2222ndnd Annual EPAC Biofuels Annual EPAC Biofuels ConferenceConference

June 24-26, 2012June 24-26, 2012Billings, MontanaBillings, Montana

Douglas A. DuranteExecutive Director

Clean Fuels Development Coalitionwww.cleanfuelsdc.org

Federal Policy and Programs

Recapturing the High Ground

E30, FlexFuel Vehicles,

CO2/Carbon Reduction

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The Mood in WashingtonThe Mood in Washington

Anything the government supports must be a boondoggleAnything the government supports must be a boondoggle Anything the government pays for must be wastefulAnything the government pays for must be wasteful If it was here it needs to goIf it was here it needs to go For ethanol, an industry literally created and sustained by For ethanol, an industry literally created and sustained by

public policy, i.e., public policy, i.e., the Governmentthe Government, that's not good news. , that's not good news. However justifiable, the tax exemption/credits, import However justifiable, the tax exemption/credits, import

duties, environmental requirements, loans/loan duties, environmental requirements, loans/loan guarantees, etc. all were criticized as everything that was guarantees, etc. all were criticized as everything that was wrong with government.wrong with government.

Ethanol has gone from hero to villain.Ethanol has gone from hero to villain. Expiration of the tax exemption and duty has helped Expiration of the tax exemption and duty has helped

tremendouslytremendously

D4: Total Disconnect, Discord, and Dysfunction in DC

Complete lack of consensus w/regard to renewables, alt fuels, env.

RFS is the law of the land and by definition it is the policy of the US Government to develop & use renewable fuels, Supported by EPA RIS

How do we meet that requirement and goal?

- A Republican House denying funding for EPA Labels on E15, blender pumps, etc.

- Legislation to define Nat gas and coal as renewables

- ILUC Policy that cripples ethanol

- Administration that is force feeding electric vehicles in a square peg/round hole approach requiring massive

subsidies--10K per car

- Eliminating FFV Credits that cost nothing!

Dysfunction, continued Solar, Wind, Geothermal, Biomass, Hydro all being whipsawed Any Environmental or Green Initiative being painted as job killing Dueling Polls

- Just last week-- Gallup says 65% pro GHG

- Previous week ABC-NY Times says 70% feel EPA Over-reaching

Suspension of stationary CO2 rule Opposing Solar in the Mojave Desert -- $45 mill to preserve Nat'l Wildlife Opposing Energy Crops as too invasive Environmental Groups (Friends of Earth) hailing expiration of

VEETC as first step with elimination of RFS next $3-4 gasoline here to stay . . . . . . . . . . . .

AND NOT A SINGLE SERIOUS EFFORT TO

REPEAL OIL SUBSIDIES!!

Key Federal Policy and Programs Affecting Ethanol

Legislative: RFS, Tax Credits (alt fuel, cellulose, ITC, etc.), Farm Bill

- Possible Collaborative Opportunities:

-- EV Incentives, Nat Gas Act, FFV Mandates/

Open Fuel Standard Regulatory: E15, CAFE, Tier 3, (EPA), Biorefinery

Assistance, BCAP, REAP (USDA) -- Ethanol need not apply (DOE)

FOR ETHANOL THE PLAY IS EPA!! CAFE/GHG/Fuel Quality ILUC Extraordinary authority to redefine RFS

RFS RequirementsRFS Requirements

6 Million Gallons

13 Million Gallons

13 Million Gallons

Cellulose Requirements VS Reality

Cellulose Requirements VS Reality

Adjusting the RFS EPA Required (Shall) to Promulgate a Rule if...

- 20% of volume is waived for 2 years

- 50% for one year Administrator can modify volumes for all years following

the year of the waiver-- any time after 2016. EPA/DOE/USDA to consider

- Environment

- Energy Security

- Infrastructure

- Rate/Status of Commercialization

- Cost

- Jobs, ag/food impacts, prices, etc.

15

5

16

0

5

10

15

20

+2.5

-2.5

Adjusted RFS Scenario

RFS RequirementsRFS Requirements

Adjusted RFS?Adjusted RFS?

