1. California Transportation Fuel Trends in Historical Demand Joint Lead Commissioner Workshop on Transportation Energy Demand Forecasts June 24, 2015 Gordon Schremp Energy Assessments Division California Energy Commission

2. Presentation Overview California transportation fuel production and distribution infrastructure – key elements Refineries Marine facilities Rail logistics Pipelines Distribution terminals Retail stations Regional fuels markets West Coast Examples of other export and import regions of the United States California historical transportation fuel demand Gasoline Diesel fuel Renewable fuels 6/24/2015 California Energy Commission 2

3. Transportation Fuel Infrastructure Overview California Energy Commission 6/24/20153

4. Fuel Infrastructure – Key Elements The California transportation fuel “infrastructure” consists of several interconnected assets operated by a combination of refiner and third-party companies: Refineries Marine facilities Rail logistics Pipelines Distribution terminals Retail stations Crude oil and petroleum product infrastructure assets separate and distinct from one another – not interchangeable Unlike electricity distribution system, Northern California is not directly connected to Southern California 6/24/2015 California Energy Commission 4

5. Key Elements - Refineries 3 primary refinery locations 12 refineries produce transportation fuels that meet California standards. 8 smaller refineries produce asphalt and other petroleum products. California refineries provide majority of transportation fuel to neighboring states. Process over 1.6 million barrels per day of crude oil 6/24/2015 California Energy Commission 5

6. Key Elements - Refineries Refineries primary hub of logistical activity Raw materials imported and finished products shipped Crude oil receipts during 2014 received by Marine vessels (foreign) - 787.1 TBD Marine vessels (Alaska) – 190.5 TBD California source via pipelines – 664.8 TBD Rail/truck – 15.7 TBD Process units operate continuously at or near maximum capacity, except during periods of planned maintenance or unplanned outages. 6/24/2015 California Energy Commission 6 TBD = Thousands of Barrels Per Day Valero Benicia refinery

7. Key Elements – Marine Facilities Marine facilities located in sheltered harbors with adequate draught to accommodate typical sizes of petroleum product tankers and crude oil vessels. Wharves usually have adjacent storage tanks that are used to temporarily hold petroleum products prior to transfer to a subsequent location. Most refiners operate a proprietary dock. Third party storage provides access to majors and independents. Kinder Morgan Pacific Atlantic NuStar Petro-Diamond 6/24/2015 California Energy Commission 7

8. Key Elements - Rail Logistics Refiners use rail cars to routinely ship propane and seasonally send out and receive butane. Rail cars are also used to deliver refinery feedstock such as gas oils and sulfuric acid for alkylation units. More recently, California refiners have started using rail cars to import crude oil from Canada and domestic sources outside the state due to changing trends of increasing oil production and discounted prices. 6/24/2015 California Energy Commission 8

9. Key Elements – Pipelines Pipelines used throughout the distribution infrastructure to interconnect key elements Intra-state pipelines used to convey petroleum products within California’s borders to distribution terminals Interstate pipelines used to export transportation fuels to Arizona and Nevada NV – Over 90% of supply AZ – Over 50% of supply Like refineries, pipeline systems normally operate on a continuous basis. Pipelines can only operate if transportation fuels are available to push liquid through the system. 6/24/2015 California Energy Commission 9

10. Key Elements - Pipelines (cont) The pipeline infrastructure in California is controlled by a combination of common carrier and private companies. Kinder Morgan is the sole common carrier of petroleum product pipelines in the State and transports the majority of fuels through its system every day. Other companies, such as Chevron, ExxonMobil, Shell, and Tesoro operate proprietary systems or segments that handle the balance of transportation fuels. 6/24/2015 California Energy Commission 10 Kinder Morgan northern system

11. Key Elements – Distribution Terminals Output from the refineries is usually placed in intermediate tanks prior to blending the finished products. The majority of gasoline, diesel and jet fuel is shipped from the refinery by pipeline to over 60 distribution terminals. Tanker trucks then transport fuel to retail & non-retail stations. Several truck trips during 2014: Gasoline – 40.28 MM gal/day 5,035 tanker deliveries/day Diesel fuel – 9.68 MM gal/day 1,210 tanker deliveries/day 6/24/2015 California Energy Commission 11

12. Key Elements – Retail Stations Consumers obtain transportation fuels mainly from retail locations accessible to the public, along with card-lock facilities that require membership. Approximately 10,000 locations available during 2012. Projections based on Energy Commission’s annual A15 survey Monthly sales can vary significantly by location Statewide average of 120,718 gallons per month per location Example below from SF Bay Area counties illustrates that hyper-marts can average over 12 times higher volumes per location 6/24/2015 California Energy Commission 12

13. Regional Fuel Markets California Energy Commission 6/24/201513

14. Western States More Isolated than Rest of U.S. California Energy Commission 6/24/201514 Significant unplanned refinery outages can create price spikes due to isolated market.

15. California Fuels Market is Balanced California is nearly self-sufficient Marine imports normally account for less than 5 percent of gasoline supply Primary sources of transportation fuels originate from inside the state Other regions of the United States vary significantly compared to California Price spikes following significant unplanned refinery outages less common 6/24/2015 California Energy Commission 15 Large net exporting region Large net importing region

16. California Historical Transportation Fuel Demand California Energy Commission 6/24/201516 First Anaheim service station - 1920 Mobil station attendant - 1925

17. Long-term California Gasoline Consumption California Energy Commission 6/24/201517 Gasoline demand rebound following 2008 recession lagged that of diesel fuel due to slower job recovery.

18. Near-term Gasoline & Renewable Demand 14.70 billion gallons of finished gasoline consumed in 2014. Base gasoline demand down 12.43 percent between 2003 and 2014 Ethanol use increasing due to Renewable Fuel Standard Ethanol use up to 1.48 billion gallons during 2014 151 percent increase since 2003 Ethanol accounted for 10.06 percent of total gasoline gallon during 2014 Due to 11.1 MM gallons of E85 use during 2014 6/24/2015 California Energy Commission 18

19. Improving Efficiency of Calif. Gasoline Use California Energy Commission 6/24/201519

20. Long-term California Diesel Fuel Consumption California Energy Commission 6/24/201520

21. Near-term Diesel and Renewable Demand 3.53 billion gallons diesel consumed during 2014. Base diesel fuel demand up 2.33 percent between 2003 and 2014. Biodiesel use increasing due to Renewable Fuel Standard and the Low Carbon Fuel Standard (LCFS.) 57 MM gallons during 2014 Renewable diesel fuel use up to 105 MM gallons during 2014 due to LCFS. Combined renewable component accounted for 4.6 percent of total diesel gallon during 2014. 6/24/2015 California Energy Commission 21

22. Questions? California Energy Commission 6/24/201522