1. Biodiesel Opportunities in the Southeast
Presented by Renewable Energy Group®
Wednesday, Sept. 1, 2010
W d d S t 1 416 S. Bell Ave.
S B ll A
Ames, IA 50010
Dial In: 866-921-2204; *1728675* Please mute your line. 888-REG-8686
www.regfuel.com

2. Today s
Today’s Agenda
• Biodiesel 201 • Infrastructure
• Federal Drivers • Blending Economics
• State Drivers • REG Overview
• Other Market Drivers • Q&A
Dave Slade, Ph.D Gary Haer Larry Breeding
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3. Biodiesel 301
d l
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4. What is biodiesel?
• Biodiesel is methyl esters made from biological oils and
fats (triglycerides) by transesterification
Methanol Methyl ester
Methanol Triglyceride Methyl ester
Methanol Methyl t
M th l ester
Raw materials Products
Transesterification reaction
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5. Methyl stearate
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6. Methyl linoleate
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7. Feedstock and fuel quality
• Biodiesel can be made from:
• Vegetable oils (soy, canola, corn, etc.)
(soy canola corn etc )
• Animal fats (pork, beef tallow, poultry)
• Used oils (used cooking oil, yellow grease)
( g y g )
• Production skill not feedstock, determines biodiesel quality
skill, feedstock
• Feedstock mix determines methyl ester profile and color
• Fatty acid profile only affects a few properties:
• Cloud point Determined by the
• Density & viscosity fatty acid profile of
• Cetane number the feedstock mix
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8. BQ 9000
BQ-9000 Critical Specifications
Free Glycerin ASTM D6584 Max 0.020% mass
Total Glycerin ASTM D6584 Max 0.240% mass
0 240%
Flash Point [Methanol] ASTM D93 Min 130 °C [Max 0.2% methanol]
Acid Number ASTM D664 Max 0.50 mg KOH/g
Water & Sediment ASTM D2709 Max 0.050% volume
Visual Appearance ASTM D4176 Max 2
Oxidative Stability EN 14112 Min 3.0 hr
Sulfur ASTM D5453 Max 15 ppm
Cold Soak Filtration ASTM D6751 Max 200/360 seconds
Annex (cold/warm weather)
Cloud Point * ASTM D2500 Report, °C
* Depends on feedstock
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9. Multi-feedstock opportunities through
enhanced production technology
• Animal fat biodiesel advantages Vegetable
Animal Fat
Test Oil
• Hi h cetane
Higher t Biodiesel
Biodiesel
• Better oxidation stability Cetane 47 – 49 51 – 58
• Lower GHG emissions number by
EPA Oxidation t bilit
O id ti stability 4 – 6 hr
h 6 – 12 hr
h
Sulfur 1 – 8 ppm 5 – 14 ppm
• Animal fat biodiesel disadvantages
Cloud P i t
Cl d Point -3 to 3°C
3t 6 to 16 °C
t
• Higher cloud point
• Unique processing challenges—
pretreatment & experience
required to exceed ASTM
• Benefits of multi-feedstock
multi feedstock
specifications biodiesel production
• Economics
• Supply assurance
• Properties not available with a
single feedstock
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10. B100 Cloud Points for REG 9000TM
REG-9000
20
16
15
13
10
9000/10
10
6 6
9000/5 9000/1
5
2
1
0
1
-3 -3
-5
Canola Inedible Corn Soybean Used Cooking Yellow Grease Poultry Fat Choice White Palm Beef Tallow
Oil Oil Grease
Cloud Pt. (°C)
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11. Federal Market Drivers
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12. Blenders Tax Credit Update
• Federal Blenders Tax Credit supporting biodiesel expired
on December 31, 2009
• Continues to be bi-partisan support for legislation to be
passed retroactively to January 1, 2010.
• Senate/House return to D.C. Sept. 13
• House: 15 working days until elections
• Senate: 7 working days until elections
• Post November elections lame duck session if R’s elected into
Post-November Rs
leadership
• Q1/Q2 of 2010, an estimated 190 million gallons of
Q /Q , g
biodiesel was produced/sold in the United States
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13. RFS2 Impact
• Revised Renewable Fuels Standard requires 1.15 billion
gallons of biodiesel (2009 + 2010) to be consumed by
ll f bi di l t b db
obligated parties by end of 2010.
