1. HOW WILL TRANSPORTATION SYSTEMS BE TRANSFORMED IN OUR ENERGY FUTURE? GEORGE A. HUME April 28, 2006 Reference was made to the following internet sites in preparing this presentation: California Energy Commission: www.energy.ca.gov/ California Energy Commission: www.energy.ca.gov/www.energy.ca.gov/ US Dept. of Energy, Energy Info. Admin.: www.eia.doe.gov US Dept. of Energy, Energy Info. Admin.: www.eia.doe.govwww.eia.doe.gov US Environmental Protect. Agency: www.epa.gov/otaq/invntory US Environmental Protect. Agency: www.epa.gov/otaq/invntorywww.epa.gov/otaq/invntory California Air Resources Board: www.arb.ca.gov/homepage California Air Resources Board: www.arb.ca.gov/homepagewww.arb.ca.gov/homepage OLLI SLATE ENERGY Spring 06

2. WHY SHOULD WE BE INTERESTED AND CONCERNED ABOUT FUEL USE IN TRANSPORTATION SYSTEMS? As the world’s fifth largest economy, California is really a nation state that runs on energy. As the world’s fifth largest economy, California is really a nation state that runs on energy. Every day, we spend approximately: Every day, we spend approximately: 82 $million for gasoline and diesel 82 $million for gasoline and diesel 82 $million for electricity 82 $million for electricity 22 $million for natural gas 22 $million for natural gas About 38% of the state’s energy consumption is by the transportation sector and currently nearly 100% of the transportation fuel is fossil fuel. About 38% of the state’s energy consumption is by the transportation sector and currently nearly 100% of the transportation fuel is fossil fuel. Demand for transportation fuel is projected to increase by 35% in 20 years. Demand for transportation fuel is projected to increase by 35% in 20 years. Petroleum will be the primary source of fuel for transportation for the foreseeable future. Petroleum will be the primary source of fuel for transportation for the foreseeable future. Improving vehicle efficiency is currently the most effective means to reduce our dependence on petroleum. Improving vehicle efficiency is currently the most effective means to reduce our dependence on petroleum. Candidate alternative transportation fuel sources include: Candidate alternative transportation fuel sources include: Ethanol/methanol Gas (LNG, CNG, Propane) Ethanol/methanol Gas (LNG, CNG, Propane) Biodiesel Gas-to-Liquid fuels Biodiesel Gas-to-Liquid fuels Electric vehicles Hydrogen Fuel Cells Electric vehicles Hydrogen Fuel Cells In 1999, mobile source emissions of carbon dioxide, methane,and nitrous oxide were responsible for more than 215 million tons of greenhouse gases. In 1999, mobile source emissions of carbon dioxide, methane,and nitrous oxide were responsible for more than 215 million tons of greenhouse gases.

3. OUTLINE OF FOLLOWING DISCUSSION POINTS Current status of fuel consumption within the transportation segment Current status of fuel consumption within the transportation segment Summary descriptions of Fuel Efficiency and Alternative Fuel Options Summary descriptions of Fuel Efficiency and Alternative Fuel Options The plan to reduce Petroleum Dependency recommended by the CA Energy Commission and the CA Air Resources Board The plan to reduce Petroleum Dependency recommended by the CA Energy Commission and the CA Air Resources Board Fuel consumption projections based on the recommended reduction plan. Fuel consumption projections based on the recommended reduction plan.

4. PRICING TRENDS OF PETROLEUM PRODUCTS IN CALIFORNIA

5. PROJECTED VEHICLE MILES TRAVELED (VMT) (2005 - 2025)

6. PROJECTED DEMAND FOR ON-ROAD GASOLINE AND DIESEL

7. PROJECTED TRANSPORTATION FUEL USE (2000 - 2025)

8. FUELS FOR AVIATION GAS TURBINES Several different kerosine related formulations of aviation turbine (jet) fuel are produced to satisfy military and civilian specifications and the unique needs of various operational uses. Several different kerosine related formulations of aviation turbine (jet) fuel are produced to satisfy military and civilian specifications and the unique needs of various operational uses. CivilianMilitary CivilianMilitary JET A-1JP-4 (mil. JET B) JET A-1JP-4 (mil. JET B) JET AJP-5 (naval use) JET AJP-5 (naval use) JET B JP-8 (MIL JET A-1 +) JET B JP-8 (MIL JET A-1 +) Annual consumption of aviation gas turbine fuel approximates 20% of the transportation sector’s total petroleum consumption. Annual consumption of aviation gas turbine fuel approximates 20% of the transportation sector’s total petroleum consumption. Researchers at Penn State have produced very small quantities of a jet fuel (provisionally designated JP-900) comparable to JET A or JP-8, but derived from at least 50% bituminous coal. Researchers at Penn State have produced very small quantities of a jet fuel (provisionally designated JP-900) comparable to JET A or JP-8, but derived from at least 50% bituminous coal.