SolutionSolution

Recapturing the High Ground: The Case for More Ethanol & More FFVs

Obvious energy security/diversity; agriculture/economic benefits,

Less obvious are environmental/health benefits- ethanol has great resume in CO, Ozone/RFG

- New CAFE standards will require small bore, high compression engines needing more octane

- Air Toxics/Aromatic content likely to increase to meet octane needs, resulting in particulates & CO2

Mid-level blends e.g. E30 could reduce aromatic content by substituting clean, low carbon, renewable octane for these air toxics

New standards make reducing carbon critical!

The Case for More Ethanol The Case for More Ethanol (Continued)(Continued)

Mobile source controls remain Mobile source controls remain lowest cost per ton to reduce most lowest cost per ton to reduce most pollutantspollutants

Ethanol increases gasoline yield at Ethanol increases gasoline yield at refineries from the oil barrelrefineries from the oil barrel

Illustration of a 10% increase in gasoline Illustration of a 10% increase in gasoline yield when substituting ethanol for yield when substituting ethanol for aromatics at 30%aromatics at 30%

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Air Toxics – Aromatics - Air Toxics – Aromatics - ParticulatesParticulates Aromatics are hazardous air pollutants and linked to Aromatics are hazardous air pollutants and linked to

many cancers and respiratory problemsmany cancers and respiratory problems- Benzene – Toluene – XyleneBenzene – Toluene – Xylene

They are in gasoline and the concentration goes up as They are in gasoline and the concentration goes up as refiners produce higher octane fuelsrefiners produce higher octane fuels

They form secondary organic aerosols and bond with They form secondary organic aerosols and bond with carbonaceous material to form PM – 10, 2.5, and now carbonaceous material to form PM – 10, 2.5, and now ultrafine particulatesultrafine particulates

PM of all types identified by EPA as major health threatPM of all types identified by EPA as major health threat EPA has clear authority to regulate air toEPA has clear authority to regulate air toxicsxics

Mobile Source Provisions of CAAA Established as Mobile Source Provisions of CAAA Established as Minimum Threshold –Minimum Threshold –EPA declined to further EPA declined to further tighten aromatic restrictionstighten aromatic restrictions

Even back in 1990, Congress directed the EPA to periodically Even back in 1990, Congress directed the EPA to periodically review available technologies to reduce air toxics as much as review available technologies to reduce air toxics as much as possiblepossible

In a 2007 Ruling, the EPA recognized ethanol as a substitute In a 2007 Ruling, the EPA recognized ethanol as a substitute for aromatics, acknowledging “high octane quality”for aromatics, acknowledging “high octane quality”

EPA declined to further tighten aromatic restrictionsEPA declined to further tighten aromatic restrictions, , pointing to economic challenges and not enough ethanol pointing to economic challenges and not enough ethanol supply.supply.

Cost benefit assessment was conducted with oil at Cost benefit assessment was conducted with oil at a range of $17-$35 a barrela range of $17-$35 a barrel

Before RFS2Before RFS2

“…use maximum achievable control technology to reduce levels of both benzene and non-benzene aromatics in gasoline to protect the public health and environment.”

Reduction in Aromatic Compounds withReduction in Aromatic Compounds withScheduled Increase in EthanolScheduled Increase in Ethanol

E30 Scenario--Creating a Sea Change in Just One Decade

Current Gasoline Pool of 135 BGPY, 25% aromatic content= 34BGPY

Modest, i.e. "achievable" reduction in aromatics of 50-60% = demand for a new 15BGPY of ethanol--exactly what is called for in the RFS!!

Gradual reductions in aromatics, replaced with ethanol, coupled with gradual increase in FFVs, with gradual replacement of pumps with FlexFuel pumps--(10%, or 7700 per year wear out, 245 million vehicle fleet turnover in 13-17 years)

CFDC, Nebraska Ethanol Board, Growth Energy, ACE and others called on EPA in our comments to connect all the dots and do something about it!!

Lets make these guys irrelevant!Lets make these guys irrelevant!BILAL QABALAN/AFP/Getty Images. Saudi Crown Prince Abdullah bin BILAL QABALAN/AFP/Getty Images. Saudi Crown Prince Abdullah bin

Abdel Aziz inaugurates the Al-Qatif new oil production plantAbdel Aziz inaugurates the Al-Qatif new oil production plant

Thank you!

For more information log on to

www.cleanfuelsdc.orgwww.ethanolacrossamerica.net