing approximately 1.8 million acres in the forests of New Mexico and Arizona.

Power Energy Fuels, Inc. has an opportunity to participate in this promising national project. A Limited Liability Company (LLC) will be formed to develop the project. The LLC will be assigned all relevant forest and wood supply contracts and will select ten (10) strategically located landing sites for plant locations. To complete this exciting venture, the "Forest Rescue LLC" requires a major financial partner who shares the vision of cleaner, safer forests, clean motor fuel and a part in the national move toward energy independence for our country.

About PEFI

Power Energy Fuels Inc. (PEFI) has licensed a patented and proprietary biomass to alcohol technology, which can help lead to near term energy security and a cleaner environment for the United States. PEFI has exclusive worldwide license to the patented Power Energy System™ and catalyst. The catalyst and process have been extensively researched at Brookhaven National Laboratories (BNL) in Upton, New York, and the Western Research Institute, (WRI) in Laramie, Wyoming. Dr. Devinder Mahajan is the head scientist for the catalyst department at BNL; Drs. Vijay K. Sethi, Michael Hauck, and Andrew Lucero are with WRI. These scientists have thoroughly evaluated the catalyst and production method of the higher alcohols. The process is capable of converting synthesis gas from all types of biomass, including wood, municipal waste, and other carbonaceous materials, directly into a clean mixed alcohol motor fuel, trade marked Ecalene™, without subsequent refining. Ecalene™ is registered with the US Environmental Protection Agency per 40 CFR 79.23 as a fuel blending additive. The process also includes the only known gas to liquids catalyst that is impervious to sulfur dioxide and other sulfur compounds. PEFI plants are being designed to be transportable, stand alone, self-powered facilities, and be erected anywhere.

TECHNOLOGY

The Power Energy System™ is able to produce a clean-burning alcohol fuel from the conversion of forest residual as well as other biomass. This material is gasified in a closed system, to form a synthesis gas composed of carbon monoxide (CO) and hydrogen (H2) which are then converted into a mix of ethanol and higher alcohols (Ecalene™). The Power Energy System™ operates pollution free and promises improvement in the Earth's environment while contributing to the energy independence for the United States.

DEMONSTRATION PILOT PLANT

Following years of catalyst development (Patent # US 6,248,756 B1 issued June 19, 2001), and 15 months of bench scale testing and production of Ecalene™ at WRI, the PEFI process is ready for commercialization. Construction of a data plant, with a production capacity of 500 gallons of Ecalene™ per day, has begun and pending appropriate funding, can be completed in 3-6 months. This plant will be used for data to engineer the commercial Power Energy System™.

PRODUCTION PLANTS

Initial commercial production plants will be designed to produce approximately 20,000 gallons per day, from approximately 170 tons of biomass feed stock, of which 20 tons will provide the power and electricity required and 150 tons will be converted to Ecalene™. The PEFI plants will be transportable, operate independent of exterior power, and can be built in tandem for larger operations.

RENEWABLE ENERGY SOURCES

The biomass feed stocks required to produce Ecalene™ can literally be found everywhere. Americans produce an average of 4.4 pounds of domestic garbage per day, a major problem and a huge energy resource. Municipal waste, along with other renewable biomass feed stocks such as wood, agricultural and animal waste are available in large quantities. Each ton of wood waste, for example, can be converted into more than 100 gallons of Ecalene™, and each ton of municipal solid waste can be converted into approximately 120 gallons.

MARKETS

Ecalene™, is registered with the EPA as a gasoline blending additive. Ethanol has been accepted as a replacement for MTBE as a 10% oxygenating blend in gasoline. Ethanol is offered in some areas of the U.S. as an 85% ethanol blend (E 85), and in some foreign countries, such as Brazil, 100% ethanol has been promoted as a complete motor fuel in an effort to reduce pollution. The ethanol supply in the United States is almost exclusively produced from the fermentation of corn and grain, and although expanding, is expected to fall short in meeting the growing ethanol requirement to replace the use of MTBE as a blending agent. The PEFI process, permitting the conversion of waste carbonaceous materials, into Ecalene™ has virtually no limitation on expansion. And preliminary economic analysis indicate that the mixed alcohol product can be produced at a 20% cost saving, compared to the fermentation production of ethanol.

