Advanced Biofuels Governors Biofuels Coalition February 24, 2009

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1 Advanced Biofuels 2009 Governors Biofuels Coalition February 24, 2009

2 Brent Erickson Executive Vice President Industrial and Environmental Section

3 Some Industrial and Environmental Section Members

4 Biotech Innovation is Accelerating Evolution in Biofuels Development Improving starch to ethanol processes Enabling cellulosic ethanol processes Enabling new fuels like butanol to be produced from carbohydrate feedstocks Enabling new technology to produce green gasoline from ag feedstocks through the application of synthetic genomics Enabling renewable hydrocarbon production from algae Producing crop yield improvements Developing new non-food dedicated energy crops

5 Advanced Biofuels Boosters and Barriers Boosters Existing incentives in federal and state legislation Relative carbon footprint lower then fossil fuels Despite bad economy progress continuing Barriers Low oil prices Lack of new capital Blend wall Confusion on indirect land use and NGO opposition No comprehensive policy framework for integration of supply chains and technology Negative press

6 History of Oil Refineries Instructive for Biorefinery Development Lukasiewicz was the first to distill kerosene from seep oil Principal refined product from petroleum was kerosene which quickly replaced whale oil in the United States. (disruptive technology) 1900 horseless carriages needed fuel. Distillation refining did not produce enough of it only about 20 percent gasoline from a unit amount of crude oil Thermal cracking then doubled the efficiency of refining, to produce 40 percent gasoline per unit of oil. The refiners could then keep pace with automobile demand s Catalytic cracking added to refining efficiency Today coking, steam cracking, alkylation, catalytic reforming, hydrocracking are used to maximize refinery outputs and produce many products Modern oil refinery was over 125 years in development Biorefineries are just getting started!

7 We Are Just at the Beginning of Biorefinery Evolution Technology Improvements & Product Diversity Fully Integrated Oil Refineries Kerosene begins to replace whale oil Petroleum Refineries Improvements Ethanol begins To replace MTBE Biorefineries Projected Accelerated Improvements & Products Time

8 New Sandia National Laboratory Study & Report

9 90 Billion Gallon Biofuel Deployment Study Sandia National Laboratories and General Motors Global Energy Systems team conducted a joint biofuels systems analysis project Purpose to assess the feasibility, implications, limitations, and enablers of aggressive, large-scale production of biofuels in the United States Potential biofuels supply chain barriers examined in this study Impact on land availability and use; Impact on water consumption; Transportation and distribution infrastructure challenges and bottlenecks; Costs for feedstock, capital, and energy; Reluctance to make long-term investments due to risk; Pace of technological innovation; and Greenhouse gas footprint

10 Additional Biomass for 60B gal Can Be Produced on Idle and Under Utilized Land and from Residues Using Diverse Feedstocks Producing 45 billion gallons per year cellulosic ethanol by 2030 requires 480 million tons of biomass, of which 215 million tons comes from dedicated energy crops : 21M acres herbaceous 5M acres SRWC 0.3 Herbaceous 0.2 SRWC Ag Residue Forest Residue

11 Additional Biomass for 60B gal Can Be Produced on Idle and Under Utilized Land and from Residues Using Diverse Feedstocks Dedicated Energy Crops 2030 Scenario Herbaceous 44M acres (100% of idle land plus 7% of cropland used as pasture) at 6 tons/acre = 264M tons of cellulosic biomass SRWC 5M acres (7% of forest land) at 5 tons/acre = 25M tons of cellulosic biomass 49M acres = 289M tons of cellulosic biomass Other Cellulosic Feedstocks No land use change for residues Ag residues 50M acres at 1.5 tons/acre = 75M tons of cellulosic biomass Forest residues 20M acres at 6 tons/acre = 120M tons of cellulosic biomass 70M acres = 195M tons of cellulosic biomass Dedicated Energy Crops + Other Cellulosic Feedstocks = 484M tons of cellulosic biomass Sufficient biomass to produce 45 billion gallons per year cellulosic ethanol by 2030

12 Capital Required for the Biofuels Supply Chain is Significant, But Developing New Oil Supplies Will Be Equally Capital Intensive Capital Investments Required, $B CAPEX for 60 BGY ethanol: $250B CAPEX for 40 BGY petroleum: $250B-$370B $160B to $270B for exploration and production &!! %"! %!! $"! $!! #"! #!! "! <)(=25-4(* <4C104*1A:43-)4D2-4(* >1-/40+7,E";! '()*+,-./*(0 '10020(345+,-./*( :150; #$9+:150; *New production of 40B gal oil per year in Gulf of Mexico assumes 6% or 12% decline in field over a 50-year period. (Requires ongoing investment in oil field production)