• Grows to 1.0 billion gallons annually by
2012
• Compared to the 350 million gallon market in
2009
• Petroleum majors are the primary
“obligated parties”
• Refiners, Refined Fuel Importers, and
Reformulators
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14. RFS2 & RINs
Primary Purpose: Incentivize Renewable Fuel Blending
• Biodiesel producers generate RINs
• RINs are attached to “neat” biodiesel and remain attached until blended
with diesel fuel or heating oil
• Product Transfer Documents required
• May transfer zero to 2.5 RINs p gallon. Buyer and Producer must
y per g y
agree how many
• IRS blended = B99. EPA blended =B80
• B99 is NOT a blended product under RFS
i bl d d d t d
• RINs must be attached.
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15. Renewable Fuel Identification Numbers
(RINs) Overview
• How do RINs work?
• RINs are attached to a batch of B100/B99 at biodiesel p
/ production facility and follow
y
through the supply chain (until fuel is blended to <B80)
• Every gallon of B100 produced, receives 1.5 RINs
– Other liquid renewable fuels could receive different numbers of RINs per neat gallon
– As an example, every gallon of ethanol from corn receives 1.0 RINs
• If an obligated party need additional RINs, biodiesel producers can attach additional
RINs to B100/B99 gallons that have been refused by small to medium sized blenders
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16. How are RINs valued?
• To an obligated party…
• RINs help them meet their EPA-regulated volume requirements
• Obligated parties can sell extra RINs to other obligated parties or
purchase additional RINs from other biodiesel users
• To a non-obligated party…
• RINs values can be extracted by aggregating many RINs and
then selling them to an obligated party or broker
• If a petroleum blender does not want to take on the EPA
paperwork of RINs, they can refuse them at the time of B100/B99
purchase
– For example: A mining customer could refuse RINs and receive a
discount on their wholesale biodiesel purchase from REG
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17. Historical Biodiesel RINs Values
Source: OPIS Biodiesel Mid-Range RIN prices
0.7000
High $0.58 per RIN, or
0.6000
0 6000 $
$0.87 per g
p gallon
0.5000
0.4000
0.3000
0.2000
0.1000
0.0000
OPIS Biodiesel RINS Mid
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18. RINs Program Resources
EPA’s RFS2 Jobber RIN Alliance RIN Star
Support Line
pp (
(Jeff Hove)
) Rinregister.com
g
515.224.7545 (575) 377-3369 – main
EMTS technical support 1-866-433-7467 cem@cfch.com
resources info@RINalliance.com
http://ww.epa.gov.otaq/fuel
h // /f l
s/renewablefuels/emtsht
ml/emtstutorials.htm
800-385-6164
(Monday thru Friday
9:00 AM to 5:00 PM ET)
(REG does not endorse third-party partners but can
work with any commercial RIN partner)
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19. State Market Drivers
k
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20. US Distillate Consumption by State
(000 gallons)
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21. Biodiesel Industry Market Drivers 2010
• State Incentives
• Mi
Minnesota
t B5 M d t effective M 1st, 2009
Mandate ff ti May t
• Illinois Tax abatement on B11 biodiesel blends 6.25%
• Iowa $0.03/gallon tax income tax credit on gallons including B2
• Oregon
g B2 Mandate effective July 2009
y
• Washington B2 Mandate effective December 2008
• Pennsylvania B2 mandate effective January 2010 for transportation fuel
• Massachusetts B2 mandate effective July 2011 for transportation fuel and heating oil
• S th C li
South Carolina $0.25/gallon t il i
$0 25/ ll retailer incentive on B100
ti
• Texas $0.20/gallon tax abatement on B100
• New Mexico B5 mandate for state fleets effective July 2010, all diesel July 2012
• Hawaii Excise tax abatement of 25% on B100 gallons
• Louisiana B2 Mandate once 15 mgy of production capacity
• Provincial Incentives
• Canada Manitoba (B2) and British Colombia (B3) effective January 2010
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22. Alabama
• Fleet Incentives
• Grants are available from the state of Alabama to cover
up to $2,500 of the cost of cleaning existing fuel tanks in
preparation for storing B20. Successful applicants will be
required to provide B20 for a minimum of three years to
provide information on the number of gallons of B20
dispensed during that time period.
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22

23. Arkansas
• Infrastructure Incentives
• Alternative fuel distributors can receive up to $300,000 or 50% of
the project cost, whichever is less, to assist with the distribution
and storage of alternative fuels or alternative fuel mixtures at
distribution facilities that are located and operated in Arkansas.
