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Biodiesel Opportunities in the Southeast
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Transcript of Biodiesel Opportunities in the Southeast
416 S B ll A
Biodiesel Opportunities in the SoutheastPresented by Renewable Energy Group®
W d d S t 1 2010 416 S. Bell Ave.
Ames, IA 50010 888-REG-8686
www.regfuel.com
Wednesday, Sept. 1, 2010 Dial In: 866-921-2204; *1728675* Please mute your line.
Today’s AgendaToday s Agenda• Biodiesel 201 • Infrastructure
• Federal Drivers
• State Drivers
• Other Market Drivers
• Blending Economics
• REG Overview
• Q&A• Other Market Drivers • Q&A
Copyright 2010Renewable Energy Group® 2
Dave Slade, Ph.D Gary Haer Larry Breeding
d lCopyright 2010Renewable Energy Group® 3
Biodiesel 301
What is biodiesel?What is biodiesel?• Biodiesel is methyl esters made from biological oils and
fats (triglycerides) by transesterificationfats (triglycerides) by transesterification
Methanol Methyl ester
Methyl ester
M th l tMethanol
Methanol Triglyceride
Methyl esterMethanol
ProductsRaw materials
Transesterification reaction
Copyright 2010Renewable Energy Group®
Methyl stearateMethyl stearate
Copyright 2010Renewable Energy Group®
Methyl linoleateMethyl linoleate
Copyright 2010Renewable Energy Group®
Feedstock and fuel qualityFeedstock and fuel quality• Biodiesel can be made from:
Vegetable oils (soy canola corn etc )• Vegetable oils (soy, canola, corn, etc.)
• Animal fats (pork, beef tallow, poultry)
• Used oils (used cooking oil, yellow grease)( g y g )
Production skill not feedstock determines biodiesel quality• Production skill, not feedstock, determines biodiesel quality
• Feedstock mix determines methyl ester profile and color
• Fatty acid profile only affects a few properties:• Cloud point• Density & viscosity
Determined by the fatty acid profile of
Copyright 2010Renewable Energy Group®
• Cetane number the feedstock mix
BQ-9000 Critical SpecificationsBQ 9000 Critical SpecificationsFree Glycerin ASTM D6584 Max 0.020% mass
Total Glycerin ASTM D6584 Max 0 240% massTotal Glycerin ASTM D6584 Max 0.240% mass
Flash Point [Methanol] ASTM D93 Min 130 °C [Max 0.2% methanol]
Acid Number ASTM D664 Max 0.50 mg KOH/gAcid Number ASTM D664 Max 0.50 mg KOH/g
Water & Sediment ASTM D2709 Max 0.050% volume
Visual Appearance ASTM D4176 Max 2
Oxidative Stability EN 14112 Min 3.0 hr
Sulfur ASTM D5453 Max 15 ppm
Cold Soak Filtration ASTM D6751 Annex
Max 200/360 seconds (cold/warm weather)
Cloud Point * ASTM D2500 Report, °C
Copyright 2010Renewable Energy Group® 8
* Depends on feedstock
Multi-feedstock opportunities through enhanced production technologyenhanced production technology
• Animal fat biodiesel advantagesHi h t Test
Vegetable Oil Animal Fat
• Higher cetane
• Better oxidation stability
• Lower GHG emissions number by EPA
Test Oil Biodiesel Biodiesel
Cetane 47 – 49 51 – 58
O id ti t bilit 4 6 h 6 12 hEPA Oxidation stability 4 – 6 hr 6 – 12 hr
Sulfur 1 – 8 ppm 5 – 14 ppm
Cl d P i t 3 t 3°C 6 t 16 °C• Animal fat biodiesel disadvantages
Cloud Point -3 to 3°C 6 to 16 °C
• Benefits of multi-feedstock
• Higher cloud point
• Unique processing challenges—pretreatment & experience • Benefits of multi feedstock
biodiesel production • Economics• Supply assurance
required to exceed ASTM specifications
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• Properties not available with a single feedstock
B100 Cloud Points for REG-9000TMB100 Cloud Points for REG 9000
16
15
20
6 6
10
13
10
15
9000/10
12
6
0
5
9000/19000/5
-3 -3-5
Canola Inedible Corn Oil
Soybean Used Cooking Oil
Yellow Grease Poultry Fat Choice White Grease
Palm Beef Tallow
1
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Cloud Pt. (°C)
d l kCopyright 2010Renewable Energy Group® 11
Federal Market Drivers
Blenders Tax Credit UpdateBlenders Tax Credit Update• Federal Blenders Tax Credit supporting biodiesel expired
on December 31, 2009
• Continues to be bi-partisan support for legislation to be passed retroactively to January 1, 2010.
