"We are pleased with the continued support of the Department of Defense in developing and continuing the Nellis Air Quality Improvement Project to advance O2Diesel as a renewable alternative clean diesel fuel for the US Military," said O2Diesel's CEO Alan Rae. "Given the heightened interest for government agencies to take larger steps to reduce the importation of petroleum products and to improve urban air quality, we believe that O2Diesel can play an important role in the emerging liquid biofuels markets in the US and abroad. Funding through DOE and DOD will help O2Diesel(TM) to complete all the regulatory verification requirements that any new fuel must meet, while allowing us to focus on developing additional bio-fuel blends to further enhance the renewable components of our product line."

O2Diesel has been under contract to develop a new fuel for the Department of Defense that will be composed of at least 20% renewable sources including the company's patented and proprietary biomass-derived stabilizing additive, and renewable ethanol. This fuel, when finalized, will help DOD facilities meet local air quality compliance requirements and strengthen its commitment to reducing the USA's dependency on foreign oil imports. Rigorous testing of this new fuel is currently underway at the Southwest Research Institute in San Antonio, Texas, a nationally recognized research facility. The research will be followed by an expanded in-use fleet demonstration at Nellis Air Force Base in Las Vegas where the company's O2Diesel(TM) fuel has been running successfully for 30 months. The Nellis Air Quality Demonstration Program will increase the vehicle test fleet in the coming months under the new allocation.

DOD is one of the largest consumers in the 60 billion gallon US diesel & distillate fuels market, and O2Diesel(TM) shows great promise in helping the armed forces reduce diesel engine emissions at US military installations and meet DOD directives to cut petroleum consumption by as much as 20% in the very near future.

O2Diesel(TM), an extensively tested blend of 7.7vol% fuel grade ethanol treated with the company's patented and proprietary biomass-derived stabilizing additive with any available diesel fuel, significantly reduces smoke, PM, CO, NOx emissions from a host of centrally-fueled diesel-powered equipment, including urban buses, and with no engine modifications.

About O2Diesel

O2Diesel is a pioneer in the commercial development of a cleaner-burning diesel fuel alternative that provides exceptional performance and environmental qualities for centrally fueled fleets and off-road equipment of all kinds. Engineered and designed for universal application, O2Diesel(TM) is an ethanol-diesel blend that substantially reduces harmful emissions without sacrificing power and performance. Extensive independent and government-recognized laboratory and in-use field tests have demonstrated the effectiveness of O2Diesel(TM) -- the introduction of this cost-effective, cleaner-burning diesel fuel is now underway in the United States and other global markets. For more information please refer to www.o2diesel.com.

Forward-Looking Statements

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding O2Diesel Corporation's business which are not historical facts are 'forward-looking statements' that involve risks and uncertainties. Forward-looking statements are subject to a variety of risks and uncertainties which could cause actual events or results to differ from those reflected in the forward-looking statements, including, without limitation, the failure to obtain adequate financing on a timely basis and other risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements, as a result of either the matters set forth or incorporated in this report generally or certain economic and business factors, some of which may be beyond the control of O2Diesel. These factors include adverse economic conditions, entry of new and stronger competitors, inadequate capital, unexpected costs, failure to gain product approval in the United States or foreign countries for the commercialization and distribution of our products, failure to capitalize upon access to new markets and failure in obtaining the quality and quantity of ethanol necessary to produce our product at competitive prices. O2Diesel disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. "O2Diesel" and "CityHome" are trademarks of O2Diesel Corporation.

Contacts:

O2Diesel Corporation
Alan Rae
+1 (302) 266-6000

Investors Contact:
Alliance Advisors, LLC
Mark McPartland
+1 (910) 221-1827

SOURCE: O2Diesel Corporation