9. TIRES AND FUEL EFFICIENCY Proper tire inflation can increase fuel efficiency as much as 3%. Proper tire inflation can increase fuel efficiency as much as 3%. Original equipment tires generally have significantly lower rolling resistance and better fuel economy than the average replacements Original equipment tires generally have significantly lower rolling resistance and better fuel economy than the average replacements The CA Energy Commission is funding tests of tire rolling resistance and other characteristics and will publish comparative results to aid consumers in the purchase of replacement tires. The CA Energy Commission is funding tests of tire rolling resistance and other characteristics and will publish comparative results to aid consumers in the purchase of replacement tires. Some tire companies have begun marketing more fuel efficient tires as part of their product lines. Some tire companies have begun marketing more fuel efficient tires as part of their product lines.

10. CHARACTERISTICS AND EXPERIENCE IN USING ALTERNATIVE FUELS Information from EPA, Transportation and Regional Programs Division, fact sheets on the following clean alternative fuels will be reviewed: Information from EPA, Transportation and Regional Programs Division, fact sheets on the following clean alternative fuels will be reviewed: Ethanol Ethanol Methanol Methanol Liquefied Natural Gas Liquefied Natural Gas Propane Propane Biodiesel Biodiesel Fischer-Tropsch “manufactured” diesel Fischer-Tropsch “manufactured” diesel

11. DEMAND REDUCTION DUE TO USE OF FUEL EFFICIENCY OPTIONS

12. DEMAND REDUCTION DUE TO USE OF FUEL SUBSTITUTION OPTIONS

13. FEDERAL FUEL ECONOMY STANDARDS PROGRAM Known as the Corporate Average Fuel Economy (CAFE) standards Known as the Corporate Average Fuel Economy (CAFE) standards Each model year (MY) manufacturers are required to: Each model year (MY) manufacturers are required to: - Achieve average of 27.5 mpg for fleet of new passenger cars - Achieve average of 27.5 mpg for fleet of new passenger cars - Achieve average of 20.7 mpg for fleet of new light duty trucks (includes minivans and SUVs). Increased to 21.6 for MY 2006 and 22.2 for MY2007 - Achieve average of 20.7 mpg for fleet of new light duty trucks (includes minivans and SUVs). Increased to 21.6 for MY 2006 and 22.2 for MY2007 Despite its flaws, as a result of CAFE, gasoline consumption is down roughly 2.8 million barrels/day from what it would be without CAFE and greenhouse gas emissions translate to a 7% reduction in CO2. Despite its flaws, as a result of CAFE, gasoline consumption is down roughly 2.8 million barrels/day from what it would be without CAFE and greenhouse gas emissions translate to a 7% reduction in CO2.

14. RECOMMENDED PLAN TO REDUCE CALIFORNIA’S PETROLEUM DEPENDENCE (as proposed by CA Energy Commission & Air Resources Board) I. Adopt a statewide goal of reducing demand for on- road gasoline and diesel to 15% below the 2003 demand level by 2020 and maintain that level for foreseeable future. I. Adopt a statewide goal of reducing demand for on- road gasoline and diesel to 15% below the 2003 demand level by 2020 and maintain that level for foreseeable future. II. Work in the national political arena to gain establishment of federal fuel economy standards that double the fuel efficiency of new cars, light trucks and SUVs. II. Work in the national political arena to gain establishment of federal fuel economy standards that double the fuel efficiency of new cars, light trucks and SUVs. III. Establish a goal to increase use of non-petroleum fuels to 20% of on-road fuel consumption by 2020 and to 30% by 2030. III. Establish a goal to increase use of non-petroleum fuels to 20% of on-road fuel consumption by 2020 and to 30% by 2030.

15. INCREMENTAL STEPS IN PLAN TO REDUCE PETROLEUM DEPENDENCE Near-Term Actions (implemented now - 2010) Near-Term Actions (implemented now - 2010) - Use more fuel efficient replacement tires & inflation - Use more fuel efficient replacement tires & inflation - Improve fuel economy in government owned fleets - Improve fuel economy in government owned fleets - Improve vehicle maintenance - Improve vehicle maintenance Mid-term Actions (implemented 2010 - 2020) Mid-term Actions (implemented 2010 - 2020) - Double fuel efficiency of LDV to 40 miles/gallon - Double fuel efficiency of LDV to 40 miles/gallon - Use natural gas-derived Fischer-Tropsch as 33% - Use natural gas-derived Fischer-Tropsch as 33% blending agent in diesel fuel blending agent in diesel fuel Long-term Actions (implemented 2020 - 2030) Long-term Actions (implemented 2020 - 2030) - Introduce fuel cell LDV in 2012, increasing to 10% of - Introduce fuel cell LDV in 2012, increasing to 10% of sales by 2020 and 20% by 2030. sales by 2020 and 20% by 2030.

16. DEMAND EFFECTS OF PETROLEUM REDUCTION GOAL

17. IMPACT OF HYBRIDS AND LT. DUTY DIESELS ON PROJECTED GASOLINE USE

18. OVERALL SUMMARY OF EFFECTS OF OPTIONS IN ON-ROAD DEMAND FORECAST