Lignol Receives Funding from the US Department of Energy ("DOE")

VANCOUVER, Sept. 29 /CNW/ - Lignol Energy Corporation (TSX-V: LEC), a leading technology company in the cellulosic ethanol, biochemicals and biorefining sector, is pleased to report that its U.S. based subsidiary, Lignol Innovations Inc. ("Lignol" or "the Company") has been informed by the DOE, of a modification to its Cooperative Agreement (the "Agreement") whereby approximately US$4.0 million (previously US$1.56 million) has now been obligated by the DOE as a contribution in phase one of the Agreement. Of this obligated amount, US$0.34 million has recently been received by Lignol and approximately US$1.2 million is currently available to be claimed in respect of expenses incurred to date. A further US$0.46 million is expected to be made available shortly by the DOE. The balance of the obligated amount of approximately US$2.0 million, is subject to Lignol achieving certain project development milestones.

On October 28, 2008 Lignol announced that it had signed a US$30 million Agreement with the DOE relating to the construction of a commercial demonstration cellulosic ethanol plant. The first phase of the Agreement relates to the development and design phase leading up to construction; including preliminary plant engineering and design as well as environmental documentation and permitting. Upon the satisfactory completion of the milestones outlined within the first phase of the Agreement, the second phase of funding will commence with the DOE contributing up to fifty percent of total plant construction costs up to a maximum of US$26 million. As with many similar federally funded programs, such contributions are subject to the availability of appropriated funding for each fiscal year.

About Lignol

Lignol (TSX-V: LEC) is a Canadian company undertaking the development of biorefining technologies for the production of fuel-grade ethanol and other biochemical co-products from non-food cellulosic biomass feedstocks. Lignol's modified solvent based pre-treatment technology facilitates the rapid, high-yield conversion of cellulose to ethanol and the production of value-added biochemical co-products, including high purity HP-L(TM) lignins. HP-L(TM) lignin represents a new class of high purity lignin extractives (and their subsequent derivatives) which can be engineered to meet the chemical properties and functional requirements of a range of industrial applications that until now has not been possible with traditional lignin by-products generated from other processes. Lignol is executing on its development plan through strategic partnerships to further develop and integrate its core technologies on a commercial scale. Lignol also intends to invest in, or otherwise obtain, equity interests in energy related projects which have synergies with its biorefining technology. For more information about Lignol, please visit our website at www.lignol.ca.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Caution concerning forward-looking statements:

Certain statements contained in this document may constitute forward-looking information within the meaning of applicable securities laws. Such forward-looking statements or information include, without limitation, statements or information about our ability to fund our Baseline Operations (as defined in the Company's Management's Discussion & Analysis of Financial Condition and Results of Operations for the three months ended July 31, 2010) the development status of our fully integrated biorefinery pilot plant in Burnaby, British Columbia, the planning and development of our proposed cellulosic ethanol commercial demonstration plant, our ability to exploit commercial opportunities and broaden our market opportunities for a range of cellulosic derivatives and environmentally sustainable biochemicals including our HP-LTM lignin and lignin derivatives and our ability to pursue these opportunities with strategic partners, and the receipt of future funding by way of government awards and corporate contributions. Often, but not always, forward-looking statements or information can be identified by the use of words such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes" or variations of such words and phrases or words and phrases that state or indicate that certain actions, events or results "may", "could", "would", "might" or "will" be taken, occur or be achieved. Such statements or information reflect Lignol's current views with respect to future events and are subject to certain risks, uncertainties and assumptions including, without limitation, our ability to scale our technology, our ability to satisfy the conditions of existing government grants and to obtain new additional grants, the timely receipt of funding under various government awards and corporate contribution agreements, our ability to finance and complete the development of the commercial demonstration plant, our ability to develop our products, our ability to obtain requisite regulatory approvals and our ability to enter into agreements with strategic partners on terms acceptable to us. Forward-looking statements and information are necessarily based upon a number of estimates and assumptions that, while considered reasonable by management, are inherently subject to significant business, economic and competitive uncertainties and contingencies. Many factors could cause Lignol's actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements or information, including among other things, the complexity of the development of the commercial demonstration plant, market conditions which will effect our ability to finance our operations, the price of gasoline and demand for ethanol, risks relating to the protection of Lignol's core technology from infringement and those risk factors which are discussed elsewhere in documents that Lignol files from time to time with securities regulatory authorities. Should one or more of these risks or uncertainties materialize, or should assumptions underlying the forward-looking statements or information prove incorrect, actual results may vary materially from those described herein as intended, planned, anticipated, believed, estimated or expected. Except as required by law, the Company expressly disclaims any intention or obligation to update or revise any forward looking statements and information whether as a result of new information, future events or otherwise. All written and oral forward-looking statements and information attributable to us or persons acting on our behalf are expressly qualified in their entirety by the foregoing cautionary statements.

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For further information: Lignol Energy Corporation: David Turner, Chief Financial Officer, Tel: [phone], Email: [email protected], Email: [email protected]; The Equicom Group: James Smith, Investor Relations, Tel: [phone] ext. 229, Email: [email protected]