• Senate/House return to D.C. Sept. 13• House: 15 working days until elections
• Senate: 7 working days until elections
• Post November elections lame duck session if R’s elected into• Post-November elections lame duck session if R s elected into leadership
• Q1/Q2 of 2010, an estimated 190 million gallons of
Copyright 2010Renewable Energy Group®
Q /Q , gbiodiesel was produced/sold in the United States
12
RFS2 ImpactRFS2 Impact• Revised Renewable Fuels Standard requires 1.15 billion
ll f bi di l (2009 2010) t b d bgallons of biodiesel (2009 + 2010) to be consumed by obligated parties by end of 2010.
• Grows to 1.0 billion gallons annually by 2012
• Compared to the 350 million gallon market in• Compared to the 350 million gallon market in 2009
• Petroleum majors are the primaryPetroleum majors are the primary “obligated parties”
• Refiners, Refined Fuel Importers, and Reformulators
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Reformulators
RFS2 & RINsRFS2 & RINsPrimary Purpose: Incentivize Renewable Fuel Blending• Biodiesel producers generate RINs
• RINs are attached to “neat” biodiesel and remain attached until blended with diesel fuel or heating oilwith diesel fuel or heating oil
• Product Transfer Documents required
• May transfer zero to 2.5 RINs per gallon. Buyer and Producer must y p g yagree how many
• IRS blended = B99. EPA blended =B80B99 i NOT bl d d d t d RFS• B99 is NOT a blended product under RFS
• RINs must be attached.
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Renewable Fuel Identification Numbers (RINs) Overview(RINs) Overview• How do RINs work?
• RINs are attached to a batch of B100/B99 at biodiesel production facility and follow / p ythrough the supply chain (until fuel is blended to <B80)
• Every gallon of B100 produced, receives 1.5 RINs
– Other liquid renewable fuels could receive different numbers of RINs per neat gallon
– As an example, every gallon of ethanol from corn receives 1.0 RINs
• If an obligated party need additional RINs, biodiesel producers can attach additional RINs to B100/B99 gallons that have been refused by small to medium sized blenders
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How are RINs valued?How are RINs valued?• To an obligated party…
• RINs help them meet their EPA-regulated volume requirements
• Obligated parties can sell extra RINs to other obligated parties or purchase additional RINs from other biodiesel userspurchase additional RINs from other biodiesel users
• To a non-obligated party…• RINs values can be extracted by aggregating many RINs and• RINs values can be extracted by aggregating many RINs and
then selling them to an obligated party or broker
• If a petroleum blender does not want to take on the EPA paperwork of RINs, they can refuse them at the time of B100/B99 purchase
– For example: A mining customer could refuse RINs and receive a
Copyright 2010Renewable Energy Group®
For example: A mining customer could refuse RINs and receive a discount on their wholesale biodiesel purchase from REG
16
Historical Biodiesel RINs Values
0 6000
0.7000
Source: OPIS Biodiesel Mid-Range RIN prices
High $0.58 per RIN, or $0.87 per gallon
0.5000
0.6000 $ p g
0.3000
0.4000
0.1000
0.2000
0.0000
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OPIS Biodiesel RINS Mid
RINs Program ResourcesRINs Program ResourcesEPA’s RFS2 Jobber
Support Line
RIN Alliance(Jeff Hove)
RIN StarRinregister.compp
EMTS technical support
resources
h // /f l
( )
515.224.7545
1-866-433-7467
g
(575) 377-3369 – main
http://ww.epa.gov.otaq/fuels/renewablefuels/emtsht
ml/emtstutorials.htm
800-385-6164
(Monday thru Friday
9:00 AM to 5:00 PM ET)
(REG does not endorse third-party partners but can
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work with any commercial RIN partner)
kCopyright 2010Renewable Energy Group® 19
State Market Drivers
US Distillate Consumption by StateUS Distillate Consumption by State(000 gallons)
Copyright 2010Renewable Energy Group® 20
Biodiesel Industry Market Drivers 2010Biodiesel Industry Market Drivers 2010• State Incentives
Mi t B5 M d t ff ti M 1 t 2009• Minnesota B5 Mandate effective May 1st, 2009
