Major Manufacturing/Marketing Agreement Signed Between Kelso & One of the World's Largest Lessors of Railway Tank Cars

VANCOUVER, British Columbia--Jan. 1, 20050, 2005--Kelso Technologies Inc. (TSX VENTURE:KLS)

Agreement with Rail Leader Sets Stage for Commercialization

Kelso Technologies Inc. has entered into a five year Joint Marketing and Development Agreement (JMA or Agreement) with Union Tank Car Company (UTLX) and its affiliate, McKenzie Valve and Machining Company (McKenzie).

The JMA combines Kelso's revolutionary, patented JS SRV line of pressure relief valves with the world class marketing and manufacturing expertise of two major companies, UTLX and McKenzie. The agreement concludes the technical, manufacturing and commercial due diligence undertaken by UTLX and McKenzie and confirms the commercial merit of Kelso and the JS SRV product line. McKenzie will bring to this alliance the volume manufacturing base needed for rapid penetration of the market. UTLX, a major manufacturer and lessor of rail tank cars, will purchase the JS SRV line for various cars in their fleet, assist Kelso in promoting the valve to both government and industry and in the formulation and execution of the marketing programs needed to convert the North American market to the JS SRV.

Kelso's 21st century advanced valve technology provides several benefits over today's technology including improved reliability and worker safety, basic elimination of product contamination, lower maintenance and shipping costs, and potentially lower insurance costs.

The Kelso/UTLX/McKenzie Agreement will enable the North American tank car market to take advantage of Kelso's unique pressure relief valve technology. It will also shorten the time it takes Kelso to begin Association of American Railroads (AAR) Service Trials. UTLX has agreed to provide the necessary tank cars when any newly-designed valves are required to undertake AAR Service Trials.

"This agreement is an important first step in Kelso's larger strategy of revolutionizing the worldwide pressure relief valve market, not only for the rail industry but for other industries too. With patent protection in most major countries around the world, Kelso's JS SRV technology has many applications. There are lucrative opportunities to establish market share internationally in the trucking, marine and air transportation industries and the petroleum and petrochemical storage and pipeline segments. It is our goal to capture a very significant portion of the $650 million annual revenues from this addressable market with our proprietary technology," stated Stephen L. Grossman, President and CEO of Kelso.

In 2005, Kelso, with the assistance of UTLX and Mackenzie, will initiate marketing and sales programs addressing the North American Rail Tank Car Market. The NA Rail Tank Car Market has been projected to represent in excess of US$130 million over the next five years. Kelso looks forward to securing a significant share of the market over the term of the agreement.

Building on AAR certification of the Kelso JS SRV and the commercial validation rendered by way of the Kelso/UTLX/McKenzie agreement, Kelso will eventually build similar market channels for the offshore rail tank car market, a market in excess of US$500 million (over the next five years). The primary offshore markets will include China, Russia and India; markets heavily dependent on their rail systems. Kelso will commence these programs by making the appropriate representations to governments, regulatory agencies and corporations.

As Kelso starts commercializing the JS SRV in the rail sector, the robustness of the technology developed and investment made by Kelso in R&D will enable the company to address other sectors with significantly reduced development cycle times.

Building on the revenues from the NA and Offshore Rail Tank Car Markets, Kelso will turn its R&D to developing products for sectors where the need for JS SRV technology has been documented and minimal modification to existing JS SRV technology is required. The trucking and petroleum & storage sectors most closely meet these requirements. Over the next five years, the trucking industry represents a market of US$590 million and the petrol-chemical & storage industries represent markets of US$2.05 billion.

Most of today's pressure relief valve technology has remained unchanged for decades despite increasing demand from regulatory agencies requiring more-stringent material-handling protocols as well as heightened public and private sensitivities to hazardous and non-hazardous spills.

ABOUT KELSO TECHNOLOGIES INC. (www.kelsotech.com)

Kelso Technologies Inc. is a public company which trades on the TSX Venture Exchange in Canada under the symbol KLS. Headquartered in Vancouver, BC, Kelso Technologies' mandate is to develop industrial technology including its JS SRV valve technology which is patent protected in many major countries around the world.

During 2004, the AAR certified Kelso's first application for the North American railroad tank car market, the external JS75 SRV pressure relief valve. Kelso's JS75 SRV is generally safer, more reliable, easier to install, and less costly to maintain than conventional internal pressure relief valves used on railroad tank cars today. Kelso's technology has the potential to capture a fast-growing share of the addressable worldwide market for safety devices which, over five years, is estimated to total $3.2 billion. Potentially, the market for Kelso includes not only the rail industry but also the trucking, petroleum, petrochemical storage, pipeline and marine and air transportation industries.

John L. Carswell, Director

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this Release.

KELSO TECHNOLOGIES INC. (TSX VENTURE:KLS)