Lignol pursues commercial-scale development

July 21, 2011, Vancouver – Lignol Energy
Corporation’s U.S. subsidiary, Lignol Innovations Inc., has reached agreement
with the U.S. Department of Energy (DOE)’s Biomass Program to phase out work on
the funding award for a demonstration project.

In January 2008, Lignol was selected to
receive an award of up to US$30 million from the DOE to build a
demonstration-scale cellulosic ethanol plant at approximately one-tenth of the
projected scale of a first commercial facility. After plans for a project in
Colorado were halted in 2009 due to the recession and market volatility, Lignol
refocused and began to modify the scale and configuration of the proposed
demonstration-scale project with the goal of developing a profitable
commercial-scale project. The new project incorporates innovations and design
improvements generated from the pilot-scale biorefinery.

In recent consultations with the DOE, it
was agreed that Lignol’s current plans cannot be supported within the terms of
the funding award. Lignol will continue with engineering, technical and project
development work, which the DOE has been funding, to meet certain reporting
milestones that should be completed in the coming months.

Lignol will pursue development of a
commercial project without the assistance of an award from the DOE. It has made
a significant investment over the past three years in constructing its
pilot-scale biorefinery in Burnaby, British Columbia, which is providing Lignol
and its partners with important data to develop off-take agreements and to
complete engineering designs. Leveraging the benefits of the pilot-scale
biorefinery eliminates the need for a capital intensive, demonstration-scale
plant and is expected to result in faster development of Lignol’s first
commercial project.