• Illinois Tax abatement on B11 biodiesel blends 6.25%
• Iowa $0.03/gallon tax income tax credit on gallons including B2
• Oregon B2 Mandate effective July 2009g y
• Washington B2 Mandate effective December 2008
• Pennsylvania B2 mandate effective January 2010 for transportation fuel
• Massachusetts B2 mandate effective July 2011 for transportation fuel and heating oil
S th C li $0 25/ ll t il i ti B100• South Carolina $0.25/gallon retailer incentive on B100
• Texas $0.20/gallon tax abatement on B100
• New Mexico B5 mandate for state fleets effective July 2010, all diesel July 2012
• Hawaii Excise tax abatement of 25% on B100 gallons
• Louisiana B2 Mandate once 15 mgy of production capacity
• Provincial Incentives• Canada Manitoba (B2) and British Colombia (B3) effective January 2010
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AlabamaAlabama• Fleet Incentives
• Grants are available from the state of Alabama to cover up to $2,500 of the cost of cleaning existing fuel tanks in preparation for storing B20. Successful applicants will be required to provide B20 for a minimum of three years to provide information on the number of gallons of B20provide information on the number of gallons of B20 dispensed during that time period.
Copyright 2010Renewable Energy Group® 22Fleet
ArkansasArkansas• Infrastructure Incentives
• Alternative fuel distributors can receive up to $300,000 or 50% of the project cost, whichever is less, to assist with the distribution and storage of alternative fuels or alternative fuel mixtures atand storage of alternative fuels or alternative fuel mixtures at distribution facilities that are located and operated in Arkansas.
• Fleet Mandate
• All diesel-powered motor vehicles, light trucks, and equipment owned or leased by a state agency are required to operate using diesel fuel that contains a minimum of 2% biofuel by volumediesel fuel that contains a minimum of 2% biofuel by volume.
Copyright 2010Renewable Energy Group® 23Fleet Infrastructure
FloridaFlorida• Fleet Mandates
• All state agencies must use ethanol and biodiesel blended fuels when available.
Copyright 2010Renewable Energy Group® 24Fleet
KentuckyKentucky• Tax Incentive (Diesel)
• Qualified biodiesel producers or blenders are eligible for an income tax credit of $1.00 per gallon of pure biodiesel (B100) or renewable diesel produced or used in the blending process (B2 blend). Re-blending of blended biodiesel does not qualify The total amount of credit forbiodiesel does not qualify. The total amount of credit for all biodiesel producers may not exceed the annual biodiesel tax credit cap of $10 million.biodiesel tax credit cap of $10 million.
Copyright 2010Renewable Energy Group® 25Incentive
LouisianaLouisiana• State Mandate (Diesel)
• B2 required in all diesel fuel sold in the state one in-state biodiesel production reaches 10 million gallons per year
Copyright 2010Renewable Energy Group® 26Mandate
South CarolinaSouth Carolina• Tax Incentives (Diesel)
A $0 25 i ti t i il bl t bi di l t il f h ll f• A $0.25 incentive payment is available to biodiesel retailers for each gallon of pure biodiesel (B100) sold, provided that the resulting blends contain at least 2% biodiesel (B2). These incentives apply only to fuel sold before July 1 20121, 2012.
• Infrastructure Incentive
• A taxpayer that constructs, installs, and places into service a qualified commercial facility for distribution or dispensing of renewable fuels in the state is eligible for an income tax credit of up to 25% of the construction and installation costs.
• Fleet Mandates
• The South Carolina Department of Education is required to fuel state school bus fleets with biodiesel when feasible
Copyright 2010Renewable Energy Group®
bus fleets with biodiesel when feasible.
27Incentive Fleet Infrastructure
TennesseeTennessee• Infrastructure Incentives• The Tennessee State Energy Office offers grants to
county governments for the installation of biodiesel infrastructure including biodiesel tanks pumps and cardinfrastructure, including biodiesel tanks, pumps, and card readers, that can be used to provide biodiesel fuel for county and city owned vehicles.
• The Tennessee Department of Transportation (TDOT) engages in public-private partnerships with transportation f f f ffuel providers to install fueling facilities. Fueling facilities include storage tanks and fuel pumps dedicated to dispensing biofuels
Copyright 2010Renewable Energy Group®
dispensing biofuels.
28 Infrastructure
h kCopyright 2010Renewable Energy Group® 29
Other Market Drivers
Air Quality: Oppo t nities in Non Attainment A easOpportunities in Non-Attainment Areas
• Biodiesel is the only alternative fuel to voluntarily complete EPA Tier I and Tier II testing to quantify emission characteristics and health effectsTier II testing to quantify emission characteristics and health effects.
• Exhaust emissions of particulate matter from biodiesel are about 47 percent lower than overall particulate matter emissions from diesel.
• Source: 1 In May of 1998 the US Department of Energy (DOE) and US Department of Agriculture (USDA) published the• Source: 1 In May of 1998, the US Department of Energy (DOE) and US Department of Agriculture (USDA) published the results of the Biodiesel Lifecycle Inventory Study. This 3.5-year study followed US Environmental Protection Agency (EPA) and private industry approved protocols for conducting this type of research.
• Biodiesel emissions show dramatically decreased levels of polycyclic aromatic hydrocarbons (75 85%) and nitrated polycyclic aromatic hydrocarbons (90%hydrocarbons (75-85%) and nitrated polycyclic aromatic hydrocarbons (90% to trace levels), which have been identified as potential cancer causing compounds.
f f f f• As a result of the health benefits of biodiesel, some chapters of the American Lung Association have pledged their support for use of the alternative fuel.
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Biodiesel Industry Market Drivers 2010• ASTM D975 diesel specifications
Biodiesel Industry Market Drivers 2010
• Announced Oct. 2008
• Allows biodiesel to be blended with diesel fuel up to B5, with no labeling requiredlabeling required
• Greenhouse gas emission reduction goals• Greenhouse gas emission reduction goals• Low Carbon Fuel Standards (California, Mass., etc.)
• RFS2 GHG Emission Reduction ThresholdsRFS2 GHG Emission Reduction Thresholds
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Biodiesel Industry Market Drivers 2010• New Market Development
Biodiesel Industry Market Drivers 2010
• Heating Oil Market
• Power Generation
Mi i• Mining
• Government
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fCopyright 2010Renewable Energy Group® 33
Infrastructure
U.S. Diesel Terminal InfrastructureU.S. Diesel Terminal Infrastructure
Copyright 2010Renewable Energy Group® 34
Pipeline Downstream Injection ConceptPipeline Downstream Injection Concept• Objective: Participate in biodiesel supply
• Introduce biodiesel at downstream pipeline facilities• Introduce biodiesel at downstream pipeline facilities• Pursue injection-blending into outbound stublines/delivery lines
• Select locations with low potential for jet fuel trail-backSelect locations ith high shippe al e d e to• Select locations with high shipper value due to:
• Local mandates• Local incentives• Climate advantagesClimate advantages
• Allow for discretionary concentration selection by shippers (B2 to B20)P id l t f t t k t it f bli t d ti• Provide a low cost, fast track opportunity for obligated parties -an initial step in biodiesel participation until trail-back challenge is resolved
Copyright 2010Renewable Energy Group®
Southeast Pipeline OpportunitiesSoutheast Pipeline Opportunities
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l dCopyright 2010Renewable Energy Group® 37
Blending Economics
Current Biodiesel PricingCurrent Biodiesel Pricing
REG-9000-1 REG-9000-10 #2 ULSDFOB, IA FOB, IA Rack Chicago
$3.15 B100 $2.90 B100 $2.00 RINS Value = $.70-80/gallon
Copyright 2010Renewable Energy Group®
B5-B20 Current Blending EconomicsB5 B20 Current Blending Economics• B100 Pricing (REG 9000/10) =$2.90/gallon