• Fleet Mandate
• All diesel-powered motor vehicles, light trucks, and equipment
owned or leased by a state agency are required to operate using
diesel fuel that contains a minimum of 2% biofuel by volume.
volume
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23 Infrastructure

24. Florida
• Fleet Mandates
• All state agencies must use ethanol and biodiesel blended
fuels when available.
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24

25. Kentucky
• Tax Incentive (Diesel)
• Qualified biodiesel producers or blenders are eligible for
an income tax credit of $1.00 per gallon of pure biodiesel
(B100) or renewable diesel produced or used in the
blending process (B2 blend). Re-blending of blended
biodiesel does not qualify The total amount of credit for
qualify.
all biodiesel producers may not exceed the annual
biodiesel tax credit cap of $10 million.
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26. Louisiana
• State Mandate (Diesel)
• B2 required in all diesel fuel sold in the state one in-state
biodiesel production reaches 10 million gallons per year
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27. South Carolina
• Tax Incentives (Diesel)
• A $0 25 incentive payment is available to biodiesel retailers for each gallon of
$0.25 i ti ti il bl t bi di l t il f h ll f
pure biodiesel (B100) sold, provided that the resulting blends contain at least
2% biodiesel (B2). These incentives apply only to fuel sold before July
1, 2012
1 2012.
• Infrastructure Incentive
• A taxpayer that constructs, installs, and places into service a qualified
commercial facility for distribution or dispensing of renewable fuels in the
state is eligible for an income tax credit of up to 25% of the construction and
installation costs.
• Fleet Mandates
• The South Carolina Department of Education is required to fuel state school
bus fleets with biodiesel when feasible.
feasible
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27 Infrastructure

28. Tennessee
• Infrastructure Incentives
• The Tennessee State Energy Office offers grants to
county governments for the installation of biodiesel
infrastructure,
infrastructure including biodiesel tanks, pumps, and card
tanks pumps
readers, that can be used to provide biodiesel fuel for
county and city owned vehicles.
• The Tennessee Department of Transportation (TDOT)
engages in public-private partnerships with transportation
fuel providers to install f
f fueling f
facilities. Fueling f
facilities
include storage tanks and fuel pumps dedicated to
dispensing biofuels
biofuels.
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29. Other Market Drivers
h k
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30. Air Quality:
Opportunities Non Attainment Areas
Oppo t nities in Non-Attainment A eas
• Biodiesel is the only alternative fuel to voluntarily complete EPA Tier I and
Tier II testing to quantify emission characteristics and health effects.
effects
• Exhaust emissions of particulate matter from biodiesel are about 47 percent
lower than overall particulate matter emissions from diesel.
• Source: 1 In May of 1998, the US Department of Energy (DOE) and US Department of Agriculture (USDA) published the
1998
results of the Biodiesel Lifecycle Inventory Study. This 3.5-year study followed US Environmental Protection Agency (EPA) and
private industry approved protocols for conducting this type of research.
• Biodiesel emissions show dramatically decreased levels of polycyclic aromatic
hydrocarbons (75-85%) and nitrated polycyclic aromatic hydrocarbons (90%
(75 85%)
to trace levels), which have been identified as potential cancer causing
compounds.
• As a result of the health benefits of biodiesel, some chapters of the American
f f f f
Lung Association have pledged their support for use of the alternative fuel.
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31. Biodiesel Industry Market Drivers 2010
• ASTM D975 diesel specifications
• Announced Oct. 2008
• Allows biodiesel to be blended with diesel fuel up to B5, with no
labeling required
• Greenhouse gas emission reduction goals
• Low Carbon Fuel Standards (California, Mass., etc.)
