Biofuels: Boom or Bust for Montana ProducersNovember 9, 2007

Biodiesel MarketByproducts MarketFeedstockSizeProcessProduction/Operation CostsConstruction CostsReturn on InvestmentRisks

Source: CARD, Iowa State University

0

100

200

300

400

500

600

700

800

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

million gallons

Scenario Baseline

One Million Gallon Plant (an example) Oils from restaurants and food processing Tallow from beef packing Oilseed crops▪ Canola▪ Safflower▪ Sunflower▪ Rapeseed▪ Mustard▪ Soybean▪ Camelina

Product Revenue Biodiesel $x.xx / gallon

Glycerin (fuel oil) .00 / lb.▪ 0.75 lbs. per gallon

Meal $120.00/ ton▪ .067 tons per gallon

Subsidy Revenue

Tax credit for small producers 0.10/gal.

Tax credit – State (MT) 0.10/gal.

Processing (assumptions) Feedstock, canola (+ handling & cleaning)▪ $0.151/pound

Crushing and filtering▪ $50 /ton

Methanol▪ $0.14/gallon of biodiesel

Catalyst▪ $0.08/gallon of biodiesel

Processing (assumptions) Neutralizer▪ $0.01/gallon of biodiesel

Natural gas/electricity▪ $0.02/gallon of biodiesel

Cost of plant operation (labor, maintenance, administration▪ $0.15/gallon of biodiesel

Assumptions Annual Production (million gallons)

Capital Cost/Gallon 0.5 $2.00

1.0 2.005.0 1.25

20.0 1.00

Important Fixed Costs

Depreciation (economic) and interest

▪ 10 years / 6 percent ------ $0.15 per gallon of biodiesel

What’s missing . . . Land Buildings Registration, licenses and certification Permits Utility installation Wastewater treatment Rail spur development

Revenue (1 million gallon/year plant)

Biodiesel $ 3,060,000 Glycerin 0 Meal 804,000

Total 3,864,000

Total with subsidies 4,064,000

Processing Costs Total processing 3,910,638

Capital costs Interest and depreciation

150,000

Total Costs 4,060,638 4.06/g

Net income (EBIT) 3,362

Producer

Production cost (net of meal revenue) 3.26

Producer profit 0.00

Small producer tax credit -0.10

State biodiesel production incentive -0.10

Transportation 0.08

Distributor purchase price 3.14

Distributor/Blender

Purchase price 3.14

Excise tax credit -1.00

Refund for taxes paid on biodiesel -0.02

Montana + federal tax 0.53

Freight 0.08

Blender profit 0.05

Retailer purchase price 2.78

Retailer

Purchase price 2.78

Refund for taxes paid on biodiesel -0.01

Retailer markup 0.12

Retail price 2.89

Sensitivity Analysis

0 0.100 0.125 0.150 0.175 0.2002.00 -0.04 -0.54 -1.04 -1.54 -2.032.50 0.46 -0.04 -0.54 -1.04 -1.533.00 0.96 0.46 -0.04 -0.54 -1.033.50 1.46 0.96 0.46 -0.04 -0.534.00 1.96 1.46 0.96 0.46 -0.03

Seed Cost ($/pound)

Biod

iese

l Pric

e ($

/gal

)

Oil supply

Crude oil prices Blending B100

Demand for biodiesel and byproducts

Distribution

Longevity of the Federal Excise Tax Credit

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