FORWARD-LOOKING STATEMENTS

The company has not yet completed a commercial plant and accordingly, there may be forward-looking statements which could be overly optimistic and should not be construed as accurate or factual without modification or further study. The process for converting synthesis gas into Ecalene™ is proven, the alcohol mix and probable yield established, and the use of various carbonaceous sources from which to derive appropriate synthesis gas is scientifically sound. However, until the pilot demonstration plant is completed, installed and tested for the conversion of synthesis gas from various feed stocks, the company cannot project results of commercial operations with certainty. Accordingly, many of the foregoing statements are "forward looking".

PRODUCT DEFINITION AND HIGHLIGHTS

The EPA's Federal registration permits the blending of Ecalene™with gasoline for usage in all 50 States. Regarded as an "ethanol plus", Ecalene™ has an octane rating of 124, significantly higher than the octane rating of ethanol currently available to the US market. Ecalene™ can be blended with gasoline and also be used as straight fuel, 85% blend (E85) or 100% pure (E100). Ecalene™ is a biodegradable mixed alcohol, environmentally friendly fuel, and economically viable from the perspectives of both producers and consumers. As a blend with gasoline and diesel or used as a straight fuel, Ecalene™ has the near term potential to become America's mainstream fuel of choice.

Ecalene™:
+       Higher mixed alcohols
+       Acts as a binding agent and co-solvent in fuel blending
+       Higher octane than ethanol
+       Is its own denaturant
+       Higher Btu's than ethanol
+       Its higher octane will increase mileage and performance

Ecalene™ when mixed with gasoline or used as a straight fuel:
+       Has an octane blending value ([R+M]/2) of 124 and is a technically sound octane-blending compound
+       Adds the oxygen that is required by Federal mandates
+       Is an effective replacement for MTBE

Ecalene™ targeted composition:

Ethanol is already an important element of transportation fuel production and is on the rise. About 12% of U.S. gasoline sold today contains 8% to 10% ethanol as a fuel additive to boost octane and reduce carbon monoxide and other toxic air emissions. Another 25% of U.S. gasoline now has a petroleum-derived additive (MTBE), which is being phased out because of water pollution concerns. Because ethanol can directly replace this 8-10% blend additive, Ecalene™ use is expected to increase rapidly.

Beginning in 2002, the Clean Alternative Fuel Program requires motor fuel sold in the U.S. to contain an increasing percentage of renewable fuel, such as Ecalene™. Compliance will result in improved air quality effectively addressing the threat of increased air pollution in our nation's most polluted cities. Furthermore, the U.S. Senate Environmental and Public Works Committee approved legislation (S. 2962), which bans the use of MTBE by 2004, virtually tripling the demand for ethanol over the next ten years. The legislation has been amended to require the EPA to evaluate air quality requirements and also provides the EPA with authority to regulate on the basis of those studies to preserve the emissions benefits of Re-Formulated Gasoline (RFG).

The demand for MTBE is over 10 billion gallons annually. Along with the current demand for ethanol, Ecalene™ is the product of choice to replace MTBE. This petroleum-derived additive currently used, MTBE, is being phased out due to ground water pollution.

A growing number of States in the country have joined to mandate clean alternative fuels to control air pollution. Other countries around the world are following rapidly. For example, Australian legislators recently limited MTBE to 1% by 2004 and the Australian Institute of Petroleum are pushing to ban MTBE ahead of the 2004 federal ban. The bill that bans the use of MTBE increases the demand for a superior blending alternative such as Ecalene™.

Ecalene™ is registered with the EPA as a fuel blending additive. This "10% blend" represents the immediate target market for the product as demand is increasing worldwide. The market characteristics and the alignment of FRLLC Ecalene™ plants indicate:

• Strong demand and acceptance worldwide for fuel alcohol
• Positive blending additive and a superior octane enhancer
• Easiest alternative fuel to fit into the existing infrastructure
• Excellent building block for: Reformulated fuels and/or Bio-Diesel
• Safe and easy to transport
• Forest Rescue Plants can be constructed close to the forest residue.
• Ecalene™ projects a higher value end product

By Gene R. Jackson
President CEO
Power Energy Fuels, Inc.
gene@powerenergy.com