MGA Bioeconomy and Transportation Working Group Meeting May 11 & 12 Holiday Inn Minneapolis, MN

Agenda Review May 11, 2009 – Discussion of BTAG Policy Options Document – Discussion of roadmap – Review of draft scenarios using “Energy Choice” model

Agenda Review May 12, 2009 – Implementation discussions Federal Biomass Policy Low Carbon Fuels Standards Transportation Policy – Wrap up and next steps

Ground Rules It is your show Everyone is equal No relevant topic is excluded No discussion is ended Respect opinions Respect time Group decision-making No attribution

BTAG Policy Options Document

POD Objectives Raise any major barriers to consensus and resolve Discuss and resolve sticky issues already identified Reach agreement to lay the document aside and focus on implementation priorities, roadmap and scenario development.

1.1 Market Pull & Distribution Infrastructure Low carbon fuels definitions and vehicle technology language added throughout policy (multiple low carbon fuels and technology) Goals revised – Focus on low carbon fuels & technologies – Emphasis on biofuels, not a specific type of fuel – Steady ramp up of low carbon fuels goals Detail added to green retailers program as implementation mechanism

1.1 Market Pull & Distribution Infrastructure Issue to resolve-advocating for an ethanol blend increase – Language did exist to advocate for a blend increase from 10% to 15-20% – Some advisory group members expressed some discomfort with advocating for a blend increase – Some advisory group members strongly support advocating for a blend increase What should be the BTAG position? – Staff suggestion: Add language supporting EPA raising the blend level, but not specifying an amount. – If we negotiated a precise amount, what would people be willing to commit to?

1.2 Low Carbon Fuel Standard LCFS recommendations approved by MGA steering committee Discussion on LCFS implementation tomorrow

1.3 Increase Vehicle Fuel Efficiency Goal Revisions – Goal for on-road and off-road vehicle emissions reductions removed – Goals added to address vehicle fleet turnover Need to flesh out specifics Detail added to policy description and design Implementation mechanisms added under financial incentives, regulations and guidelines and legislation

1.3 Increase Vehicle Fuel Efficiency Implementation mechanisms added – Electric vehicle demonstration projects – “End of life” assistance/buyback program – Permit sale of high efficient vehicles from U.S. and non U.S. automakers not currently available in the market – Work with utilities to add EV component to “smart grid” plans – Provide price support/cost recovery for automakers during transition to more efficient vehicles – Support federal fleet modernization (aka “cash for clunkers”)

Fleet modernization General discussion on 2 conference calls about this issue, and several options exist: – “Cash for Clunkers” program to replace older vehicles – is this a state policy? Or are we supporting the federal bills? – State fleet modernization – support for modernizing state fleets with more fuel efficient vehicles. Is there support for adding language to the implementation section (not a new policy, just a new implementation strategy) of BT 1.3

2.1 Vehicle Miles/Demand Management Pricing Pay-as-you-drive – Provides incentives and removes regulatory barriers for auto insurance companies to institute a “pay-as-you-drive” (PAYD) system for policyholders. Goal revised – Assume market penetration of PAYD insurance of 15% in 2015 and 75% in 2025

2.1 Vehicles Miles/Demand Management Pricing Impact on rural drivers addressed – Brookings Institute Hamilton Project study PAYD premiums vary depending on other risk factors such as lower accident incidence in rural areas. Rates would also be relative to average driving patter for each local area Study concluded no adverse impacts on rural drivers

2.2 Expand Travel Choices Major changes – Content reorganized and detail added to policy design – Implementation mechanisms added for each mode MGA states commit to fully implement MWRRI Adequate governance and taxing authority by states for securing federal local transit funding Complete streets for bicycle and pedestrian expansion Goal – Increase transit ridership per capita 2% annual from

2.3 Transportation Infrastructure and Planning Goal revision – Reduce the number, frequency, and distance of trips made by driving, with the goal of a return to the per capita rate of driving of the early 1980’s. Progress to be measured as a reduction of VMT per capita by 40% from a 2005 baseline by 2050.

2.3 Transportation Infrastructure and Planning Overview of changes – Additional implementation mechanisms added and reworked – References to related programs/policies – Detail added to estimated GHG reductions and costs/savings section – Detail added to key uncertainties – Detail added to additional benefits and costs

2.4 Freight Transportation Goal revisions: – Reduce the GHG intensity per ton mile by 20% by – Remove bottlenecks that impede mode-shifting such as the CREATE project, shortages of dock space and technological improve to increase utilization.

2.4 Freight Transportation Overview of changes – Detail and content reorganized for implementation mechanisms Rail-infrastructure efficiencies State and local governments factor GHG emissions into purchasing decisions Maximize ARRA funding for freight electrification infrastructure River and lock improvements Long-term rail upgrade and modal movement

BT 3-Research & Technology Overall policy options ranked low during working group implementation priority setting in January. Staff added references to ARRA where appropriate. Simple text revisions completed, but no substantial edits.