• Biodiesel RINs Values (=$0.75/gallon)
• #2 ULSD Basis vs. NYMEX HO (=$0.10/gallon)
• Transportation Costs from Iowa =$0 25/gallon• Transportation Costs from Iowa =$0.25/gallon
• Net Delivered B100 Price =$2.30/gallon
• #2 ULSD = $2.00/gal
• B100 = $2.30/gal
• B5 = $2.015/gal
• B10 = $2.03/gal
• B20 = $2.06/gal
Copyright 2010Renewable Energy Group®
B20 $2.06/gal
39
d dCopyright 2010Renewable Energy Group® 40
REG Overview and Updates
A Complete Biodiesel SolutionA Complete Biodiesel Solution• Leading biodiesel company through vertical integration
• Feedstock Production, Research and DevelopmentF d t k E t ti d R fi i• Feedstock Extraction and Refining
• Conversion of Feedstock to Fuel• Fuel Sales and Marketing• Fuel Distribution and Logistics
C t S i d Ad i i t ti• Customer Service and Administration
• Industry Leadership• Began business in 1996• Tremendous growth opportunities across biodiesel value chain• Tremendous growth opportunities across biodiesel value chain• Experienced and best-in-class management team• Headquartered in Ames, Iowa with locations nationwide
• Redefining biodiesel quality• Redefining biodiesel quality • REG-9000TM biodiesel meets and exceeds industry quality specifications• Marketed through existing nationwide diesel infrastructure
Copyright 2010Renewable Energy Group®
41
REG Network of Biodiesel ProductionREG Network of Biodiesel ProductionLow
HighLow
HighLowLow
REG Houston35 MGY Startup: 08/2008
REG Newton30 MGY S 5/2007
REG Danville REG Ralston35 MGY, Startup: 08/2008
Seabrook, TX30 MGY, Startup: 5/2007
Newton, IA45 MGY, Startup: 11/2008
Danville, IL12 MGY, Startup: 3/2003
Ralston, IA
LowLow
High
Low
HighHighLow
REG Emporia60 MGY Startup: TBD
REG New Orleans60 MGY Startup: TBD
SoyMor Biodiesel30 MGY Startup: 8/2005
REG Seneca60 MGY Acquired: 04/2010 60 MGY, Startup: TBD
Emporia, KS60 MGY, Startup: TBD
Destrehan, LA
Low free fatty acid feedstock conversion
Low High High free fatty acid f d t k i
30 MGY, Startup: 8/2005Glenville, MN
60 MGY, Acquired: 04/2010Seneca, IL
Copyright 2010Renewable Energy Group®
feedstock conversion (soy, canola, refined fats)
feedstock conversion (fats, corn, waste greases)
42
REG Sales and MarketingREG Sales and Marketing • 2009: ~26% U.S. biodiesel consumption
S ld 94 illi ll i 2009 t l f 98 illi• Sold 94 million gallons in 2009, expect sales of >98 million gallons in 2010.
• Distribution through some of US’s leading terminal-operators (15+ locations)
• REG’s commercial scale facilities, production expertise and BQ-9000 Producer and Marketer status meet customers’ demands forProducer and Marketer status meet customers demands for consistent quality, quantity and supply assurance
• REG distribution advantages L i h h d• Lower transportation costs than other producers
• Long-term contracts and high volume allowed REG to negotiate advantageous turns
• In a tight market, REG established itself as a reliable supplier
Copyright 2010Renewable Energy Group® 43
• Current production capacity at 6 plants of >210 million gallons.
Supply Chain Management and Distribution & LogisticsDistribution & Logistics• Marketing via rail and truck in all 48 continental states across the
U S l H iiU.S. plus Hawaii
• REG has 18 terminal locations nationwide
• REG strategically locates plants and utilizes terminals which allow theREG strategically locates plants and utilizes terminals which allow the company to ship via rail, barge or deep water or store fuel for easy customer access
• REG manages customer demand and can produce fuel 24/7 as necessary at our network facilities.
Copyright 2010Renewable Energy Group® 44
National Infrastructure(Production & Terminals)(Production & Terminals)
Copyright 2010Renewable Energy Group® 45
Thank YouThank YouLarry Breeding
Bi di l S l M S th t R iBiodiesel Sale Manager, Southeast [email protected]
Gary HaerVice President, Sales and Marketing
Gary haer@regfuel [email protected]
Dave Slade, PhDDirector, Technical Services
Copyright 2010Renewable Energy Group® 46