13 Conclusions 90 Billion Gallon Biofuel Deployment Study 90 billion gallons per year of biomass derived ethanol can be produced and distributed with enduring government commitment and continued technological progress Producing 45 billion gallons per year cellulosic ethanol by 2030 requires 480 million tons of biomass, of which 215 million tons comes from dedicated energy crops. The cost competitiveness of ethanol is directly dependent on the price of oil and the realization of technological improvements. Government policy incentives such as tax credits and loan guarantees for cellulosic biofuels have the ability to mitigate the risk of oil market volatility, thus reducing the risk and increasing the attractiveness of cellulosic biofuels investments. Continued support of R&D and initial commercialization is also critical, because sustained technological progress and commercial validation are required to affordably produce the large volumes of ethanol considered in this study. Infrastructure investment is important to ensure that the rail network in the U.S. can support biofuels distribution; however, this is a small component of projected total rail demands resulting from future expanded economic activity.

14 Recommendations 90 Billion Gallon Biofuel Deployment Study This study found no fundamental barriers to producing biofuels at large scale (e.g., supply chain or water constraints). However, multiple actions could be taken to enhance the successful build out of the cellulosic biofuels industry. Recommendations A multi decade energy policy that values stable fuel prices that are high enough to enable energy diversity in light of oil price volatility and periodic economic dislocations Supportive policies to enable biofuel market success, including well planned market incentives and carbon pricing, that could minimize investment risks Enhancement of biofuels competitiveness with aggressive R&D and commercialization associated funding, despite current declining/low oil prices (Department of Energy, VCs, etc.) Conversion investments to increase conversion efficiency and decrease capital cost Improved energy crop technology to reduce cost, land use, and water use Decreased timeframe for technologies to reach maturity (lowers investment risk)

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16 The Advanced Biofuel Industry Will Create Thousands of New Jobs Building biorefineries to produce advanced biofuels will create thousands of new jobs within a few years: , , ,000 The economic impact will create many additional jobs in other industries: , , ,000

17 Jobs Will Be Created in Agriculture, Construction, Research, Operations

18 Jobs Created Will Be in Sectors Hit Hardest by Recent Job Losses Jobs created in various sectors (RFS 21 BGY/45 BGY scenario): Agriculture 88,400/267,000 Construction 60,000/60,000 Processing 20,000/42,500 Transportation 2,000/11,300 Jan. 08 to Jan. 09 unemployment rate increases: Agriculture from 9.5% to 18.7% Construction from 11% to 18.2% Transportation from 4.4% to 8.4% Manufacturing from 5.1% to 10.9%

19 Advanced Biofuel Production Will Contribute Billions in Economic Growth Direct annual contribution to U.S. economic growth will be felt quickly: 2012 $5.5 billion 2016 $17.4 billion 2022 $37.0 billion The full economic impact could reach $150 billion by 2022: 2012 $20.2 billion 2016 $64.2 billion 2022 $148.7 billion

20 Economic Growth Directly Associated with Advanced Biofuel Production

21 Increasing Advanced Biofuel Production Would create: More than 400,000 jobs within the industry Nearly 1.9 million jobs throughout the economy Direct economic activity of $113 billion Total economic boost of $300 billion to 45 BGY by 2030

22 Advanced Biofuels Will Reduce U.S. Oil Imports Advanced biofuel could reduce annual oil imports: 2012 $5.5 billion 2016 $23 billion 2022 $70 billion Advanced biofuels could save a total of $350 billion in oil imports between now and 2022

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24 IEA Status and Outlook for Biofuels, Other Alternative Fuels and New Vehicles Sustainability of biofuels Sustainability of Second Generation Biofuels is Comparable to Energy Savings (conservation) and Fuel Cell Hydrogen Vehicles

25 Existing and Planned U.S. Cellulosic Biorefineries

26 BP Jumps Into Next Generation Biofuels With Plans to Build Florida Refinery Feb. 19, 2009 Wall Street Journal headline BP PLC is making a huge investment in producing advanced biofuels BP is extending an existing partnership with Verenium Corp. to include developing what would be the world's biggest facility to make biofuels from non food plants such as grass. This major announcement to pursue a full scale biofuels facility reflects the level of interest in advanced biofuels but could only be undertaken now by a large company with big cash reserves. The Florida facility will cost between $250 million and $300 million.

27 New Blog

28 Thank You