Building the Biofuel Infrastructure Jess Hewitt President, Gulf Hydrocarbon Phone: "The U.S. Biodiesel Market, Trends, Drivers, & Threats" December 4-5, 2007 Hyatt Summerfield Suites

Gulf Hydrocarbon: Gulf Hydrocarbon: Biodiesel Marketing CompanyBiodiesel Marketing Company Private Company Started 1997Private Company Started Biodiesel Terminals:4 Biodiesel Terminals: Houston, Texas Houston, Texas Amarillo, Texas Amarillo, Texas Dallas, Texas Dallas, Texas Hammond, Indiana (Chicago) Hammond, Indiana (Chicago)

Production Locations January 2007 BQ-9000 Accredited Producers

500,000 2 Million US Biodiesel Demand Biodiesel Tax Incentive

Biodiesel Production Will Increase 65 additional biodiesel production facilities, 65 additional biodiesel production facilities, Adding 1.46 billion gallons/year of biodiesel production Adding 1.46 billion gallons/year of biodiesel production Almost 600% increase in Production Almost 600% increase in Production Possible Reinstatement of Bioenergy Program for subsidies for feedstock. Possible Reinstatement of Bioenergy Program for subsidies for feedstock.

Biodiesel Demand Drivers Tax Credit $1/gallon Renewed? Tax Credit $1/gallon Renewed? Export of Tax Credit Denied? Export of Tax Credit Denied? Imports of Biodiesel Continue to Qualify for $1/gallon Blender’s Credit Imports of Biodiesel Continue to Qualify for $1/gallon Blender’s Credit RINS: Biased to Biodiesel? RINS: Biased to Biodiesel? 2.5 credits for every gallons Biodiesel2.5 credits for every gallons Biodiesel

Biodiesel Demand Drivers Tax Credit $1/gallon Renewed? Tax Credit $1/gallon Renewed? Blenders tax credit expires December The Energy Title of the Farm Bill may contain an extension of the tax credit until 2010 (two year extension).

Biodiesel Demand Drivers Export of Tax Credit Denied? Export of Tax Credit Denied? Major issue. The Energy Advancement and Investment Act passed by the US Senate contained a denial of the tax credit for biodiesel removed from the USA. Biodiesel and Soybean industry groups are petitioning to keep the credit for exports of “domestic biodiesel.” Export of tax credit is difficult to justify to public and Congress.

Biodiesel Demand Drivers Imports of Biodiesel Continue to Qualify for $1/gallon Blender’s Credit Imports of Biodiesel Continue to Qualify for $1/gallon Blender’s Credit Domestic Producers are asking for removal of the $1 credit for foreign made biodiesel but odds are that Congress will not address any exclusions for biodiesel imported into the USA. Look for this credit to keep being applied to foreign made biodiesel.

Biodiesel Demand Drivers RINS: Biased to Biodiesel? RINS: Biased to Biodiesel? 1.5 credits for every gallons Biodiesel1.5 credits for every gallons Biodiesel Biodiesel producers are asking for a specific set aside in the Renewable Fuel Standard (RFS) of the Energy Bill, called the Alternative Diesel Standard. Look for NO CHANGE on the RFS for biodiesel as it already receives an advantage on RINS of 1.5 for biodiesel versus 1.0 for ethanol.

Current Infrastructure About 1,800 petroleum distributors now About 1,800 petroleum distributors now offer biodiesel More than 1,000 retail locations More than 1,000 retail locations Half are truck stops or truck accessible locations (biotrucker.com) Half are truck stops or truck accessible locations (biotrucker.com) 37 terminals 37 terminals

Infrastructure Must Expand Must add more than 150 biodiesel terminals: Must add more than 150 biodiesel terminals: 8.0 Million Gallons/Yr per Terminal8.0 Million Gallons/Yr per Terminal Investment $350,000+ per TerminalInvestment $350,000+ per Terminal Minimum Investment is $50 Million Minimum Investment is $50 Million

Gulf Hydrocarbon Focus Petroleum Terminals: Petroleum Terminals: Add Biodiesel and Ethanol to boost utilization and encourage more demand of petroleum products.Add Biodiesel and Ethanol to boost utilization and encourage more demand of petroleum products. Terminal value increases dramaticallyTerminal value increases dramatically

Boost Diesel Demand with Biodiesel? Biodiesel is only 5-20% of total diesel fuel sales Biodiesel is only 5-20% of total diesel fuel sales Diesel Demand increases as terminal is local source of Biodiesel Blends Diesel Demand increases as terminal is local source of Biodiesel Blends Diesel fuel sales increase with every Biodiesel Blend Diesel fuel sales increase with every Biodiesel Blend Therefore Biodiesel Creates Diesel Demand Therefore Biodiesel Creates Diesel Demand

Case Study: Shut Down Terminal Petroleum Terminal Petroleum Terminal Houston, Texas Houston, Texas 160,000 Barrels Jet/Diesel Storage 160,000 Barrels Jet/Diesel Storage Teppco and Magellan Pipelines Teppco and Magellan Pipelines 3 Bay Truck Rack 3 Bay Truck Rack

Petroleum Terminal

Gulf Hydrocarbon Solution Add Biodiesel to Terminal Add Biodiesel to Terminal 10 MB Tank, Dispense at the Rack10 MB Tank, Dispense at the Rack Add Biodiesel Blend CustomersAdd Biodiesel Blend Customers Add Municipal Customer (B10)Add Municipal Customer (B10) Add Petroleum Distributor (LSD)Add Petroleum Distributor (LSD) Total Cost: Greater than $300,000 Total Cost: Greater than $300,000

Results Terminal Sales Increase: Terminal Sales Increase: Biodiesel Deliveries: 4-8 MGYBiodiesel Deliveries: 4-8 MGY Diesel Fuel Deliveries: MGYDiesel Fuel Deliveries: MGY

Case Study: Underutilized Terminal Vegetable/Chemical Terminal Vegetable/Chemical Terminal Hammond, Indiana Hammond, Indiana Excess Capacity Available Excess Capacity Available No truck rack No truck rack No Petroleum on Site No Petroleum on Site

Vegetable Oil Terminal

Gulf Hydrocarbon Solution Add Metered Loading System Add Metered Loading System Petroleum Style Loading SystemPetroleum Style Loading System Add 24/7 Personnel Add 24/7 Personnel Total Cost Less Than $100,000 Total Cost Less Than $100,000

Tank 126,000 Gallons

Petroleum-Style Loading System

Results Terminal Sales Increase: Terminal Sales Increase: Biodiesel Deliveries: 8 MGYBiodiesel Deliveries: 8 MGY

Gulf Hydrocarbon Locate Petroleum and other Terminals for Biodiesel Expansion Locate Petroleum and other Terminals for Biodiesel Expansion Locations in Major Metropolitan AreasLocations in Major Metropolitan Areas Proximity to Pipelines/BargeProximity to Pipelines/Barge In need of Sales BoostIn need of Sales Boost

Building the Biodiesel Infrastructure Direct the nearly 2 billion gallons per year into terminals for distribution Direct the nearly 2 billion gallons per year into terminals for distribution Utilize governmental assistance for adding biofuel infrastructure Utilize governmental assistance for adding biofuel infrastructure Creates a new “green” distribution system that can accommodate future growth of renewable fuels Creates a new “green” distribution system that can accommodate future growth of renewable fuels

For More Information Jess Hewitt Gulf Hydrocarbon Phone: