BAAT (www.baat.com) signed an agreement with a chemical company overseas to market a diesel fuel additive that dramatically reduces major diesel fuel pollutants even at very low concentration levels. The additive has no harmful effects on diesel engine life or performance and can be added to diesel fuel for a very low cost (pennies per gallon). BAT plans to initiate a major marketing campaign for the product starting in early 2001 in nine countries where it has obtained exclusive rights including the US, Mexico, France, Portugal, Brazil, Argentina, Chile, Hungary and India.

BAT and its affiliated companies have undergone extensive testing of the fuel additive in its own labs and at independent labs to verify emission benefits. Independent lab testing was conducted by Emission Testing Services (ETS) in Costa Mesa, California, a lab using U.S. Environmental Protection Agency approved emissions testing equipment and testing protocols. ETS is recognized by California Air Resources Board (CARB) as an independent lab capable of conducting acceptable testing to CARB standards. ETS testing involved the additive mixed with a 10% concentration of biodiesel. The test results showed that both particulates (PM 10) and opacity (black smoke) could be reduced substantially while simultaneously reducing nitrogen oxides (NOX). These two pollutants are the major contributing causes of air pollution from operation of diesel engines. The results of the tests were as follows:

Nitrogen Oxide (NOX) reduction: 7% Particulate Matter (PM 10) reduction: 30% Opacity (smoke) reduction: 80%

The ability to reduce both NOX and particulates/opacity is a major breakthrough for an additive because it helps address a major engineering challenge faced by diesel engine manufacturers and air pollution regulators. In an SAE Conference in 1999, Dr. Magdi Khair, Staff Engineer at Southwest Research Institute noted that "it is difficult for diesel engines to meet projected nitrogen oxide (NOX) and particulate matter (PM 10). Traditionally measures aimed at reducing one of these two exhaust species has led to increasing the other. This physical characteristic, which is known as the NOX / PM tradeoff, remains the subject of an intense research effort". The results above were particularly encouraging because the same testing showed that biodiesel alone actually increased NOX emissions by about 2-3%. Thus overall NOX reductions were closer to 9-10%.

Control of NOX and particulate matter from diesel engines is one of the biggest air pollution challenges faced by air quality regulators worldwide. Improvements to the emissions of gasoline engines has led to much lower pollution levels from automobiles in many parts of the world. At the same time, there has been an increasing contribution of pollution from trucks, buses, marine vessels and other diesel engines because of the large number of miles traveled by each vehicle or vessel and limited pollution control measures on these engines. Recent evidence linking cancer to particulate matter has led to propose regulations in the US, California and around the world.

A fuel-based approach to achieving particulate matter and NOX reductions has significant advantages over new engine emission standards because it addresses pollution from both on-road vehicles and new engines. Since diesel engines have a very long life (500,000 to 1 million miles), engine based approaches take a long time to achieve emission reductions. Fuel additives provide immediate emission benefits as soon as they are added to diesel fuel in a country or state. Various regulations are now under consideration to lower sulfur levels in diesel fuel to 15 parts per million to allow new catalysts to work properly. This presents an opportunity to propose more comprehensive approaches that include addition of additives to the fuel to quickly and effectively reduce NOX and PM 10.

BAT plans to introduce the additive to each of the countries listed above through a program of cooperative testing with private sector partners, government agencies and government and private transportation fleets. This will include both laboratory and field testing on buses, trucks, stationary sources and marine vessels. BAT has developed extensive contacts in the US regulatory community as a result of prior development of electric vehicles, super-efficient vehicles and engines, electric bikes and scooters and other technologies. BAT has also developed government and private industry contacts in the target countries through its participation in military "industrial offset programs". The military company's Industrial Offset Programs act as "matchmakers" to identify private industry partners and government regulators interested in technology lab testing, field testing, joint venture formation and market introduction in the target countries.

Diesel consumption is very large in most countries around the world. Addition of additives to reduce pollution represents significant revenue potential from additive sales. In California alone, 12 million gallons of diesel fuel is consumed daily. Annual global consumption of petroleum is now over 72 million barrels per day and a large portion of this total consumption is in diesel engines used in mobile and stationary applications. The additive can be used to reduce pollution from both mobile and stationary sources (oil heating systems, oil power plants, etc.). There are also efforts to adopt marine emission standards, including a convention that has passed or is under consideration for ratification by major shipping countries in the International Maritime Organization (IMO) that will require substantial reductions of PM 10 and NOX in new or retrofitted ships. In Scandinavia, where IMO conventions are already approved, there are even variable port tax fees based on emission standards achieved by vessels that provide a strong incentive to utilize fuel additives. BAT has identified numerous strategies to pursue product introduction and distribution programs in marine, stationary, heating, power generation, truck, bus and other markets. These efforts, which have been underway at a planning level over the last year, will intensify in early 2001.

BAT International is organized as a holding company with major ownership positions in a set of subsidiary or affiliated companies now commercializing advanced automotive technology products developed by BAT over the last eight years. This includes electric bicycles and scooters, super-efficient or high power engines, advanced batteries and lubricant additives, (for information, see www.baat.com).