• RFS2 GHG Emission Reduction Thresholds
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32. Biodiesel Industry Market Drivers 2010
• New Market Development
• Heating Oil Market
• Power Generation
• Mi i
Mining
• Government
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33. Infrastructure
f
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34. U.S. Diesel Terminal Infrastructure
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35. Pipeline Downstream Injection Concept
• Objective: Participate in biodiesel supply
• Introduce biodiesel at downstream pipeline facilities
• Pursue injection-blending into outbound stublines/delivery lines
• Select locations with low potential for jet fuel trail-back
• Select locations with high shipper value due to:
ith shippe al e d e to
• Local mandates
• Local incentives
• Climate advantages
• Allow for discretionary concentration selection by shippers (B2
to B20)
• P id a low cost, fast t k opportunity f obligated parties -
Provide l t f t track t it for bli t d ti
an initial step in biodiesel participation until trail-back challenge
is resolved
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36. Southeast Pipeline Opportunities
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37. Blending Economics
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38. Current Biodiesel Pricing
REG-9000-1 REG-9000-10 #2 ULSD
FOB, IA FOB, IA Rack Chicago
$3.15 B100 $2.90 B100 $2.00 RINS Value =
$.70-80/gallon
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39. B5 B20
B5-B20 Current Blending Economics
• B100 Pricing (REG 9000/10) =$2.90/gallon
• Biodiesel RINs Values (=$0.75/gallon)
• #2 ULSD Basis vs. NYMEX HO (=$0.10/gallon)
• Transportation Costs from Iowa =$0.25/gallon
=$0 25/gallon
• Net Delivered B100 Price =$2.30/gallon
• #2 ULSD = $2.00/gal
• B100 = $2.30/gal
• B5 = $2.015/gal
• B10 = $2.03/gal
• B20 = $2.06/gal
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40. REG Overview and Updates
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41. A Complete Biodiesel Solution
• Leading biodiesel company through vertical integration
• Feedstock Production, Research and Development
• Feedstock Extraction d Refining
F d t k E t ti and R fi i
• Conversion of Feedstock to Fuel
• Fuel Sales and Marketing
• Fuel Distribution and Logistics
• Customer S i and Administration
C t Service d Ad i i t ti
• Industry Leadership
• Began business in 1996
• Tremendous growth opportunities across biodiesel value chain
• Experienced and best-in-class management team
• Headquartered in Ames, Iowa with locations nationwide
• Redefining biodiesel quality
• REG-9000TM biodiesel meets and exceeds industry quality specifications
• Marketed through existing nationwide diesel infrastructure
41
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42. REG Network of Biodiesel Production
Low Low Low Low
High High
REG Danville REG Houston REG Newton REG Ralston
45 MGY, Startup: 11/2008 35 MGY Startup: 08/2008
MGY, 30 MGY S
MGY, Startup: 5/2007 12 MGY, Startup: 3/2003
Danville, IL Seabrook, TX Newton, IA Ralston, IA
Low
High Low Low
High
Low High
REG Seneca REG Emporia REG New Orleans SoyMor Biodiesel
60 MGY Acquired: 04/2010
MGY, 60 MGY Startup: TBD
MGY, 60 MGY Startup: TBD
MGY, 30 MGY Startup: 8/2005
MGY,
Seneca, IL Emporia, KS Destrehan, LA Glenville, MN
Low Low free fatty acid High High free fatty acid
feedstock conversion feedstock
f d t k conversion i
(soy, canola, refined fats) (fats, corn, waste greases)
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43. REG Sales and Marketing
• 2009: ~26% U.S. biodiesel consumption
• S ld 94 million gallons in 2009, expect sales of >98 million
Sold illi ll i 2009 t l f 98 illi
gallons in 2010.
• Distribution through some of US’s leading terminal-operators (15+
locations)
• REG’s commercial scale facilities, production expertise and BQ-9000
Producer and Marketer status meet customers’ demands for
customers
consistent quality, quantity and supply assurance
• REG distribution advantages
• Lower transportation costs than other producers
L i h h d
• Long-term contracts and high volume allowed REG to negotiate advantageous
turns
• In a tight market, REG established itself as a reliable supplier
• Current production capacity at 6 plants of >210 million gallons.
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44. Supply Chain Management and
Distribution & Logistics
• Marketing via rail and truck in all 48 continental states across the
U.S. l H
U S plus Hawaiiii
• REG has 18 terminal locations nationwide
• REG strategically locates plants and utilizes terminals which allow the
company to ship via rail, barge or deep water or store fuel for easy
customer access
• REG manages customer demand and can produce fuel 24/7 as
necessary at our network facilities.
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45. National Infrastructure
(Production & Terminals)
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46. Thank You
Larry Breeding
Biodiesel Sale Manager, Southeast Region
Bi di lS l M S th t R i
Larry.breeding@regfuel.com
Gary Haer
Vice President, Sales and Marketing
Gary.haer@regfuel.com
Gary haer@regfuel com
Dave Slade, PhD
Director, Technical Services
Dave.slade@regfuel.com
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