1. D3 Cellulosic Fuels 10th FELC Jim Ramm, PE
9/26/2016
D3 Cellulosic Fuels 10th FELC Jim Ramm, PE

3. RIN 101 Introducing the Renewable Fuel Standard
9/26/2016
RIN 101 Introducing the Renewable Fuel Standard
D-Codes
RVOs
Q-RIN

4. Fuel Categories & D Codes
9/26/2016
Fuel Categories & D Codes
D3 & D7
D4 & D5 D6
Cellulosic ethanol, cellulosic diesel, renewable CNG/LNG/electricity,
Corn ethanol, other grandfathered biofuels
Sugarcane ethanol, Renewable diesel, biodiesel

5. Renewable Volume Obligations (RVOs) Are “Nested
9/26/2016
Renewable Volume Obligations (RVOs) Are “Nested
Renewable Volume Obligations (RVOs) Are “Nested”
Fuel Type
RIN Used to Prove Compliance
2018 RVO (BG)
Cellulosic Biofuel
D3 , D7
0.238
Biomass Based Diesel
D4, D7
2.10
Remaining Advanced Biofuel
D3, D4, D5, D7
1.902
Sub Total 2018 RVO
4.24
Remaining Renewable Fuel
D3, D4, D5, D6, D7
15.00
Total 2018 RVO
19.24 D3 D4 D5 D6

6. Current RVO Schedule (BGY)
Year
Cellulosic Fuels
Biomass-based Diesel
Advanced Biofuels
Renewable Fuel
Total
D Code
D3, D7
D4, D7
D3, D7, D4, D5
D3, D7, D4, D5, D6
2014
0.033
1.63
2.67
13.61
16.28
2015
0.123
1.73
2.88
14.05
16.93
2016
0.230
1.90
3.61
14.50
18.11
2017
0.311
2.00
4.28
15.00
19.28
2018
0.238
2.10
4.24
19.24
2019
tbd 13
28.00
2020 15
30.00
2021 18
33.00
2022 21
36.00
EPA has authority to re-set annual RVOs

7. Document Review: Purchases, Sales, RINs
Q-RIN Requirements
Document Review: Purchases, Sales, RINs
Facility Mass Balance
RFS Records
The Quality Assurance Program (QAP) is a Voluntary audit program for RIN generators
Put into place after widespread RIN fraud destabilized RIN markets.
Auditors must receive annual approval by EPA and meet strict independence criteria
Benefits:
RINs receive a “Q-RIN” tag in EMTS
Obligated parties who utilize Q-RINs for their compliance obligation receive an affirmative defense against notices of violation.

8. Market Valuation of Energy Credits
9/26/2016
Market Valuation of Energy Credits
RIN Pricing
Cellulosic Waiver Credits

9. D4 is the Marginal Compliance Cost for the D6 Mandate
RIN Values are Being Led by D6 Demand & D4 prices
Key drivers of D4 RIN prices: feedstock prices, diesel prices, and $1 blenders tax credit.

10. RIN Pricing History

11. Examples of Political Uncertainty, Rumors
EVENTS 1
Donald Trump elected President 2
2017 D6 RVO is set higher than expected 3
Rumors of a deal changing the point of obligation 4
Regulatory freeze ends with 2017 RVO unchanged 5
Proposed 2018 RVO released 6
US Appeals court strikes down 2016 RVO, rules against EPA

12. Supply-Demand Dynamics Plus Regulatory Uncertainty Drive Volatility
Advanced biofuel & biomass based diesel RVO’S
Pace of biofuel production vs. mandate
Availability of banked carry-over RINs from previous year - can be used for up to 20% of current year obligation
Other temporary shifts in supply-demand
Regulatory uncertainty - when the EPA publishes its proposed and final RVOs
Perceptions of fraud
Political events

13. Uncertainty Is the New Certainty
NEARLY 42,500 COMMENTS FILED ON 2017 RFS PROPOSAL
Will EPA increase RVO for conventional biofuel to statutory levels?
What will be advanced biofuels RVO?
Will there be a market for E15 and flex fuels?
Will the program will be amended under the current administration?
Will the point of obligation change?
Will biodiesel imports be treated equal to domestic production (IRS, Commerce Dept.)

