Solutions to the Issue: Real World Applications Supply & Infrastructure Steven J. Levy Sprague Energy Hudson River Navigator A Regional Conference to Address Air Quality: Smart Fuels & Technology 03/29/ 2006

Sprague Energy Overview Sprague Energy has been servicing the Northeastern U.S. as the leading independent wholesale distributor of energy products for over 130 years Revenue in excess of $2 billion Owns 20 terminals –Over 7 million barrels of capacity Throughput, exchange and purchase product at 100 plus terminals 475 employees Wholly owned subsidiary of Axel Johnson Inc., a member of the Axel Johnson Group of Sweden –Energy –Environmental –Telecommunications

Sprague’s Core Businesses Natural Gas Materials Handling Risk Management / Fuel Management Coal Fungible Petroleum Products Clean Fuels ULSD Biofuel Ethanol

What is driving fuel choice?

 Emission reductions  Energy dependence

Who is driving fuel choice?

 Environmentalists  Federal regulations  State legislation  Local legislation  Consent Decrees

Obstacles to Alternative Fuels Availability of supply Lack of a fueling infrastructure –Infrastructure cost –Cost to supply fuel –Lack of demand Equipment range limitations New equipment cost and availability Equipment cost of conversion Fuel Cost Lack of experience, education, training, etc.

Fuel Alternatives WindSolar Natural Gas Hydroelectric Power Biomass Liquid Petroleum Gas Coal UraniumOil ULSD Hydrogen Propane Emulsified Fuel Ethanol Fischer Tropsch MethanolElectricityOxydiesel Biofuel

Countries throughout the world are moving to lower sulfur fuels to reduce worldwide emissions and provide product consistency

What is Currently Happening? Sulfur Level 50,000 ppm 5,000 ppm 2,000 ppm 500 ppm 15 ppm

Low Sulfur Diesel Regulations 500 ppm 80% 15 ppm, 20% 500 ppm 15 ppm On-road Diesel Non-road Diesel Locomotive & Marine Diesel Home Heating Oil 5000 ppm500 ppm15 ppm 5000 ppm500 ppm 15 ppm 5000 ppm5000/500/15 ppm ?500/15 ppm ?

Why ULSD Environmental acceptance Meets EPA regulations Immediate emission reductions Supply readily available Unlike other alternative fuel options, ULSD has no infrastructure or fleet changes/modifications Least costly alternative fuel option Meets/exceeds OEM fuel specifications Most ULSD, we know Sprague’s does, exceeds ASTM and engine manufacturers’ lubricity specifications Enabler to new emission reduction technology

KEY: PM = Particulate Matter CO = Carbon Monoxide THC= Total Hydrocarbons ULSD Base Fuel Only ULSD with DPF Retrofit ** THC76%92% CO29%94% PM23%88% *Society of Automotive Engineers, Inc : “Performance and Durability Evaluation of Continuously Regenerating Particulate Filters on Diesel Powered Urban Buses at New York City Transit” ** 99% reduction in PM particle counts across all size ranges, including the smallest particles. ULSD Proven Emission Reductions*

ULSD vs Conventional Diesel Big Dig Job Site

ULSD Applications ULSD Typical Applications

Local ULSD Users County of Westchester/Liberty Lines City of New York –Department of Sanitation –Department of Transportation –Department of Parks & Recreation –Police Department City of New York Department of Education State of New York MTA New York City Transit Katonah-Lewisboro Schools Wappingers School District Keyspan Silverstein Properties Construction

Major Users of ULSD

What is Ethanol? Ethanol is grain alcohol, readily obtained from sugar or starch in crops such as corn Blended with gasoline for use as a fuel –Clean-burning –High-octane –Renewable resource E10 – 10% ethanol and 90% unleaded gasoline –Approved for use in any make or model vehicle sold in the U.S. E85 – 85% ethanol and 15% unleaded gasoline –An alternative fuel for use in Flexible Fuel Vehicles Increasingly used as an oxygenate for gasoline, replacing MTBE

What is Biodiesel? Biodiesel is the name of a clean burning alternative fuel, produced from domestic, renewable resources Soy –Most common in U.S. –Largest availability –Best cold temp ops 35 Poultry / Tallow –Lower feedstock cost –Full tax benefit –Limited supply –Poorer cold temp ops 45 / 50 Recycled oils / fats –Lower cost / ½ tax benefit –Limited supply –Mid cold temp ops 40 / 45 Imports: Palm –Very large supply –Full tax benefit –Worst cold temp ops 60

Why Biofuel Energy Dependence Emission benefit with higher sulfur fuels Economical in conjunction with tax incentives and high conventional fuel costs Renewable Stimulates economy

Why ULSD, Biodiesel, Bioheat, E85? Supply readily available Fueling infrastructure in place No equipment range limitations Additional fuel cost is minimal, if any Transparent to the user Most cost effective choices

Clean Fuels Supply Ultra Low Sulfur Diesel Fuel –Bulk deliveries –Mobile refueling –October 15, 2006 available at the retail service station as diesel is today Biodiesel/Bioheat –Available today –Key is to make sure it meets industry quality standards –ASTM 6751 quality –Biodiesel realizes cold temperature operability issues faster than most petroleum diesel E85 –Available for bulk delivery –Local infrastructure will be based upon demand –Adverse reaction toward water as well as certain materials in the infrastructure –Scouring effect of ethanol requires high-performance filtration of contaminants

Contact Information Steven J. Levy Sprague Energy 4 New King Street White Plains, NY Phone: Toll Free: Fax: