Senate Transportation and Housing Committee

Providing Fuels of the Future

Catherine Reheis-BoydPresident

October 24, 2011

WESTERN STATES PETROLEUM ASSOCIATION

Low Carbon Fuel Standard Adopted April 2009 Reduce full fuel cycle “carbon intensity”

C.I.) of transportation fuel pool at least 10% by 2020; a reduction of 16MMT of GHG emissions; 10% of total GHG reductions to meet AB32 target

Intended to drive market toward innovative, low carbon fuels Reduce California’s dependence on petroleum Applies to all refiners, blenders, producers or importers Considers direct and indirect land use changes Includes periodic reviews – 2011, 2014 Board revisions to regulation in 2011

WESTERN STATES PETROLEUM ASSOCIATION

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Petroleum is a fuel of the future

Source: U.S. Energy Information Administration

WESTERN STATES PETROLEUM ASSOCIATION

Petroleum companies are investing in the fuels of the future

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Low carbon options

Source: California Air Resources Board, staff report on Low Carbon Fuel Standard fuel pathways, September 20105

WESTERN STATES PETROLEUM ASSOCIATION

WESTERN STATES PETROLEUM ASSOCIATION

Federal Biofuels Mandate (RFS2):Incentive To Develop Advanced Biofuels

Source: US Energy Information Administration

Advanced cellulosic; advanced non-cellulosic,(e.g., sugar ethanol); biomass-based diesel

Conventional, corn ethanol

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Low Carbon Fuel Standard compliance schedule

Source: Proposed Regulation to Implement the Low Carbon Fuel Standard Volume I, Staff Report: Initial Statement of Reasons, March 5, 20097

WESTERN STATES PETROLEUM ASSOCIATION

Midwest Corn Ethanol CI Range 73.20 – 120.99

Cellulosic Ethanol From Trees CI 20.40 (not commercially available)

Sources: CARB Tool for Calculation for Required Ethanol CI to Comply with Gasoline Standard, May 2011; Method 2A/2B Applications and Internal Priority Pathways (as of June 24, 2011);May 25, 2011Clean Final Regulation Order Part 1 and 2 Combined; Detailed California-Modified GREET Pathway for Cellulosic Ethanol from Farmed Trees by Fermentation, February 27, 2009

* Assumes no change to current 10% ethanol blend wall and no wide scale use of E85

Carbon intensity of ethanol blended into gasoline required to meet LCFS gasoline targets*

Car

bon

Inte

nsity

(gC

O2e

/MJ)

LFCS Compliance Scenario – Gasoline Only

Brazil Sugar Cane Ethanol CI Range 58.40 – 83.96

Sorghum/Wheat/Corn Ethanol CI Range 56.56 – 99.89

California Ethanol CI Range 71.40 – 88.90

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Examples of other LCFS compliance pathways

Source: Proposed Regulation to Implement the Low Carbon Fuel Standard Volume I, Staff Report: Initial Statement of Reasons, March 5, 2009; California Energy Commission, 2009 Integrated Energy Policy Report

All electric car

Hydrogen fuel cell vehicle

Flexible fuel vehicle (E85)

Natural gas vehicle

Electric & hydrogen 560,000 – 2 million 14,680vehicles

Flexible fuel vehicles 1.8 – 3.4 million 400,000(43 E85 stations)

Natural gas vehicles ? 24,810

Vehicle pathway CARB scenario Reality1

1 Based on 2008 data

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WESTERN STATES PETROLEUM ASSOCIATION

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Global oil reserves

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HCICO could result in crude shuffling, higher GHG emissions

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WESTERN STATES PETROLEUM ASSOCIATION

LCFS impacts to California refiners, consumers

Lower carbon intensity biofuels are expected to command a price premium

Over the long‐term, there will be pressure to pass costs increases along to consumers

The potential impact on E10 prices for blends using Brazilian ethanol could range between 10.4 cents per gallon and 17.5 cents per gallon

There are numerous challenges to developing adequate vehicle production and sales, refueling infrastructure, and technical standards

Source: California Energy Commission, Draft Staff Report , Transportation Energy Forecasts and Analyses for the 2011 Integrated Energy Policy Report, August 2011