14. Cellulosic Waiver Credit
WHAT IS THE CELLULOSIC WAIVER CREDIT?
Cellulosic fuels not produced in sufficient amounts to satisfy statutory requirements.
EPA reduces the statutory requirements for cellulosic biofuels to set annual standards.
EPA sells “cellulosic waiver credits” (CWCs) as alternative to RINs to meet the reduced cellulosic biofuel standard.
CWCs are purchased by obligated parties at prices set by the EPA.

15. Cellulosic Waiver Credit
PRICE CALCULATIONS
The price of a CWC is the GREATER of
$0.25 or
$3.00 minus the wholesale price1 of gasoline (most recent 12 months),where both the $0.25 and $3.00 are adjusted for inflation.
Description
Formula
2017 Calculation
$0.25 (Inflation Adjusted)
$0.25*Inflation Adjustment for Year = CWC Price
$0.25*1.142 = $0.29
$3 – Wholesale Price of Gasoline (Inflation Adjusted)
($3.00* Inflation Adjustment for Year) – Wholesale price of Gasoline = CWC Price
($3.00*1.142)-$1.423 = $2.001
CWC Price for Year
Larger of the two values is selected, rounded to the nearest cent
$2.00
1www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=EMA_EPM0_PBR_NUS_DPG&f=M.

16. Pricing a D3 RIN DEPENDS ON D5, CWC AND A REASONABLE DISCOUNT
Theoretical floor = D5 RIN
Theoretical ceiling = D5 + CWC
Actual is somewhere in between…
Year
Average D5 RIN Value
CWC Value
D3 Floor Price
D3 Ceiling
D5 + 80% of CWC
Actual quotes
2015
$0.711
$0.64
$1.35
$1.22
$1.25
2016 (YTD June 30)
$0.778
$1.33
$2.11
$1.84
$1.90
2017 (estimate)
$0.975
$2.00
$2.975
$2.58
$2.60

17. 9/26/2016
Biogas
Biogas Background
Biogas End Use
Biogas Opportunities

18. Methane From Biogas is Renewable Natural Gas (RNG)
Anaerobic Digester
Digestate
RNG
Biogas
Slurry & Manure
Food & Amenity Waste
Crops & Residues
Heat
Power
Gas Grid
Transport Fuel

19. Evolution of Biogas Uses
Raw to moderately upgraded
Pipeline quality

20. Carbon Credits Add Significant Value to RNG
One MMBTU of Pipeline Quality Biogas Produced in the Midwest and Used for Transportation in California
Value of Gas
$3.00 9%
Value of Federal Credits (RINs)
$22.20
69%
Value of California Credits (LCFS)
$6.85
21%
Total
$32.05
100%

21. Feedstock Determines D Code
D5 RIN
D3 RIN
END USE OPTION 1
END USE OPTION 2
END USE
OPTION 3
OPTION 4
Picture source:

22. Kernel Fiber Evaluating Kernel Fiber under LCFS
9/26/2016
Kernel Fiber
Evaluating Kernel Fiber under LCFS
Value of Kernel Fiber Ethanol
RFS Pathways 2

23. Evaluating Kernel Fiber Ethanol CI- For CA LCFS
No iLUC (Indirect Land Use Change, 19.8 gCO2e/MJ for Corn Ethanol)
No Corn farming and transportation burden
Generally speaking, the CI is in the range of gCO2e/MJ
Exact CI depends on the specific facility and specific technology selected

24. RFS Pathways 2 New Cellulosic Pathways: D3 Kernel Fiber Co-Processing
D3 Kernel Fiber Separate Processing
D3 Biogas from Wastewater Treatment Plant, Landfills, and Manure Digesters and D5 Biogas from digestion of other wastes
D3 electric vehicle RINs from landfill gas