BT 4-Biobased Products Overview of changes – Policy reviewed by Mike Bailey, Ohio Department of Agriculture Added implementation mechanisms consistent with OH Dept. of Agriculture process on biobased product development

5.1 Perennial Biomass Supply Summary of changes – Content streamlined and reorganized in policy description and design – Implementation mechanism focus is federal funding opportunities – Implementation mechanisms reorganized and streamlined – Additional related policies/programs added

5.2 Biomass Feedstock Supply Logistics Overview of changes – Content streamlined and reorganized in policy description and design – ARRA funding added to implementation mechanisms – Complementary federal programs added

BT 6-Wealth Creation and Jobs Overview of changes – Overall policy options ranked low during working group implementation priority setting in January – Opportunity for a cross-cutting issue group or rolling these recommendations into Governor Granholm’s Green Jobs initiative – Content reorganized and streamlined in policy description and design – References to ARRA added – Feedback from cluster members incorporated

Discussion of roadmap outline & Review of draft scenarios Liz Marshall, World Resources Institute Jane Ruliffson Objectives

Implementation Discussion Objectives – Review implementation strategy – Discuss potential participants

Federal Biomass Policy Key decision: Whether to recommend a strategy to steering committee Whether to recommend an MGA/NCBC partnership NCBC partnered on the LCFS work Other objectives: Review overall strategy Discuss other federal opportunities Discuss state-specific opportunities

Process Partnership w/ NCBC Stakeholders: – Electric utilities – Existing biomass projects Show Me Energy – Ag groups – NGOs – State Departments of Ag

Biomass goal Increase overall funding for Midwestern biomass projects Implement the goals laid out in the Policy Options Document

Biomass Crop Assistance Program Push for early pilot projects Push for program funding

Other federal programs Track other federal rule-makings on biomass programs and make recommendations as appropriate – Repowering Assistance and Biorefinergy Assistance from the 2008 Farm Bill; – The $800 million competitive grant program for biomass to fuel conversion authorized in the American Recovery and Reinvestment Act of 2009 for biomass related projects; and – The Agricultural Bioenergy Feedstock and Energy Efficiency Research and Extension Initiative in Title VII (Research) to improve biomass, production, biomass conversion in biorefineries, and biomass use. Provides grants of up to 50% of cost for energy efficient research and extension projects. Establishes a best practices database of biomass crops. Authorized appropriations of $50 million annually for FY [Sec. 7207]

State policy Make recommendations, as needed, on needed state policies to achieve BTAG goals in this area.

Low Carbon Fuels Standard Discussion Questions: Suggestions for participants from: Electricity Hydrogen Other advanced fuels Respond to our proposed emphasis: ILUC Fossil baseline

LCFS Background LCFS part of original Platform Year-long process in partnership with NCBC Final recommendation approved by LCFS Working Group in January 2009 Final recommendations approved by BTAG in January 2009 Final recommendations formally adopted by MGA Steering Committee in March 2009

What the governors agreed to Create a Regional Coordinating Body made up of regulatory agencies – this is the decision- making body for the process Create a Scientific and Technical Committee made up of stakeholders, which will make recommendations to the RCB

Process cont… RCB and STC will: – Develop design recommendations for a MW LCFS LCA rules Credits and Deficits Scope What fuels are included Etc. – Perform any research needed to develop a recommended policy – Coordinate with other regions and the federal government

What is unique about the Midwest, and why would this make our LCFS different? Biofuels Manufacturing economy Oil/Tar sands

Proposed emphasis 1.Recommendations for federal policies RFS rule – is there time? Waxman-Markey 2.Study how an LCFS would be met in the Midwest What would be the environmental and economic impacts? Is our mix of fuels the same or diff’t than CA? What unique risks/opportunities do we have? What is the baseline of petroleum use and emissions, and what efficiency-related improvements are possible? 3.Indirect Land Use Change What options exist beyond including ILUC in an LCA analysis for addressing international land use change Credit program? Offsets? 4. Final design recommendations Review of CA LCFS draft rule Areas of agreement and disagreement Focus on specific issues: Use of RINs system How will electricity and other advanced fuels be handled?

Providing Input to MGA Green Jobs Initiative Gary Yakimov, Corporation for a Skilled Workforce Objectives

Transportation Policy Goals: Implement that transportation policies and goals in the Policy Options Document Decision: Whether to continue to pursue something in this area, developing a more coherent idea and seeking funding to staff a project.

Collective regional policies Midwest Regional Rail Initiative CREATE

Policies benefiting region, requiring state action Pay-as-you-drive insurance: – State-by-state analysis of where this type of insurance is not allowed – Possible state-specific action to remove regulatory hurdles Transportation planning and infrastructure – How can states implement a comprehensive strategy to reduce VMT:

Wrap-up and Next Steps Reconvene 1.1 Review minor POD changes (BT2) Need to sign-off on BT 6 Resolve w/ other staff who is doing what with PHEV cross-cutting policy Input on scenarios as they are developed Input on roadmap as further drafts are developed Additional meeting???