25. Approved Pathways Under RFS
Fuel Type
Feedstock Type
Production Process
D Code
Cellulosic Ethanol (60)
Cellulosic Biomass – Agricultural Residues (70)
Cellulosic Production Process (280) 3
Renewable Compressed Natural Gas, Renewable Liquefied Natural Gas, and Renewable Electricity
Biogas from waste digesters
Any 5
Renewable Compressed Natural Gas, Renewable Liquefied Natural Gas, Renewable Electricity
Biogas from landfills, municipal wastewater treatment facility digesters, agricultural digesters, and separated MSW digesters; and biogas from the cellulosic components of biomass processed in other waste digesters

26. RFS Pathways 2 CELLULOSIC HYDROLYSIS MECHANICAL SEPARATION CELLULLOSIC
MIXTURE OF CELLULOSIC
& NON CELLULLOSIC
FEED STOCK
NON CELLULLOSIC
CELLULLOSIC
DERIVED SUGARS
& NON CELLULLOSIC DERIVED BIO FUEL
RESIDUAL SOLIDS
CELLULOSIC
HYDROLYSIS
MECHANICAL
SEPARATION
NON-CELLULOSIC
FERMENTATION
SEPARATIONS
& REFINING

27. RFS Pathways 2
Best practices to separate adhering starch in order to be considered a de minimus contaminant and qualify as crop residue
Separate hydrolysis of kernel fiber
Mass balance determination of cellulosic ethanol gallons from reasonably accurate feedstock and process data

28. Simultaneous Or In-situ Biochemical Processing
Simplified schematic of a biochemical process with in-situ hydrolysis
MIXTURE OF CELLULOSIC
& NON CELLULOSIC
DERIVED BIO FUEL
MIXTURE OF CELLULOSIC
& NON CELLULLOSIC
FEED STOCK
HYDROLYSIS
DERIVED SUGARS
FERMENTATION
SEPARATION
& REFINING
RESIDUAL
SOLIDS

29. RFS Pathways 2 Registration Requirements:
Process diagram; description of the treatment process; description of pre-treatment; third party engineer verification
Peer Review of Non-VCSB laboratory methods
Initial converted fraction based on a minimum of 3 batch trials
Initial converted fraction must be submitted with the registration and remains valid for first 500,000 gallons
The overall fuel yield including supporting data and a discussion of possible variability
The cellulosic converted fraction including supporting data and a discussion of variability
A description of how the cellulosic converted fraction is determined

30. RF Pathways 2
SIMULTANEOUS OR IN-SITU BIOCHEMICAL PROCESSING

31. RFS Pathways 2 Ongoing Requirements:
Cellulosic converted fraction must be recalculated and reported within 10 business days of every 500,000 gallons of cellulosic RINs generated
For deviations in converted fraction over 10%, the Producer must notify EPA and adjust RIN Gen within 5 business days

32. IN-SITU vs. Separate Processing
Comparison Category
In-Situ Processing
Separate Processing
D3 Pathway Available
Yes
D3 Ethanol Lift
1-3%
7-10%
Capital Cost
0 – 300K$
10-20M$
Implementation Time
3 months to 6 months
12 – 18 months
System Requirements
Optional enhanced milling technology, Cellulase Enzyme, measurement of Converted Fraction of Cellulase and Starch
Best practices for starch separation, Separate Hydrolysis, mass balance based on reasonably accurate feedstock and process data, Cellulase Enzyme
Registration Requirements
Process diagram; process description; Peer Review of Non-VCSB lab methods; Initial converted fraction for first 500,000 gallons of D3 production; overall fuel yield; cellulosic converted fraction; methods for determining cellulosic converted fraction; 3rd party engineering review and registration update
Process diagram; process description; measurement of D3 gallons; mass balance method; 3rd party engineering review at substantial completion and registration update
Recalculation Requirements
Sampling, analysis, and calculation of Cellulosic converted fraction must be performed every 500,000 gallons NA
Record Keeping Requirements
5 year requirement to retain laboratory results and duplicate samples
D3 Volume Measurements, Mass balance, D3 ledger